Accenture flags federal contract cancellations, delays as US curbs spending

Audio By Carbonatix

Enlarge

By Priyanka G and Akash Sriram

(Reuters) -Consultancy firm Accenture said on Thursday the Trump administration’s efforts to reduce federal spending have led to delays and cancellations of new contracts, sending the company’s shares down more than 6%.

The new U.S. administration and its Department of Government Efficiency (DOGE), led by billionaire Elon Musk, have been implementing measures to slash spending and reduce the size of the federal workforce.

Accenture said its federal services unit is facing a slowdown as the U.S. General Services Administration instructed all federal agencies to review their contracts with consulting firms and cancel contracts that are not essential.

The unit catering to the U.S. federal government accounted for about 8% of the company’s total revenue in 2024.

“Many new procurement actions have slowed, which is negatively impacting our sales and revenue,” Accenture said on a post-earnings call.

Many officials have criticized DOGE’s rapid workforce reductions, contract cancellations and regulatory changes that have prompted lawsuits and public dissatisfaction, creating uncertainty about whether these efficiency-focused measures will ultimately benefit or harm federal government functionality.

President Donald Trump will sign a long-anticipated executive order on Thursday that aims to shut down the Department of Education, according to a White House summary seen by Reuters.

IBM’s shares fell 4%. The consultancy and IT company is a vendor for the department.

New bookings for Accenture, a key indicator of future revenue, fell 3% to $20.9 billion in the second quarter.

“Accenture’s revenue faces headwinds due to the Trump administration’s focus on federal cost cutting, leading to slowed procurement and contract reviews,” Michael Ashley Schulman, Chief Investment Officer at Running Point Capital, said.

Second-quarter revenue at its consulting service segment, which accounts for 59% of Accenture’s revenue, was $8.3 billion, but fell short of the average analyst estimate of $8.54 billion, according to data compiled by LSEG.

Accenture now expects annual revenue to grow between 5% and 7%, compared with its prior forecast of 4% to 7%. Analysts had expected revenue growth of 5.7%.

The company reported second-quarter revenue of $16.66 billion, compared with estimates of $16.62 billion.

(Reporting by Priyanka.G, Akash Sriram and Harshita Mary Varghese in Bengaluru; Editing by Shounak Dasgupta)