Morgan Stanley analyst James Faucette downgraded Accenture (ACN) to Equal Weight from Overweight on Monday, slashing the price target to $177 from $240. The downgrade reflects concerns over slower-than-expected IT services budget growth and the impact of artificial intelligence spending on traditional consulting revenue.
Accenture shares traded near $169, down about 0.8% for the session, after falling 43.9% over the past year. The stock has been under pressure as investors await clarity on AI-driven demand ahead of the company's third-quarter fiscal 2026 earnings call scheduled for June 18.
According to Morgan Stanley's first-quarter 2026 CIO Survey, IT services budgets increased just 2% year-over-year, while total IT budgets grew to 3.7%, barely above the 3.6% growth seen in 2025. The bank noted that companies are not reducing overall AI spending but are reallocating funds from other areas to finance AI initiatives, which is pressuring traditional consulting and IT services.
Jefferies also lowered its price target on Accenture to $185 from $210, maintaining a Hold rating. The new target implies an upside of approximately 10% from the last close of $168.89. The stock traded between $166.94 and $173.53 during the session.
Accenture has faced a turbulent year, with shares declining 43.9% to close at $170.28. Multiple analysts, including those from JPMorgan, TD Cowen, Wells Fargo, Stifel, and Truist, have lowered their targets or ratings on the stock in June, citing similar risks related to IT services demand and AI-driven spending shifts.
In its second-quarter fiscal 2026 results, Accenture reported revenue of $18.04 billion, up 8% in U.S. dollars and 4% in local currency. New bookings reached $22.11 billion. Chair and CEO Julie Sweet highlighted "strong AI-driven growth" in the company's March release, but the full-year revenue growth target in local currency remains at 3% to 5%.
Investors are closely watching the upcoming June 18 earnings call for signs that AI projects are translating into larger, more profitable deals rather than small pilot programs. There is also concern over whether new spending on AI represents genuine budget expansion or simply a reallocation of funds from other IT projects.
The broader market context shows that IT consulting firms are navigating a challenging environment where AI adoption is reshaping spending patterns. While AI remains a priority for many enterprises, the pace of revenue realization from these investments has been slower than anticipated, putting pressure on traditional consulting revenue streams.
