Techquity
Technology Investor, Fundamental Research
Accenture's rising acquisition spending raises concern about shareholder value as its return on invested capital falls. ROIC dropped from about 113% to 25% while debt tripled in two years to $13.4 billion, exceeding cash for the first time. Revenue grew 6% and operating margin held near 15-16%; 25% is still a very good return and net debt is close to zero. AI's potential to reshape consulting remains a worry. x.com
Accenture's surge on claims that AI is helping the business overlooks how hard it was straining for revenue. Just a few months ago it effectively asked employees to defer vacation so they could bill more hours in Q4 and pull revenue forward. x.com
Accenture's headcount-based consulting model is being cannibalized by AI pure-plays, and it is hard to win in AI when the entire model is selling human labor. Bookings of $19.3B came in below last year's $19.7B, and the stock is making new 52-week lows. Headcount reductions look inevitable across the industry. x.com
Accenture and Wolters Kluwer benefit massively from cheaper AI tokens and margin gains as they deploy AI. Their knowledge costs rank among the highest relative to COGS, but regulatory capture, reputation and sticky customers keep revenue broadly intact. Neither shows clear signs of slowing growth; Accenture guided to high-single-digit revenue growth from 2029. Despite enormous terminal-value compression, an unwinding AI-infrastructure trade could bring a sizeable rerating if fundamentals hold. … Show more
Meta's decade of revenue and operating cash flow growth makes it worth at least $2T. LTM revenue rose from $18B in 2015 to $242B, and operating cash flow from $10B to $133B. A $10B legal charge tied to the teenagers case drove the quarterly EPS miss; without it, EPS would have been $7.40. Quarterly free cash flow turned negative for the first time in over 10 years, raising the question of whether the investment will pay off. x.com x.com x.com
AI's next winners may capture the most value with the least incremental shareholder capital. Equipment suppliers get paid while others largely fund AI factories, though they face competition, cyclicality, concentration and valuation risk. Cash-rich builders can fund much of their own capex, but still need adequate ROIC. Capital-dependent builders need outside financing; leverage could yield enormous returns if ROIC stays well above its cost, but works against them if returns fall below it. x.com
Accenture looks overdone after its post-earnings plunge, with a dividend yield above 5% and a forward P/E in the low 10s, near March 2020 pandemic-low prices. It booked 104 deals of $100 million-plus this year, up 13%, raised its dividend 10% and is buying Dragos, runZero and NetRise to expand in cybersecurity. Yet this is not a growth stock: revenue missed, bookings fell 2%, guidance was cut, the Middle East cost $400 million, and agentic AI threatens consulting. It could fall further. x.com
Accenture's core work of installing software for enterprises is exactly what agentic AI does first and cheapest: the coding, testing and documentation that fill billable hours. For ten years it compounded as the firm, with 786,000 people and $70B in revenue, that taught the Fortune 500 to use its tools. Now those tools may not need a teacher. The stock is down 58% in a year and breaking down both fundamentally and technically. x.com
Alphabet's heavy AI spending is reinvestment into exploding AI and Cloud demand, not a rescue of a struggling business. It raised 2026 capex guidance to $195B-$205B, yet Q2 revenue grew 24%, Cloud surged 82% and operating margin expanded to 34%. The buildout is pressuring ROIC, but ROE and ROA are climbing fast. x.com
Accenture looks undervalued because the market seems to have decided AI kills consulting, while it could be the big winner as companies need AI implemented at scale. Q2 bookings hit a record $22.1B, AI bookings nearly doubled to $2.2B and FCF guidance rose to $10.8-11.5B. It has 85,000 dedicated AI staff, and unlike McKinsey it builds, runs and maintains AI, yet trades at 14x earnings, cheaper than Coca-Cola. This could be very wrong, but it looks interesting at these levels. x.com x.com x.com
Accenture looks set to rebound after shares fell 18–20% on guidance cuts tied to AI eating into consulting demand. AI bookings have since hit records, and it announced a $2B buyback plus a mid-market pivot to reignite growth. Holding above $134.70 should start filling the gap above, with targets of $155.82, $169.76 and $181.94. x.com
