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Driven by broad-based growth across its markets and industries, consulting and IT services company Accenture (A) edged past Q2 EPS and revenue expectations. Despite the upside performance, the stock is trading sharply lower due to concerns that the company's growth is set to slow under the Trump Administration's deep spending cuts. In fact, these DOGE-led spending cuts are already having a negative impact on Accenture's business as illustrated by the 3% decline in new bookings to $20.9 bln, signaling a decrease in the company's future revenue streams.

• The slowdown in new bookings is especially discouraging since Accenture was experiencing solid momentum across its business, including in its largest Americas region where revenue grew by 11% to $8.55 bln. In terms of verticals, Financial Services and Products were notable areas of strength, up 11% and 9%, respectively, in Q4. Impressively, Accenture ended the quarter with 32 clients that had quarterly bookings of $100 mln or more.
• Assisting companies and organizations with their digital rollouts and implementations of AI are two key services that Accenture provides. More specifically, Accenture assists clients in embedding AI tools into their operations, and it also helps clients utilize AI in data analytics and process automation. Therefore, the rapid expansion of AI technologies is providing Accenture with a potent growth catalyst, as reflected by the company achieving GenAI new bookings of $1.4 bln during the quarter. 
• Accenture has also identified a few strategic priorities that it anticipates will underpin growth in years ahead. Cloud Services, one of those strategic priorities, experienced double-digit growth in Q2, fueled by continued growth in cloud migration projects. Security, which generated "very strong double-digit growth" due to increasing client investments in data security, is another area that Accenture is focusing on.
• This good news, though, is being clouded over by Accenture's lackluster FY25 EPS outlook, which was below expectations based on the midpoint of the guidance range, and the decline in new bookings. The soft guidance is a function of DOGE and the reduction in federal spending, leading to the loss of several Accenture contracts. In FY24, U.S. federal contracts accounted for 17% of Accenture's North America revenue, so the erosion in the government sector is a significant development.

Although Accenture slightly exceeded Q2 expectations, the new bookings decline, and the associated DOGE cost-cutting measures that have led to the cancellation of several multi-million U.S. government contracts, is creating meaningful growth concerns.