Accenture warned Thursday that cost-cutting measures led by Elon Musk’s Division of Authorities Effectivity will harm its backside line as a result of a number of multi-million greenback contracts had been canceled — sending shares tumbling 7%.
The consultancy large’s CEO Julie Candy advised traders on an earnings name that the corporate was experiencing a notable slowdown in securing new contracts from the US authorities.
US authorities contracts constituted round 8% of Accenture’s world revenues — or $1.33 billion out of its whole income of $16.7 billion for the quarter ending Feb. 28 — the corporate stated.
“The new administration has a clear goal to run the federal government more efficiently. During this process, many new procurement actions have slowed, which is negatively impacting our sales and revenue,” Candy stated.
The discount in authorities spending comes as a part of a broader marketing campaign pushed by Musk’s DOGE, which goals to cut back federal expenditures by scrutinizing contracts with consulting firms.
Accenture and 9 different main consultancies together with Deloitte, IBM and Booz Allen Hamilton have been instantly impacted by this coverage shift.
Shares of IBM have fallen by greater than 8% within the final month, whereas Booz Allen Hamilton inventory is down greater than 6% throughout the identical interval.
Deloitte is a privately held firm.
A federal submitting disclosed final week indicated {that a} beforehand awarded Accenture contract, which had the potential to usher in as much as a further $5 million by 2027, was abruptly “terminated for convenience.”
This contract had already generated round $10 million in income since its inception in 2021 and marked the tenth such contract misplaced by Accenture underneath the Trump administration’s new tips.
The Basic Companies Administration, the federal government physique liable for overseeing federal procurement actions, acknowledged that businesses should clearly show the worth and necessity of their consulting contracts.
If unable to justify these agreements, departments at the moment are required to terminate them as a part of the continuing effectivity measures.
Candy emphasised the important nature of Accenture’s federal initiatives however acknowledged future uncertainties.
“While we continue to believe our work for federal clients is mission critical, we anticipate ongoing uncertainty as the government’s priorities evolve and these assessments unfold,” she cautioned.
Regardless of the turbulence, Candy stated she expects contracts with the federal government to extend sooner or later.
“We see major opportunities over time for us to help consolidate, modernize and reinvent the federal government to drive a whole new level of efficiency,” she stated.
Accenture originated as Andersen Consulting, the enterprise and know-how consulting division of Arthur Andersen, earlier than formally separating and rebranding as Accenture in 2001.
Initially based mostly in Chicago, the corporate relocated its headquarters to Dublin, Eire, in 2009 — citing a extra business-friendly tax setting.
Since then, Accenture has grown into a world chief in consulting and know-how providers, working in over 120 international locations.
President Trump final week accused Eire of drawing pharmaceutical jobs and tax revenues away from the US, criticizing the nation’s tax insurance policies that permit firms to report income there with out bodily producing all their medicines in Eire.
Multinational firms base their headquarters in Eire because of its low company tax fee of 12.5%, business-friendly rules and entry to the European Union market.
Main American companies similar to Apple, Google, Fb, Microsoft, Pfizer and Intel have established their European or worldwide headquarters there to be able to reap the benefits of tax incentives, a talented workforce and favorable mental property legal guidelines.
Whereas Eire’s tax insurance policies have confronted scrutiny, the nation stays a lovely vacation spot for world companies because of its steady economic system and strategic location.
The Submit has sought remark from the White Home and Accenture.
