The Stock of Accenture Sinks as the Company Touts Ai Growth but Pulls Back on Its Growth Outlook Due to a Shift in Demand

Accenture PLC investors faced their most challenging day in four years on Thursday, as the management consultancy adjusted its full-year earnings forecast downwards due to a reduction in client spending and prolonged delays in corporate decision-making.

‍

Simultaneously, the company, trading under the symbol ACN, -8.10%, highlighted its strides in the generative artificial intelligence market, expressing intentions to double its AI workforce within the next two years.

‍

During the fiscal second quarter, new bookings for generative AI surpassed $600 million, culminating in a total of $1.1 billion for the first half of the fiscal year, as CEO Julie Sweet emphasized the company's commitment to expanding its presence in the genAI sector.

‍

Sweet indicated, “We presently boast over 53,000 proficient data and AI practitioners, aiming to double our data and AI workforce from 40,000 to 80,000 by the conclusion of fiscal year 2026," as cited in an AlphaSense transcript of the post-earnings call with analysts.

‍

However, the stock plummeted by 7.3% towards a two-month low during morning trading, leading the S&P 500 index's SPX decliners. This marked the most substantial single-day decline since its 8.4% drop on March 16, 2020, during the peak of the pandemic panic.

‍

The decline ensued after the company reported better-than-expected fiscal second-quarter profits but fell short on revenue and revised its fiscal 2024 guidance downwards.

‍

As 2024 commenced, Sweet noted, “another shift towards constrained spending by our clients.” She attributed this to alterations in the composition of new bookings, deviating from initial expectations.

‍

“We observe clients persisting in prioritizing investments in extensive transformations, translating to slower revenue generation and further constraints on discretionary spending, especially in smaller projects,” Sweet elaborated. “Additionally, we encountered continued delays in decision-making and a decelerated spending pace.”

‍

Quarterly net income, ending on Feb. 29, surged to $1.68 billion, or $2.63 per share, from $1.53 billion, or $2.39 per share, in the corresponding period the prior year. Adjusted earnings per share, excluding exceptional items, stood at $2.77, surpassing the consensus of $2.66.

‍

Despite beating revenue expectations, which dipped by 0.1% to $15.8 billion from $15.81 billion, the FactSet consensus anticipated a rise to $15.85 billion.

‍

New bookings experienced a 2% decline to $21.58 billion, with consulting bookings totaling $10.52 billion and managed-services bookings reaching $11.06 billion.

‍

Looking forward, the company forecasts third-quarter revenue between $16.25 billion and $16.85 billion, falling short of the current FactSet consensus of $17.02 billion.

‍

For fiscal 2024, Accenture revised its guidance range for revenue growth to 1%-3% from the previous 2%-5%, and for adjusted EPS to $11.97-$12.20 from $11.97-$12.32. While the FactSet EPS consensus stands at $12.24, the revenue consensus of $66.17 billion implies a 3.2% growth.

‍

Year to date, Accenture's stock has only gained 0.5%, compared to the S&P 500's 10.1% rally.

‍

Accenture CEO Sweet underscored the widespread acknowledgment of AI's significance, yet highlighted the variance in scaling AI applications, contingent upon clients' digital infrastructure robustness.

‍

“While most clients are acknowledging the investments required to implement AI comprehensively, scaling remains a challenge, as AI technology represents merely a fraction of the prerequisites,” she stated.

‍

Sweet emphasized the necessity for clients to reinvent themselves through technology, data, and AI, emphasizing the importance of a robust "digital core," operational transformation, employee training, and AI-centric capability development, all while fostering a profound comprehension of AI mechanisms.

‍