Accenture's (ACN, Financial) stock fell by approximately 7.3% after the consulting firm reported that federal spending cuts are impacting its revenue. This development places Accenture among the first major U.S. companies affected by the Trump administration's "Department of Government Efficiency." CEO Julie Sweet noted that the new administration aims to manage the federal government more efficiently, leading to a slowdown in new procurement actions, negatively affecting sales and revenue.
During the company's second fiscal quarter earnings call, Sweet revealed that Accenture's federal services business lost several contracts with the U.S. government, contributing to the stock decline. She stated that federal business accounts for about 8% of Accenture's global revenue and 16% of its revenue in the Americas. The U.S. General Services Administration (GSA) has advised federal agencies to review contracts with the top ten consulting firms by compensation and terminate non-essential ones, impacting Accenture's federal services.
Sweet expressed that despite believing in the critical nature of their work for federal clients, the shifting government priorities and ongoing evaluations introduce uncertainty. She also mentioned that the already significant uncertainties in the global economic and geopolitical environment are intensifying, differing from the situation during the first quarter of fiscal year 2025. Nevertheless, Sweet remains confident in the industry's strong fundamentals.
Investor concerns over the risks associated with reduced U.S. government spending overshadowed Accenture's better-than-expected quarterly earnings and revenue results. The company reported earnings per share of $2.82 and revenue of $16.66 billion, slightly surpassing the projected $2.81 per share and $16.62 billion in revenue, according to LSEG data.
Over the past month, Accenture's stock has dropped by 22.9%, with a year-to-date decline of nearly 14.5%. Additionally, Booz Allen Hamilton's stock also fell by 8.1% in response to the news.
