Wall Street Just Sold Off These IT-Services Stocks on AI Fears. Is the Sell-Off Overdone?

Shares of Accenture (NYSE: ACN) cratered about 18% on June 18 -- the consulting giant's worst single-day drop on record. What spooked investors wasn't the quarter. It was the outlook, and the fear behind it.

And Accenture didn't fall alone. EPAM Systems (NYSE: EPAM) slid about 9% the same day without reporting anything of its own. The worry driving this sell-off? The risk of artificial intelligence (AI) threatening the work these firms get paid for.

So is AI structurally shrinking demand for IT services, or is this an overreaction?

Image source: Getty Images.

Accenture: a record drop on a cautious outlook

Overall, Accenture's fiscal third quarter of 2026 (the period ended May 31, 2026) was solid. Revenue rose 6% to $18.7 billion, and earnings per share climbed 9%.

But the trouble was the guidance. Management trimmed its full-year revenue growth outlook to 3% to 4% in local currency, from 3% to 5%. New bookings, a measure of future work, fell 2%.

CEO Julie Sweet tied part of the softness to the war in the Middle East, which she said cut about $100 million from fiscal third-quarter revenue relative to expectations.

And Sweet is optimistic that AI will be a catalyst for its business.

"We believe that AI will be a tailwind for us and our industry as it scales," Sweet said on the company's fiscal third-quarter earnings call.

But the market seems more pessimistic. At about $128 as of this writing, less than half its 52-week high, Accenture trades at only about 10 times earnings.

EPAM Systems: the most exposed?

If any of these businesses looks vulnerable to AI coding tools, it's EPAM. It's a pure-play digital engineering and software development shop -- the hands-on programming work that AI assistants keep getting better at automating.

The stock has been punished for it. Shares closed near $77 as of this writing, down roughly two-thirds from a January high above $220. Adding to the stock's calamity, EPAM was dropped from the S&P 500 earlier this month.

Still, the business held up fairly well in the first quarter, with revenue up 7.6% to $1.4 billion. But management cut its full-year revenue growth outlook to a range of 4% to 6.5%.

In the meantime, EPAM signed a multi-year partnership with AI developer Anthropic and is training more than 20,000 employees on Anthropic tools.

But apparently, this isn't enough to excite Wall Street. Trading at about 11 times earnings, the stock prices in heavy doubt.

Cognizant: bookings that don't fit the panic

Cognizant (NASDAQ: CTSH), an IT-services and outsourcing company, fell about 10% on June 18, to a 52-week low -- even though it reported a solid first quarter back in April, with revenue up 5.8% to $5.4 billion and non-GAAP (adjusted) earnings per share up about 14%.

Even more, its first-quarter bookings rose 21%, and trailing-12-month bookings reached $29.6 billion, up 11%. The company signed seven deals worth $100 million or more in the quarter, including one above $500 million.

At around 9 times earnings, plenty of bad news is already in the price.

IBM: the best-positioned to thrive?

IBM (NYSE: IBM) sits at the opposite end -- its stock slipped about 5% on June 18, a fraction of the others' losses.

The difference is what IBM sells. Consulting is only about a third of its revenue, and it grew just 4% last quarter (1% excluding currency). The rest of its business, however, may be more durable. First-quarter software revenue rose 11% to $7.1 billion, and infrastructure jumped 15% on a strong mainframe cycle. Total revenue climbed 9% to $15.9 billion.

CEO Arvind Krishna, like Accenture's, has called AI a tailwind for the business. But Krishna arguably has more substance behind his claim.

That recurring software and hardware base is why IBM commands a higher valuation of about 22 times earnings, while the pure-services names trade in the single-digit to low-double-digit range.

IBM investors are paying up for revenue they believe AI can't easily strip away.

What's next?

So was the sell-off overdone?

In places, probably. Cognizant's rising bookings and Accenture's 104 client bookings of $100 million or more this fiscal year, up 13%, don't describe businesses caving to AI. And at single-digit and low-double-digit earnings multiples, a lot of pessimism is already baked in.

But the overhang won't lift soon. The fear that AI hollows out demand for consulting and engineering could weigh on these stocks for years, and they could rerate lower still if investors decide their advantages are eroding.

Ultimately, AI may be both a tailwind and a disruptor simultaneously. Perhaps over the next few quarters, we'll get more visibility into whether or not the tailwind is the stronger force.

Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Accenture Plc, EPAM Systems, and International Business Machines. The Motley Fool recommends Cognizant Technology Solutions and recommends the following options: long January 2028 $260 calls on Accenture Plc and short January 2028 $280 calls on Accenture Plc. The Motley Fool has a disclosure policy.