Accenture flags federal contract cancellations, delays as US curbs spending

(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% in premarket trading.

The new U.S. administration is looking to streamline government operations and implement measures to reduce federal spending and 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.

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

Clients have reduced spending on consulting services and smaller-sized contracts due to heightened geopolitical and economic uncertainty, Accenture said in a filing on Thursday.

However, strong demand for large-scale projects in cloud migration, artificial intelligence-related projects and data security has helped companies such as Accenture.

Revenue at its consulting service segment, which accounts for 59% of Accenture's revenue, increased by 3% to $8.3 billion.

But it 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's GenAI business recorded new bookings of $1.4 billion in the second quarter.

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

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