Accenture Falls 14% After Revenue Outlook Cut

Accenture shares fell about 14% in premarket trading after the company lowered the top end of its annual revenue growth forecast to 3% to 4% from a previous 3% to 5% range.

For the quarter ended May 31, net income was $2.34 billion, up from $2.2 billion a year earlier. Adjusted earnings were $3.80 per share, above analysts’ estimate of $3.71. Revenue rose 5.6% to $18.72 billion, narrowly missing estimates of $18.78 billion. New bookings fell to $19.3 billion from $19.7 billion a year earlier.

Accenture raised the low end of its full-year adjusted earnings forecast to $13.78 per share while keeping the top end at $13.90. The company projected fourth-quarter revenue between $17.75 billion and $18.40 billion, below the roughly $18.47 billion analysts had expected.

Management attributed the trimmed revenue outlook to continued caution among corporate clients on discretionary technology spending and an interest-rate environment that has not supported larger IT budgets.

To expand its cybersecurity business, Accenture agreed to acquire a majority stake in industrial security firm Dragos and to buy asset intelligence company runZero and device security specialist Netrise. The transactions total $4.18 billion, are expected to close in August or September pending regulatory approvals, and will add about $208 million in combined annual recurring revenue to Accenture’s roughly $10 billion cybersecurity unit. The company also disclosed earlier purchases of Alfahealth and Industries eXcellence Group.

Investors and analysts reacted to the guidance cut. Morgan Stanley downgraded the stock to Equal-Weight from Overweight and wrote that it was not seeing the budget growth inflection it had expected, adding that large investments in artificial intelligence could redirect resources from traditional IT services. Jefferies analyst Surinder Thind noted he had seen no evidence of a recovery in customer demand despite management’s optimistic commentary. Analysts also questioned whether recently announced, more product-oriented acquisitions will contribute meaningful revenue in the near term.

Accenture derives about half of its revenue from consulting services, a segment that has been affected as companies reduce discretionary projects.