Consultancy firm Accenture reported that the efforts by the Trump administration to reduce federal spending have resulted in delays and cancellations of new contracts, leading to a more than 6% drop in the company's shares.
The new U.S. administration and its Department of Government Efficiency (DOGE), overseen by billionaire Elon Musk, have been implementing measures to cut spending and downsize the federal workforce. Accenture's federal services unit is experiencing a slowdown as the U.S. General Services Administration has directed all federal agencies to evaluate their contracts with consulting firms and cancel those deemed non-essential.
This unit, which serves the U.S. federal government, accounted for approximately 8% of Accenture's total revenue in 2024. Accenture noted in a post-earnings call that the slowdown in new procurement actions is negatively impacting sales and revenue.
Officials have criticized DOGE's expedited workforce reductions, contract cancellations, and regulatory changes, which have led to lawsuits and public discontent, raising uncertainty about whether these efficiency-focused initiatives will ultimately enhance or impede federal government operations.
IBM's shares fell 4%, impacting its role as a vendor for the Department of Education, as Accenture's new bookings—a key future revenue indicator—declined by 3% to $20.9 billion in the second quarter.
Michael Ashley Schulman, Chief Investment Officer at Running Point Capital, observed that Accenture's revenue is facing challenges due to the administration's emphasis on federal cost-cutting, resulting in slowed procurement and contract reviews.
In the second quarter, revenue from Accenture's consulting services segment, which constitutes 59% of the company's revenue, was $8.3 billion, falling short of the average analyst estimate of $8.54 billion.
Accenture now anticipates annual revenue growth of 5% to 7%, an adjustment from its previous forecast of 4% to 7%, while analysts had projected a growth of 5.7%. The company reported second-quarter revenue of $16.66 billion, slightly above the estimates of $16.62 billion.