AI is eating consulting (ft. Accenture, IBM, Gartner, Genpact)
Three earnings calls, $90 billion in consulting revenue, one uncomfortable pattern
I’ve written plenty of times about how AI is bearish for most software. But what about services - in particular, professional services and consulting? I have an updated take on software coming soon, but this post is about the service providers (e.g. Accenture, IBM) you hire to implement solutions.
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As collateral damage from the 2026 software meltdown, consulting and outsourcing stocks have been getting hammered too. That’s unfortunate (ouch)... because a lot of buy side investors came into 2026 “long professional services”—names like Accenture, Gartner, Genpact, IBM, which were already beaten down throughout 2025. (2026 YTD performance: ACN -10%, IT -36%, IBM -1%, G -17%).
The bullish thesis was straightforward. If 2026 were to be the year of “AI transformation”, then the natural winners would be the consulting firms, since most enterprises opt to hire outside help. Firms like Accenture, Genpact, or Gartner were supposed to print money doing AI transformation projects (which they are!). Plus, consulting firms can dogfood AI tools to improve their own profit margins per engagement (also true!).
But that trade hasn’t worked out so well so far. Gartner sold off 20% after posting earnings (Feb 2nd), and Accenture and IBM are also down YTD after a head fake in January.
So is consulting / sthe next shoe to drop? Can these “professional services” stocks turn around, and what are the short term and long term effects of AI on these businesses?
The hand wavy answer is “AI is killing consulting”, but that’s not exactly true, at least yet. It’s like how software hasn’t seen the seat compression yet, but revenue is a backward looking metric. Similarly, the consulting firm CEOs all affirm our bull case: 1) AI disruption fears are increasing the demand for consulting, and 2) consulting firms are using AI heavily to improve their own margins (see Deloitte getting caught for using AI).
But when we take a step back and listen very carefully to what the management is saying, there’s some worrying trends developing beyond 2026.
First of all, none of these firms gave great guidance (except IBM, which has a reaccelerating mainframe business). But more importantly, there are signs that AI - while being a short term tailwind - can flip into a headwind, and growth may decelerate into 2027. I’ll go over my rationale in this post.
In the following premium section I’ll talk about my view on professional services firm valuations as well as offer a vision for “future of services” in the Claude Code era. Prices for regular paid plans will go up at the end of February.