Accenture's shares plummeted more than 14% on Thursday after the IT consulting giant highlighted the adverse effects of the Iran war on its operations, reduced its annual growth forecast, and projected quarterly revenue below Wall Street expectations, sparking a selloff across the technology services sector.
Conflict Costs and Impact
The company disclosed that the conflict had already incurred approximately $400 million in losses in its Middle East business during the third quarter. It warned that the disruption could persist in the coming months. CEO Julie Sweet stated in a post-earnings call with Reuters, "The indirect impact really started in the last few weeks. It's not clear how fast things will change, particularly because some of the industries are dealing with longer-term issues." Sweet noted that the automotive industry, a key client segment for Accenture, was already under strain before higher fuel costs linked to the conflict added to its challenges.
Broader Sector Impact
The weaker outlook weighed heavily on the broader IT services sector. Following Accenture's lowered annual sales expectations, shares of Infosys, Cognizant, Capgemini, and IBM fell between 5.5% and 10.8%.
Geopolitical and Economic Uncertainty
Geopolitical and economic uncertainty have dampened demand for technology projects in recent months. Additionally, concerns that autonomous AI tools could replace traditional software and consulting services have pressured valuations across the industry. To counteract the slowdown in consulting demand, Accenture announced cybersecurity acquisitions worth $4.18 billion, expanding its push into a segment it views as a major growth opportunity.
Cybersecurity Acquisitions
The company stated it would acquire a majority stake in industrial cybersecurity firm Dragos and fully acquire asset intelligence company runZero and device security specialist NetRise. With greater internet connectivity and wider adoption of artificial intelligence exposing factories, power grids, and other critical infrastructure to cyber threats, companies are increasingly investing in security solutions. The acquisitions, expected to close in August or September subject to regulatory approvals, will add businesses generating a combined annual recurring revenue of $208 million.
Increased Acquisition Spending
Accenture also announced plans to spend $9 billion on acquisitions this year, up from $5 billion previously, as it doubles down on AI, cloud, and data businesses.
Revised Revenue Forecast
The Dublin-headquartered company now expects annual revenue growth of 3-4%, compared with its earlier forecast of 3-5%. For the fourth quarter, it projected revenue of $17.75 billion to $18.4 billion, below analysts' average estimate of $18.47 billion, according to LSEG data. In the third quarter, new bookings fell about 2% to $19.3 billion, while revenue rose 6% to $18.72 billion, missing analysts' estimates of $18.75 billion.
