Accenture's stock has seen significant declines, dropping to $186.31 after its Q2 FY26 earnings release and falling 23.69% year-to-date and 35.81% over the past year. Several Wall Street firms have cut their price targets, and the analyst consensus target sits at $268.51, nearly 30% above the current trading price. This downturn is attributed to worries that AI's impact isn't generating new revenue but is instead shrinking the existing IT spending pie by making traditional services more efficient, potentially leading to margin compression for Accenture.
Morgan Stanley downgraded Accenture to Equalweight from Overweight and reduced its price target to $177 from $240. This decision was based on their Q1 2026 Chief Information Officer (CIO) Survey, which indicated that IT services budgets are expected to grow by only 2% year-on-year in 2026, with total IT budget growth at 3.7%. The survey suggests that AI investments are currently redirecting spending from traditional IT services rather than expanding overall technology budgets, and pilot programs have not yet generated sufficient returns to trigger broader spending increases.
Despite beating Q2 FY26 earnings estimates with $2.93 EPS against an estimated $2.84, and achieving $18.04 billion in revenue (up 8.3% year-over-year) with record bookings of $22.11 billion, the stock still fell. Accenture's CEO, Julie Sweet, countered the bearish outlook by citing strong AI-driven growth, including $2.2 billion in advanced AI new bookings in Q1 FY26 and $5.9 billion in gen AI bookings for all of FY25. However, the market remains skeptical, awaiting clearer evidence that AI bookings are additive to, rather than replacing, traditional consulting revenue.
Other firms, including Jefferies, also cut their price targets, with Jefferies lowering its target to $185 from $210, maintaining a Hold rating. The stock hovered near $169, with investors uncertain about AI projects' ability to significantly boost overall IT services demand. Accenture also raised its full-year free cash flow guidance to between $10.8 billion and $11.5 billion, from an earlier range of $9.8 billion to $10.5 billion. The company has a Q3 FY26 revenue guidance of $18.35 billion to $19.0 billion, which will be a key indicator for investors.
