Accenture Stock Drops Over 14% Amid Iran Conflict, Triggering IT Sector Selloff
Accenture’s shares plummeted over 14% on Thursday after the IT consulting firm reported significant impacts from the ongoing conflict in Iran. The company lowered its annual growth outlook and projected quarterly revenue that fell short of Wall Street expectations, leading to a selloff in the technology services sector. Accenture indicated that the conflict has already cost it approximately $400 million in its Middle East operations during the third quarter.
CEO Julie Sweet noted that the indirect effects of the conflict began to manifest in recent weeks. She expressed uncertainty about the pace of change, particularly as some industries face longer-term challenges. The automotive sector, a crucial client base for Accenture, was already experiencing difficulties before the conflict exacerbated issues related to rising fuel costs.
The negative outlook from Accenture had a ripple effect across the IT services sector. Shares of major firms such as Infosys, Cognizant, Capgemini, and IBM fell between 5.5% and 10.8% following Accenture’s announcement. Geopolitical and economic uncertainties have dampened demand for technology projects, while concerns over the potential replacement of traditional software and consulting services by autonomous AI tools have further pressured valuations in the industry.
To counteract the slowdown in consulting demand, Accenture announced plans for cybersecurity acquisitions totaling $4.18 billion. The company aims to strengthen its position in a segment it views as a significant growth opportunity. Accenture will acquire a majority stake in industrial cybersecurity firm Dragos and fully purchase asset intelligence company runZero and device security specialist NetRise.
With increasing internet connectivity and the broader adoption of artificial intelligence, critical infrastructure is becoming more vulnerable to cyber threats. As a result, companies are investing more in security solutions. The acquisitions, pending regulatory approvals, are expected to close in August or September and will add businesses generating a combined annual recurring revenue of $208 million.
Accenture also plans to increase its acquisition budget to $9 billion this year, up from $5 billion, focusing on AI, cloud, and data businesses. The company now anticipates annual revenue growth of 3-4%, a reduction from its previous forecast of 3-5%. For the fourth quarter, Accenture projects revenue between $17.75 billion and $18.4 billion, which is below analysts’ average estimate of $18.47 billion. In the third quarter, new bookings declined by about 2% to $19.3 billion, while revenue rose 6% to $18.72 billion, missing analysts’ expectations of $18.75 billion.
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