I have a long position in Accenture, so it’s painful to look at the share price and its 31% year-to-date decline. It gets even more irritating when you consider the global backdrop of extensive corporate investment in AI, an environment that seems perfect for Accenture’s strategy as the leading technology-focused management consultancy. It should be absolutely cleaning up at the moment. Instead, the p:e is now below 20, compared with the 10-year average of 27 — the exact opposite of how most AI-related companies are currently trading!
This is a useful reminder of why my portfolio consists of a large number of smaller positions, rather than being highly concentrated. Everyone celebrates the famous fund managers who had concentrated portfolios, while conveniently glossing over the survivorship bias that is inherent in this approach. We don’t hear about all the other fund managers who blew up their portfolios by being deeply exposed to the wrong things. As Accenture has demonstrated, a perfectly logical investment thesis can quite easily punch you in the face.
But why has this happened?
Perhaps the most irritating thing about the share price performance in 2025 is that the bullish AI thesis is still intact. The CEO, Julie Sweet, describes the opportunity for Accenture in taking advanced AI from “mind share” to “adoption” at corporates. In other words, Accenture is plugging the gaps to help corporates move from thinking about generative AI to actually using it every day in their businesses. Or, to use the famous Guy Kawasaki quote: “Ideas are easy, implementation is hard.”
Accenture is all about solving implementation for clients. How does it do this? Well, organisations often need to unify data from numerous legacy systems before they even get around to building the AI agents that will actually do something useful with that data. It makes no sense at all for a company to hire the specialist skills for project work like this, which is exactly where Accenture comes in. If anything, there’s a more obvious customer value proposition in this type of work than in the strategy consulting that is more commonly observed in the consulting industry.
We also can’t fault Sweet’s commitment to having the right people in the organisation. Some of this is typical corporate gumph, like referring to staff as “reinventors” who are helping clients make the leap. But underneath all this, there’s a clear message that the staff need to be reinventing themselves as quickly as the clients, with a blunt statement in the earnings transcript that employees who can’t get up the AI curve will be “exited” from the business on a “compressed timeline” — yikes!
This is a cautionary tale about the technology sector
Despite the excitement around AI, Accenture grew revenue only 7% for the full year 2025. Adjusted earnings per share grew 9% and though free cash flow was ahead of guidance, these are still single-digit growth rates at a time when the technology giants are expanding their AI businesses at vastly higher rates. The guidance for financial 2026 is even less inspiring, with revenue growth expected to be in the low single digits. That’s not acceptable for a technology company that is also talking about increasing its headcount to respond to the growth opportunity — what growth, exactly?
Analysts on the latest earnings call had some pointed questions about whether AI is deflationary for Accenture’s service offering, or whether it might boost the consulting business at the expense of the managed services offering. Clearly there’s concern about these growth rates, and rightly so, with management unable to give particularly inspiring answers.
To add to the worries around AI’s net impact on Accenture, we have another problem that reared its head this year: Doge, or the department of government efficiency. Accenture’s revenue from the US government has been under immense pressure, with a 150 basis points drop in revenue growth in the latest quarter. There’s some hope that the decline in spend is normalising, with Accenture trying to respond to the decrease by putting in place a partnership with Palantir, a company that seems to have won the ears (and wallets) of the Trump administration.
Alas, the guidance for financial 2026 doesn’t suggest that it will be enough, with the share price having given up most of its pandemic-era gains. This is a cautionary tale about the technology sector, especially for those who have highly concentrated positions. Things don’t always work out as planned.
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