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IT consulting giant Accenture (ACN -4%) is encountering selling pressure today after Bloomberg reported that the company would delay staff promotions by six months due to an extended slump within the consultancy industry. The news is sending a shockwave across the consultancy landscape as several of ACN's peers tick lower in sympathy, including DAVA -5%, EPAM -2%, GLOB -2%, and IBM -1%.

Since reporting Q3 (May) results in late June, ACN has been mounting an impressive comeback, soaring by over +20%. Artificial intelligence kept shares of ACN afloat after delivering a rather underwhelming Q3 performance. Management was allocating significant resources to its AI division, boasting around 55,000 skilled data and AI practitioners as it heads toward its target of roughly 80,000 by the end of FY26, reflecting outsized enthusiasm for a surge in AI-related demand. Excitement was further kicked into gear after ACN posted a nearly sevenfold increase in Gen AI bookings YTD compared to all of FY23.

Against this backdrop, today's Bloomberg story is creating some uneasiness among investors, spurring profit-taking.

• Still, today's report should not be too surprising. Even though shares of ACN gapped higher, its Q3 (May) report in late June showed some cracks. The company missed earnings expectations on a 0.6% drop in revs yr/yr. Meanwhile, management lowered its FY24 (Aug) EPS guidance while narrowing its revenue growth forecast to +1.5-2.5% from +1.0-3.0%.
• Client spending developed differently than ACN anticipated at the start of FY24. Customers continue prioritizing large-scale transformations, which convert to revenue more slowly. At the same time, customers are limiting their discretionary spending, especially on smaller projects, while also delaying decisions, all adding to a sluggish pace of spending. These structural headwinds were not offset by the explosive AI-related revenue, largely because $2.0 bln in bookings is a drop in the bucket compared to ACN's $21.1 bln in total bookings last quarter.
• ACN was confident it was positioned to capture an eventual uptick in discretionary spending. However, the timeline is hazy. EPAM noted last month that there are conversations surrounding significant modernization among customers. Still, it had not turned into anything tangible. Nevertheless, ACN repeatedly cited AI as the catalyst that will ramp overall spending.

Today's reaction illuminates how volatile the macroeconomic backdrop remains. While Gen AI has been spurring significant demand, it has not propped up the rest of ACN's business. Meanwhile, the road ahead remains uncertain. Perhaps management will provide FY25 commentary when it reports Q4 earnings on September 26. Lastly, keep an eye on DAVA as it reports Q4 results on September 19 before the open.