Accenture's Federal Services is grappling with the repercussions of new guidance from the U.S. General Services Administration, which has led to a review of contracts with the top 10 highest paid consulting firms contracting with the U.S. government. As a result, Accenture has become one of the first major U.S. corporations to be affected by the Trump administration's Department of Government Efficiency. This campaign, spearheaded by billionaire Elon Musk, aims to downsize federal agencies and streamline their operations.
The impact on Accenture has been significant, with shares dropping nearly 8% on Thursday. The consulting firm revealed that tighter federal spending initiatives are beginning to affect its revenues, leading to the loss of contracts with the U.S. government following recent assessments. In fiscal year 2024, federal contracts represented about 8% of Accenture's global revenue and 16% of its Americas revenue.
Accenture's shares have seen a decline of 22% over the past month and are down nearly 15% year to date. The company is experiencing heightened levels of uncertainty in the global economic and geopolitical landscape, marking a departure from its first quarter FY 2025 earnings report in December.
"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," stated Julie Spellman Sweet, CEO of Accenture.
The new administration underlines its commitment to increasing federal government efficiency, which has resulted in a slowdown in new procurement actions. This has adversely affected Accenture's sales and revenue.
"Federal represented approximately 8% of our global revenue and 16% of our Americas revenue in FY 2024. As you know, 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," Sweet elaborated.
Accenture is navigating these turbulent times while maintaining that the core fundamentals of their industry remain robust. However, the current scenario underscores a notable shift from their previous financial projections.