Key facts
- Accenture shares have fallen over 57% in the past year.
- Capgemini shares have dropped nearly 40% in the past 12 months.
- PwC's advisory arm saw a 3% dip in revenue, with KPMG reporting a similar decline.
- Accenture, IBM, and Capgemini reported revenue growth in their latest third quarters.
- OpenAI acquired AI consulting firm Tomoro to launch its own AI deployment business.
Shares in major global consulting firms have experienced significant declines as investors express concerns about the disruptive impact of artificial intelligence (AI) on the industry's traditional business models. Accenture, a US-Irish tech and management consulting giant, has seen its value drop by over 57% in the past year, with a substantial portion of this loss occurring in the last six months. Similarly, French IT and consulting group Capgemini has slumped nearly 40% in the same period. Other firms like the London-listed legal group Gateley have plunged over 60%, while tech giant IBM is down nearly 12% and FTI Consulting has dropped by nearly 10%.
Investors fear that AI will lead clients to reduce their reliance on expensive consultants, opting instead for in-house technology solutions or more cost-effective alternatives. This sentiment is reflected in the performance of the Big Four accounting firms, whose consulting arms are experiencing contraction despite overall revenue increases. PwC reported a 3% dip in its advisory arm, and KPMG saw a similar decline, attributed to reduced spending by blue-chip clients influenced by the speed and cost of new AI tools.
Despite these market fears, some of the listed giants, including Accenture, IBM, and Capgemini, have reported revenue growth in their latest third quarters. Accenture posted $18.7 billion in revenue, up about 6% year-over-year, while IBM saw a 9% increase to $15.9 billion, and Capgemini's revenues rose over 6% to £5.1 billion. However, analysts at Morningstar have downgraded firms like Accenture and Capgemini due to AI-fueled uncertainty regarding their future sales pipelines.
AI presents a dual challenge for the consulting sector: it is both a significant threat to established business models and a potential driver of future revenue. The industry is grappling with declining revenue from consultancy arms and the knock-on effects of AI, leading to substantial headcount reductions. Junior staff, whose administrative tasks are increasingly being automated by AI, are particularly vulnerable. The rise of boutique and independent consulting firms also pressures larger players as clients seek cheaper options. The long-standing billable-hour system is at risk as clients expect consultants to leverage technology for efficiency.
Consulting firms, particularly those focused on technology-driven services, face new competition from AI companies themselves, which are now directly selling software and offering implementation advice. Market strategist Lale Akoner noted that investors are seeking stronger evidence of revenue acceleration and margin discipline before assigning higher valuations. Clients are more cost-conscious, making project-based revenues harder to defend.
In a significant development, OpenAI launched its own AI 'Deployment Company' in May, acquiring AI consulting firm Tomoro and its team of over 150 engineers. This move, backed by firms including McKinsey & Co, Goldman Sachs, and Capgemini, suggests a potential shift where major AI players could offer their own optimized consultancy services.
Despite these market pressures, industry leaders are pushing back against doubts. Accenture's CEO, Julie Sweet, stated that the firm is securing work advising companies on embedding AI into their business models and believes its current share price does not reflect its business fundamentals. Gateley's CEO, Rod Waldie, expressed frustration over his company's perceived undervaluation. FTI Consulting believes its expertise-based model offers immunity to AI pressures. Investment director Russ Mould noted that firms are actively acquiring capabilities, such as in cybersecurity, and arguing they can help companies leverage AI rather than be replaced by it. Analysts suggest that firms with specialist expertise, recurring revenues, or clear links to digital transformation remain well-positioned.