Accenture: Undervalued GenAI Leader or Snake Eating its Own Tail?

Key Points

• Accenture's bad 2025 continues to worsen, with shares falling after its recent earnings.
• Accenture now trades at its lowest forward P/E multiple in recent memory.
• The company's GenAI business is growing rapidly, but will the technology come back to bite this consulting firm?

 

For international consulting company Accenture NYSE: ACN, 2025 has been a rough year. Shares have provided a total return of approximately -33% as of the September 25 close. This has put the stock at a historically low valuation multiple. In fact, Accenture’s forward price-to-earnings (P/E) ratio of 17x is the lowest it has been in three years. This suggests a strong opportunity for the stock to recover, especially with its GenAI business booming.

However, given market sentiment and the company’s latest earnings, is Accenture truly a value play, or a train to nowhere for now?

ACN Beats, but Guidance Leads Shares Down

On September 25, Accenture released its fiscal Q4 and full-year 2025 results. Compared to analyst estimates, the company’s financials were solid. In Q4, revenues grew to $17.60 billion, up 7.3% from the prior year. This moderately beat projections of $17.34 billion, or 5.7% growth.

Adjusted earnings per share (EPS) reached $3.03, growing by 8.6%. This was 5 cents better than the $2.98 anticipated, or a 6.8% growth rate. Despite this, the stock sold off by nearly 3% in reaction to the results.

This was mainly due to Accenture’s fiscal 2026 guidance, which markets considered weak. The company sees revenue growing by 2% to 5% in local currency, and projects adjusted EPS of $13.71 at the midpoint.

Analysts were looking for $13.78. Still, after adjusting for the Q4 EPS beat, the firm’s fiscal 2026 EPS guidance only comes in 2 cents lower than expected. The stock’s moderate sell-off makes sense considering this. Now, let’s take a deeper look at some of the underlying metrics at Accenture.

Booking’s Growth Recovers, GenAI Continues Strong Contributions

One crucial positive from Accenture’s Q4 was that new bookings totaled $21.3 billion, an increase of 6% in U.S. dollars. Bookings are a key indicator of future revenue potential, reflecting contracts the company signed but has not yet received revenue from. 

This growth was a significant shift from past quarters. In fiscal Q2, bookings declined 3% and decreased by over 6% in fiscal Q3. Despite this, the booking numbers indicate stabilization rather than an outright recovery. Accenture says it has “not seen any meaningful change, positive or negative” in its overall market.

However, the acceleration in the company’s GenAI bookings growth was impressive. They moved up to $1.8 billion from $1.5 billion in Q3. Overall, the company’s GenAI bookings came in at $5.9 billion in fiscal 2025, accelerating every quarter.

This moderately exceeds the $5.5 billion of GenAI bookings at tech sector rival International Business Machines NYSE: IBM over the past four quarters.

Notably, Accenture’s adjusted operating margin increased by 10 basis points in the quarter and in the full year. Although this slight expansion is not a great sign, it is also better than one might expect, considering the dramatic drop in Accenture’s share price.

Analysts See 25% Upside, But Sentiment Continues to Weaken

Currently, the MarketBeat consensus price target on Accenture is approximately $322. Compared to its September 25 closing price, this implies a very significant 39% share upside. However, recent price target updates paint a much less favorable picture. 

The average target updated from September 9 to September 24 is just $291. That number implies around 25% upside in the stock. Still, Wall Street forecasts and Accenture’s forward P/E ratio point to undervaluation. However, sentiment on this name remains very low for several reasons.

First, Accenture is undergoing a significant restructuring of its business. Due to this, the company expects combined charges of $865 million in Q4 and fiscal Q1 2026. This is because Accenture is shifting its workforce to have more GenAI-specific capabilities. A reduction in federal spending at the company is also a key headwind.

Lastly, many believe that although GenAI is a growing part of Accenture’s business, the technology could hurt it long-term. As the technology advances, current customers could increasingly consult GenAI tools rather than Accenture to improve their businesses.

However, the evolution of GenAI also means people’s understanding of the technology will need to evolve, potentially creating new domains where Accenture can add value. How this dynamic will play out remains difficult to know, but few are taking Accenture’s side.

Overall, with sentiment on Accenture decidedly negative, things could get worse for this stock before they get better. Thus, until something materially changes around how the market views Accenture, it feels like a name best avoided.