Accenture (ACN, Financial) reported that federal spending cuts are putting pressure on its revenue, leading to a drop in its stock price. The company is among the first major U.S. corporations to feel the impact of the Trump administration's "Office of Government Efficiency," led by billionaire Elon Musk, which aims to reduce the size of federal agencies and consolidate office spaces.
During the second fiscal quarter earnings call, Accenture's CEO disclosed that the company's federal services business lost contracts with the U.S. government following a recent review, resulting in a 7.3% decline in its stock price. Federal procurement accounts for 8% of Accenture's global revenue for fiscal year 2024 and 16% of its revenue in the Americas. The CEO noted that the new government has a clear objective to manage the federal government more efficiently, leading to a slowdown in new procurement actions, negatively affecting sales and revenue.
The CEO also mentioned that Accenture's federal services division has been impacted by guidelines from the U.S. General Services Administration. These guidelines require all federal agencies to review contracts with the top 10 highest-paid consulting firms and terminate those not deemed mission-critical. Despite believing in the importance of their work for federal clients, the CEO anticipates ongoing uncertainty as government priorities evolve and assessments continue.
Although Accenture released better-than-expected quarterly earnings and revenue results, investor concerns about risks related to the slowdown in U.S. government spending overshadowed these results. According to FactSet data, the company reported earnings per share of $2.82 and revenue of $16.66 billion, slightly above expectations of $2.81 per share and $16.62 billion in revenue.
Accenture's stock has fallen 22.9% over the past month and nearly 14.5% year-to-date. On the same day, Booz Allen Hamilton (BAH) also saw its stock drop by 8.1%.
