Stocks of technology consulting giant Accenture(NYSE:ACN) Shares fell about 18% on Thursday, the worst single-day decline in years, after the company announced its third-quarter financial results for the period ending May 31, 2026. The decline has seen the stock trade around $128 at the time of writing, down more than 50% this year.
What’s strange is that the quarter itself looked healthy. Accenture’s earnings per share rose 9% year over year to $3.80, and revenue rose 6% to $18.7 billion. The company’s operating profit margin further increased.
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But this selloff likely has little to do with Accenture’s just-announced quarter and more to do with what’s to come and the issues that have clouded the stock all year. Is artificial intelligence (AI) starting to erode the demand for the jobs that made Accenture a consulting powerhouse?
Image source: Getty Images.
Forecasts, not quarters
The most specific concern was instruction.
Accenture now expects full-year sales to rise 3% to 4% in local currencies, down from the 3% to 5% range it had indicated three months ago. This lowers the midpoint of the growth target from 4% to 3.5%. For a company with annual sales of about $70 billion, even half a point is significant, suggesting near-term demand is softening rather than recovering. Management has limited the impact on its U.S. federal business by about a percentage point as government cost cuts squeeze consulting contracts, and it expects this headwind to ease by this quarter.
Additionally, new bookings, which are a good indicator of future revenue, fell to $19.3 billion from $19.7 billion in the year-ago period.
Then there was the timing of the financial results report. The same morning, Accenture announced it would spend about $4.18 billion to acquire a majority stake in cybersecurity firm Dragos and to acquire two smaller security companies, Runzero and NetRise. This is the company’s largest effort to date to protect operational technology (OT), the systems behind power grids and factories. Spending billions of dollars on deals while organic growth is slow is a common desire from investors.
“Customers across industries and geographies are looking for ways to more proactively integrate their approach to cybersecurity,” CEO Julie Sweet said in the acquisition announcement.
Bigger questions about AI
There’s a deeper fear here that has driven stocks down about 40% this year. The majority of our consulting revenue comes from helping our clients build software and integrate systems. As AI tools can do more work in less time, companies may need fewer billable hours. Accenture’s consulting revenue rose just 1% in local currency last quarter, but the concerns are real.
Accenture’s answer is that customers need AI because of AI.
Helping large companies actually leverage AI across their operations is cumbersome and expensive. That’s exactly what Accenture is selling. The company booked $2.2 billion in so-called advanced AI-related work in its fiscal first quarter, but management has since stopped disclosing that number and said that nearly all the work done by AI is now done by AI.
“We believe AI will be a tailwind for our company and our industry as we expand,” CEO Julie Sweet said on the company’s latest earnings call, rejecting the idea that technology is hurting demand for its services.
Betting on cybersecurity follows the same logic. As companies connect AI to the machines that run factories and public facilities, ensuring the security of that infrastructure becomes a much larger market. One Accenture currently has a market of about $27 billion.
Now let’s talk about stocks. After Thursday’s decline, Accenture trades at a price-to-earnings ratio of about 11 times, even though it generated $3.6 billion in free cash flow last quarter and returned $2.2 billion to shareholders. This is a level not seen in recent years. This is an unusually low valuation for a highly profitable market leader.
So, will AI also appear in the consulting business? Probably on the margins, what I want to focus on most here is the soft booking numbers. However, this assessment appears to factor in a future in which AI becomes a major disruptor for consulting and Accenture will be unable to adapt. But overall, I think Thursday’s decline looks more like an overreaction than a verdict against companies. However, I would like to see the reserve go higher again before calling the stock a clear bargain.
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Daniel Sparks and his clients have no positions in any stocks mentioned. The Motley Fool has a position in and recommends Accenture Plc. The Motley Fool recommends the following options: A long January 2028 $260 call on Accenture and a short January 2028 $280 call on Accenture. The Motley Fool has a disclosure policy.
Accenture just had its worst day in years. Will AI also appear in the consulting business? Originally published by The Motley Fool
