Demand Backdrop Still Soft Heading into 2H

Research evidence excerpt

Demand Backdrop Still Soft Heading into 2H

Q assumptions. We view visibility into framework** = Based on consensus methodology

the assumed discretionary improvement as challenged given that no acceleration e = Morgan Stanley Research estimates

Quarterly EPS ($)

has been observed through early June, and the macro backdrop remains difficult.

2026e 2026e 2027e 2027e

The Astreya acquisition has also yet to close. Management had budgeted roughly Quarter 2025 Prior Current Prior Current

one month of Astreya revenue into the 2Q guide (3.2%–4.7% y/y cc, embedding Q1 1.23 - 1.40a 1.49 1.49

Q2 1.31 1.37 1.36 1.54 1.54

~150bps of aggregate inorganic contribution from 3Cloud and a partial-quarter Q3 1.39 1.45 1.45 1.61 1.61

Q4 1.35 1.47 1.47 1.61 1.60

Astreya), but with the deal still pending as of 6/22, most of that contemplated

e = Morgan Stanley Research estimates, a = Actual Company reported data

contribution is already unlikely to materialize, leaving 2Q inorganic tracking lighter

than guided.

ACN read-throughs reinforce our caution on the backdrop and view that AI is

likely crowding out Services spend. ACN's F3Q26 print further emphasized a

challenged macro (see EPS recap here), where management called out 1) an ~

$100M revenue hit from the Middle East conflict, split evenly between direct

regional exposure and indirect global effects, 2) ~$400M of sales impact in the

Middle East plus longer decision-making in EMEA, and 3) more of the F4Q range

now in play given the indirect impact that only emerged late in the quarter and is

expected to persist. Separately, ACN noted a couple of large managed services

opportunities slipping into FY27 for company-specific reasons, which we think may Morgan Stanley does and seeks to do business with