Here's our initial take on Accenture's (NYSE: ACN) fiscal 2025 third-quarter financial report.

Key Metrics

Accenture Finds Growth in Challenging Environment

Accenture posted solid growth in a difficult period for consulting companies. Corporate customers are scaling back due to macroeconomic uncertainty, and the U.S. federal contracting environment is bogged down by efforts to cut government spending. Yet Accenture still was able to grow revenue by 7.6% and earnings per share by 15% in the quarter, topping Wall Street estimates.

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Financial services was the standout segment based on performance, up 13% year over year, and Accenture saw better strength in the Americas (up 9%) than it did in Europe (up 6%) or Asia (up 4%). Companywide operating margin improved by 80 basis points to 16.8%.

But the results are unlikely to be enough to quell investor fears about the macro economy taking its toll. New bookings for the quarter came in at $19.7 billion, down 6% year over year. Included in that is about $1.5 billion in generative AI new bookings.

Accenture remains a cash generation machine, reporting $3.5 billion in free cash flow in the quarter. The company paid $924 million in dividends and repurchased $1.8 billion of its shares in the quarter, increasing its dividend by 15% compared to fiscal 2024.

Immediate Market Reaction

Investors appear to be focusing on the bookings weakness. Accenture shares were down 5% in premarket trading ahead of the opening bell in New York.

What to Watch

Accenture is now 75% through its fiscal year, and has seen enough to firm up some of its guidance. The company now sees full-year fiscal 2025 revenue up by 6% to 7%, compared to the previous forecast for 5% to 7% growth, and boosted its full-year earnings per share guidance to $12.77 to $12.89, from $12.55 to $12.79. Accenture expects to return "at least" $8.3 billion in capital to shareholders.

There's a lot of uncertainty in the near-term guidance, with the bookings number reflecting the turbulence in the federal contracting market and uncertainty among corporate clients.

But for long-term focused investors, the need for Accenture's assistance in areas such as IT modernization remains as strong as ever, and Accenture appears to be having success establishing itself as a go-to vendor to help clients incorporate artificial intelligence (AI) into their businesses.

Accenture still has a lot of ways to win.

Helpful Resources

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Shares of consulting company Booz Allen Hamilton (NYSE: BAH) fell on Friday, down as much as 5.1% before recovering a bit to a 1.7% decline as of 1 p.m. ET. The decline was notable in comparison with the S&P 500 index, which had rallied 1.3% at that time.

Booz Allen had some negative news today as a result of the Department of Defense announcing big spending cuts. The company gets virtually all of its revenue from government contracts, and the stock has sold off hard since Election Day on the expectation it would lose business.

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However, are today's cuts already priced into the stock?

Pete Hegseth announces $5.1 billion in Defense Department cuts

Last night, Secretary of Defense Pete Hegseth announced $5.1 billion in cuts from the Department of Defense budget. Booz Allen was listed as one of the consulting contracts that were eliminated.

While $5.1 billion certainly sounds like a lot, only $1.8 billion of that total had been allocated to consulting companies. And of that $1.8 billion, Booz Allen was mentioned along with Accenture (NYSE: ACN), Deloitte, and "others."

On the heels of the announcement, Noah Poponak at Goldman Sachs lowered his price target on Booz Allen from $150 to $109, roughly about where the stock is now. Poponak said: "We believed the company's expertise in AI and Cyber gave it exposure to high growing and insulated areas of the Federal spend, but the company has been more negatively impacted by DOGE contract reductions than we anticipated. We see risk to estimates as results are reported in the coming quarters."

Still, given that the stock had already sold off 43% from its pre-election all-time highs, the overly negative scenario could already be priced in.

Should you buy the dip?

While the cancellation of the contract is definitely a negative, it's a good idea to keep some perspective. Over the past 12 months, Booz Allen had $11.8 billion in revenue, growing at a double-digit rate. Moreover, the company had a $39.4 billion backlog as of its January earnings report.

In that light, a mere fraction of $1.8 billion in cuts doesn't seem so bad; in fact, it seems pretty small compared with the overall business.

With the stock now trading around 16 times earnings, compared with an average in the low 20s over the past 10 years, Booz Allen Hamilton could be an interesting value opportunity, provided there aren't many more drastic cuts to its government contracts.

Should you invest $1,000 in Booz Allen Hamilton right now?

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Billy Duberstein and/or his clients have positions in Booz Allen Hamilton and has the following options: short December 2025 $55 puts on Booz Allen Hamilton. The Motley Fool has positions in and recommends Accenture Plc and Goldman Sachs Group. The Motley Fool recommends Booz Allen Hamilton. The Motley Fool has a disclosure policy.