Accenture’s stock price took a significant hit on Thursday, dropping by 7.3%, following the consulting firm’s announcement regarding pressures on its revenues from the federal government sector. The decline in shares reflects investor concerns about changes in U.S. government spending priorities.

Impact of Federal Services on Revenue

During an earnings call for the second fiscal quarter of 2024, CEO Julie Spellman Sweet highlighted that the Federal Services division, responsible for approximately 8% of Accenture’s global revenue and 16% of its revenue in the Americas, has been adversely affected. The company has lost contracts with the U.S. government due to recent procurement reviews.

As noted by Sweet, “Federal represented approximately 8% of our global revenue and 16% of our Americas revenue in FY 2024. As you know, the new administration has a clear goal to run the federal government more efficiently.” This ongoing efficiency initiative has led to a slowdown in new procurement actions, negatively impacting both sales and revenue.

Government Efficiency Initiatives

Accenture is one of the initial corporate entities to feel the effects of the Trump administration’s “Department of Government Efficiency.” This initiative, led by Elon Musk, aims to streamline federal agencies and minimize office space requirements. Sweet explained that the recent guidance from the U.S. General Services Administration, urging federal entities to reassess their contracts with high-paying consulting firms, has resulted in the cancellation of non-essential agreements.

Future Challenges and Market Reaction

“While we continue to believe our work for federal clients is mission-critical, we anticipate ongoing uncertainty as the government’s priorities evolve and these assessments unfold,” Sweet communicated during the call, emphasizing the unpredictable nature of federal contracts moving forward.

Furthermore, Sweet mentioned that the broader economic and geopolitical landscape has contributed to increasing uncertainty, contrasting sharply with more optimistic views shared during the previous quarterly earnings report in December.

Quarterly Performance vs. Market Sentiment

Despite reporting quarterly earnings of $2.82 per share and revenue of $16.66 billion—exceeding analyst expectations—investors remained focused on the implications of slowing federal spending. Analysts had anticipated earnings of $2.81 per share on revenue of $16.62 billion, according to FactSet.

As a result of the recent downturn, Accenture’s stock has plummeted approximately 22.9% over the last month, contributing to a year-to-date decline of nearly 14.5%. Additionally, shares of Booz Allen Hamilton, another consulting firm, fell by 8.1% on the same day, reflecting broader industry concerns.