Accenture's growth forecast raises concerns for fiscal sustainability

In the United States, Accenture reported its third-quarter earnings, surpassing expectations with earnings of $3.49 per share compared to the consensus estimate of $3.31 per share. The company also saw sales of $17.7 billion, which slightly exceeded analysts' expectations of $17.30 billion. Sales grew 8% in U.S. dollars and 7% in local currency. Following these results, Guggenheim analyst Jonathan Lee adjusted his fiscal 2025 revenue growth outlook to 6%-7%, an increase from the previous estimate. However, concerns remain over future growth, particularly for fiscal 2026. Despite a strong third quarter, Lee highlighted several factors contributing to investor skepticism about Accenture's growth potential moving forward. One major concern is the decline in new bookings, which fell 6.5% in constant currency, along with a reduction in headcount. Additionally, early signs of disruptions related to fluctuations in the economy may pose challenges for revenue growth, with anticipated headwinds projected to impact the fourth-quarter figures. Analysts predict that these factors collectively could dampen Accenture's performance. Management has made a strategic decision to target lower acquisition numbers due to potential targets not meeting financial requirements, leading to expectations of around a 2% inorganic growth contribution for the coming years. In response to allegations of siloed operations, Accenture announced a reorganization aimed at streamlining its go-to-market structure by consolidating various segments under its Reinvention Services business unit. This move aims to better address client needs and improve service delivery. Despite the positive momentum from fiscal 2025 estimates, with adjusted revenue expectations rising and diluted earnings forecasts being slightly increased, investor confidence remains shaky. Analysts emphasize that the elevated revenue forecast does little to quell anxieties regarding softer growth for fiscal 2026. As Accenture navigates these operational challenges, the future trajectory of the company remains uncertain, prompting ongoing scrutiny from market analysts.