In the third quarter of 2025, Bristol Gate Capital Partners' US Equity Strategy experienced an underperformance compared to the S&P 500 Total Return Index. This was largely attributed to their limited exposure to the burgeoning AI/TMT sector and the Value sector, which benefited significantly from the Federal Reserve's rate adjustments. Despite these challenges, the portfolio demonstrated robust dividend growth of 15% over the preceding twelve months, underpinned by strong operational fundamentals.
Accenture plc (NYSE:ACN), a prominent professional services firm specializing in management consulting, technology, and outsourcing, was identified as a primary detractor from Bristol Gate's absolute returns during the quarter. The company's stock faced headwinds following a disappointing earnings report from Gartner, an independent research and analysis provider. This fueled a 'bear' narrative surrounding AI, suggesting that generative AI (GenAI) could potentially diminish the value of consulting and business process services offered by IT companies like Accenture.
However, Bristol Gate maintains a contrasting perspective, highlighting the fundamental difference between Gartner's research-focused services and Accenture's hands-on implementation and workflow re-engineering capabilities. Accenture's historical performance during technological revolutions suggests that such advancements often serve as catalysts for its business. The company has proactively embraced GenAI, significantly increasing its revenue from advanced AI to $2.7 billion in fiscal 2025 and nearly doubling its GenAI bookings to $5.9 billion. This proactive engagement positions Accenture for continued growth, demonstrating its capacity to adapt and thrive in the era of artificial intelligence.
Accenture's strategic embrace of artificial intelligence and its established track record of navigating technological shifts underscore a promising future. The company's ability to not only adapt but also to leverage cutting-edge technologies like generative AI for substantial revenue growth exemplifies a forward-thinking approach that can lead to sustained success and positive impact in the global economy.