Accenture Earnings: Negative Bookings Trend Raises Uncertainty to Future Growth; Reducing Valuation

Wide-moat Accenture reported third-quarter results slightly above our expectations. Revenue grew 7% in constant currency to $18 billion, and the operating margin of 16.8% is an 80-basis-point year-over-year expansion. However, total new bookings recorded two consecutive quarters of year-over-year decline as a result of heightened economic and geopolitical uncertainty. We now foresee a stronger near-term demand headwind for IT services firms, and we are lowering Accenture’s fair value estimate to $311 per share, from $318 previously. Shares currently look moderately undervalued to us, as we believe agentic artificial intelligence-oriented demand from enterprises should provide a stable long-term growth tailwind.