Morgan Stanley analyst James Faucette downgraded Accenture plc (NYSE: ACN) from Overweight to Equalweight with a price target of $177.00 (from $240.00).

The analyst comments: “Downgrading to EW as we are not seeing the budget growth inflection we had previously expected. Our prior OW thesis assumed AI spend would rationalize in CY26, with pilots that demonstrated clear returns accelerating overall IT budget growth, while stopping projects unlikely to deliver returns would free incremental discretionary spend for Services companies, where we saw ACN as well-positioned. This has yet to materialize. Our 1Q26 CIO Survey points to CY26 IT Services budget growth of just ~2% y/y, as AI spend crowds out traditional discretionary IT services. Notably, total IT budget growth is roughly flat (+3.7% vs. +3.6% in CY25) even as AI prioritization rises, suggesting pilots have yet to demonstrate meaningful returns, while rapid model advancement pressures leaders to keep investing at the expense of discretionary spend. Additionally, we see the interest rate environment as a neutral to negative signal, where we see stable rates as limiting any rate-driven acceleration in budgets, while higher rates could add further downward pressure. We still view Accenture as well positioned for an eventual recovery, given its scale, enterprise relationships, and exposure to large transformational programs, though the timing of any reacceleration remains increasingly uncertain.”

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Shares of Accenture plc closed at $170.28 yesterday.