Accenture sinks 14% as lowered outlook clouds earnings beat and cybersecurity deals

Shares of consulting and technology services giant Accenture plunged 14% in premarket trading on Thursday after the company lowered the top end of its annual revenue growth forecast, underscoring concerns that businesses remain cautious about spending on discretionary technology projects.

The company now expects annual revenue growth of 3% to 4%, compared with its earlier forecast of 3% to 5%.

It also projected fourth-quarter revenue of between $17.75 billion and $18.4 billion, below analysts' expectations of $18.47 billion, according to data compiled by LSEG.

The reduced outlook overshadowed better-than-expected quarterly earnings and a series of acquisitions aimed at expanding Accenture's cybersecurity capabilities.

Quarterly earnings beat expectations

For the three months ended May 31, Accenture reported net income of $2.34 billion, up from $2.2 billion a year earlier.

Quarterly earnings rose to $3.80 per share, exceeding analysts' estimates of $3.71 per share, according to FactSet.

Revenue increased 5.6% to $18.72 billion, although it narrowly missed Wall Street expectations of $18.78 billion.

The company also raised the lower end of its adjusted earnings forecast and now expects annual earnings of $13.78 to $13.90 per share, compared with prior guidance of $13.65 to $13.90.

However, new bookings slipped to $19.3 billion from $19.7 billion a year ago, indicating softer demand conditions.

Cybersecurity push gathers pace

Accenture also announced a significant expansion of its cybersecurity business through acquisitions valued at a combined $4.18 billion.

The company said it would acquire a majority stake in industrial cybersecurity firm Dragos, and fully purchase asset intelligence company runZero and device security specialist Netrise.

The acquisitions are expected to close in August or September, subject to regulatory approvals.

The deals will add companies with combined annual recurring revenue of $208 million and strengthen Accenture's cybersecurity division, which already generates about $10 billion in annual revenue.

The new assets are expected to broaden Accenture's offerings in protecting industrial operations and critical infrastructure, including power grids, factories, pipelines and data centers, amid growing concerns about AI-driven cyber threats and geopolitical risks.

The announcement follows acquisitions of Alfahealth and Industries eXcellence Group that were unveiled earlier this week.

Spending concerns weigh on sentiment

Despite its acquisition push, Accenture entered its earnings report facing growing investor skepticism.

Morgan Stanley downgraded the stock to Equal-Weight from Overweight earlier this week, saying massive investments in artificial intelligence were diverting resources away from traditional information technology services.

"We are not seeing the budget growth inflection we had previously expected," the bank's analysts wrote.

Accenture derives roughly half of its revenue from consulting services, a business that has come under pressure as corporate clients continue to constrain technology spending.

Analysts have also questioned whether Accenture's recent acquisitions, which are increasingly product-oriented rather than service-based, can deliver meaningful revenue contributions.

The current interest-rate environment has added another layer of pressure.

Morgan Stanley described it as a "neutral to negative signal," arguing that stable rates offer little support for technology budgets while any future increases could further tighten corporate spending.

Jefferies analyst Surinder Thind also raised concerns earlier this year, saying he had seen no evidence of a recovery in customer demand despite management's optimistic commentary.

Thursday's sharp share decline suggests investors remain focused on slowing enterprise technology spending and weakening demand trends, even as Accenture bets heavily on cybersecurity and artificial intelligence-related opportunities.

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