Accenture's Consulting Biz Suggests A Slowing Economy

Consulting businesses operate at the bleeding edge when it comes to corporate discretionary spending. To that end, we analyzed Accenture’s (ACN) Consulting business (Accenture also has an Outsourcing / Managed Services business) to get a sense for corporate spending and how it may play into Accenture’s Bookings and Revenue in the coming quarters. Our view is that the economy and Accenture’s Consulting business will further slow before they see improvement.

The Yellow shaded columns in the table below are our estimates. Our view is that Accenture’s Consulting business will experience a modest Bookings and Revenue decline in fiscal 2024 (ACN is on an August fiscal year) with a more pronounced slowdown in fiscal 2025 as corporations maintain a short leash on discretionary spend, especially in an elevated interest rate environment.

Fiscal 2025 could be worse than the -7% Bookings decline and -5% Revenue decline that we have modeled. During the great recession, Accenture experienced low double-digit percentage declines in both Bookings and Revenue (fiscal year 2009). Smaller consulting firms had it much worse with declines in the 20-30% range.

What is different this time around is that the Federal Government has demonstrated that it is willing to run enormous deficits and run all sorts of bailout programs should the U.S. Economy weaken (CARES Act in response to Covid, BTFP in response to bank stress in Q1 2023). Therefore, I do not expect liquidity to hit a wall like it did in early 2009. Nonetheless, the economy is slowing.

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