Behind the AI boom, the turning point of corporate IT budgets has not yet appeared! Accenture Plc Class A (ACN.US) downgraded by Morgan Stanley, with target price cut to $177.

Morgan Stanley downgraded its rating on Accenture Plc Class A (ACN.US) to "hold" from "buy" on Monday, with a target price lowered from $240 to $177. The reason for the downgrade was that the rationalization of spending related to artificial intelligence (AI) "has not yet truly occurred." Analyst James Foster wrote in a client report, "We are downgrading Accenture Plc Class A to 'hold' as we have not seen the anticipated inflection point in budget growth." "Our previous 'buy' rating logic was that AI spending would rationalize by the 2026 calendar year, with pilot projects that have shown clear returns driving accelerated overall IT budget growth; at the same time, projects that are unlikely to generate returns are terminated, releasing additional discretionary spending for service companies and creating opportunities, and we believe Accenture Plc Class A has a strong advantage in this area." The analyst further explained, "However, this situation has not yet occurred." "Our survey of Chief Information Officers (CIOs) in the first quarter of fiscal year 2026 showed that IT service budget growth for the 2026 calendar year was only about 2% year-on-year. This is because AI spending is squeezing traditional discretionary IT service spending." "It is worth noting that despite the increasing emphasis on AI by businesses, overall IT budget growth has remained relatively flat - around 3.7% for the 2026 calendar year compared to 3.6% for 2025. This indicates that AI pilot projects have not yet proven to bring significant returns. At the same time, rapid iterations and upgrades of AI models require continuous investment from business management, sacrificing other discretionary spending." The analyst added, "Furthermore, we believe the current interest rate environment is a signal that is neutral to slightly negative for the industry. Stable interest rates mean budgets will not receive additional growth stimulus from rate cuts; and if rates rise further, it may create greater downward pressure on budgets." "Nevertheless, considering Accenture Plc Class A's scale advantage, enterprise client network, and extensive involvement in large-scale digital transformation projects, we still believe the company is well-positioned for industry recovery in the future. However, the specific timing of the growth resurgence is becoming increasingly difficult to determine."