Accenture (ACN) stock experienced a substantial decline, slipping 5.3% on one day and being down 23.69% year-to-date and 35.81% over the past year, trading near $169. This downturn is attributed to concerns that AI investments by clients are not creating new revenue but are instead leading to a reallocation of existing IT budgets, thus impacting traditional consulting and managed services.
Several financial firms have downgraded Accenture and cut price targets. Morgan Stanley downgraded Accenture to "Equal-weight" from "Overweight," slashing its price target from $240 to $177. This was based on findings from their first-quarter 2026 CIO Survey, which indicated that IT services budgets are expected to grow by only 2% in 2026, while total IT budget growth remains largely unchanged at 3.7%. The report suggests AI spending is displacing, rather than expanding, other discretionary technology spending. Similarly, Truist Securities cut its price target to $210, and Jefferies reduced its target to $185 from $210, maintaining a "Hold" rating.
Despite the stock's performance, Accenture reported Q2 FY26 earnings per share of $2.93 against an estimate of $2.84, with revenue of $18.04 billion, beating estimates and growing 8.3% year-over-year. New bookings reached a record $22.11 billion, and the company raised its full-year free cash flow guidance to $10.8 billion-$11.5 billion. CEO Julie Sweet affirmed strong AI-driven growth, citing $2.2 billion in advanced AI new bookings in Q1 FY26 and $5.9 billion in gen AI bookings for all of FY25. However, analysts question if these AI bookings are additive or merely replacing traditional revenue streams, impacting segments like Health & Public Service which declined 1% in local currency. The elevated effective tax rate of 24.3% (up from 20.4% a year ago) also poses a challenge to net income growth.
