Starbucks ditches AI inventory tool; what it means for accountants

There may be errors in spelling, grammar, and accuracy in this machine-generated transcript. David Leary: [00:00:04] Microsoft cut off its engineers from AI because the bill got too big. So Microsoft, remember, they invested $13 billion into open AI, and they're using AI to write 30% of its own code. But they turned off and cut off the engineers from AI coding tools because the costs spiraled out of control. Coming to you weekly from the OnPay Recording Studio. Blake Oliver: [00:00:29] Hey, everyone, and welcome back to the Accounting Podcast, your weekly roundup of news in the profession. I'm Blake Oliver. David Leary: [00:00:36] And I'm David Leary. Blake Oliver: [00:00:37] Today we're going to talk about what CBA's stock price decline means for private equity. Cba's is the only publicly traded public accounting firm. And that matters for private equity because we assume private equity is going to want to take firms public or offload them someday. And those Investors who invest in the next round. Eventually they're going to want to take it public. Uh, is there room for more accounting firms in the public markets? Also, Starbucks has killed off its AI inventory counting tool. Not a good sign for AI in accounting. And it's funny because we talked about how inventory counting is one of those things that, uh, will not passage. Right? Exactly. Right of passage for auditors and will not be easily automated. So maybe this is a sign that our jobs are secure. We'll talk about that in a lot more. But first, David, let's thank our sponsors. David Leary: [00:01:34] Our sponsors. This week we have canopy on pay, CSR consulting and maxima. Let me ask you something. How much of your day is actually spent doing accounting? If you're like most firm owners, 30 to 40% of your time is eaten alive by the work around the work. 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To see a truly modern automated practice looks like, head over to The Accounting Podcast dot io slash canopy. That is Accounting Today dot io forward slash CANOPY. Blake Oliver: [00:02:53] Here is the stock price of Cbiz, Inc. today it is at $34.68. That is down 51% over the past year. David Leary: [00:03:07] Can you just for illustration purposes, can you also add Intuit in the S&P to this chart? Well can you do things like that. Blake Oliver: [00:03:15] Intuit stock price is right here. And if we look at one year it's down 5354. David Leary: [00:03:24] Similar similar chart. Okay. Blake Oliver: [00:03:25] Yep. S&p 500. Let's take a look. That is down. Let's see. Oh that's up 28. David Leary: [00:03:32] Yeah. The last couple of months. Blake Oliver: [00:03:33] Over the last. David Leary: [00:03:33] Year we've had a bump. Blake Oliver: [00:03:34] Yeah. But I mean I mean we'd have to break it out. But we know that uh, that's due to like the, the AI boom boom that's been going on the bubble perhaps as we've discussed. I mean, I think it's a bubble, at least for some of these companies. Um, but yeah, Seb is getting hammered. Gary Schamus, the CEO of winding River consulting, wrote an article in Accounting Today and the title is What Can We Learn from Cbis? And in this article, he argues that Cbis is sharp. Stock decline should be taken seriously by accounting firm leaders because it's one of the clearest, clearest public tests so far of the private equity backed growth thesis in accounting. It's not necessarily that private equity has failed, but that the market is now openly pricing in execution risk, specifically around integration leverage and slower than expected growth. So let's go back to when Cbiz, uh, acquired Marcum. Cbiz acquired Marcum at the end of 2024, and its stock was at $78, and it rose to $90 in early 2025 and then fell to just under $27 by the end of March of this year. Now it's since recovered to say, $35. But you know, that's way down from 90 bucks in 2025. Uh, and, you know, um, way below where it was when it acquired Marcum, it's like half. David Leary: [00:05:06] So, so you said the peak was March or April of 2025. Blake Oliver: [00:05:09] Yeah. Uh, in, uh, early 2025, $90. David Leary: [00:05:13] In early 2025 is when a lot of these PE deals were had high velocity. I feel like we haven't, we haven't covered any recent big ones in a long time. Blake Oliver: [00:05:22] So that was at the peak of, say, the the PE deal making. He. Gary Seamus cites the main reasons for the drop as, uh, missed earnings expectations, difficulties with the Marcum integration, and then investor concerns about the CPA sector's leverage, limited organic growth and small market capitalization. And CBA's is 2026 guidance is only 2 to 5% revenue growth, which is like not great. I mean, that's, that's inflation less than inflation, right? So it basically it's if you if you consider that, then it's like no growth. So why would investors be excited right about a stock that is basically with a company that's that's not really growing much. David Leary: [00:06:13] Imagine it's also getting that lens of, well, AI can do this just in the same way. Intuit stock and zero stocks are getting punished. Accounting firms AI can just do what an accounting firm does, and it's probably getting that same lens and punishing the stock that way as well. Blake Oliver: [00:06:28] And I agree with that thesis. I think there's a lot of opportunity in accounting for AI to increase productivity, increase billings, increase the value of what we do. But in order for that to happen, you have to reinvent the business model of your firm. And traditional firms, large firms like Cbiz are billing for time. Yeah. David Leary: [00:06:51] And if you're going to be successful rolling out AI, your guidance on earnings has to be 1% because you probably don't see any path to have higher earnings. The billable hour is going to go down right. Blake Oliver: [00:07:02] And you have to switch tax and audit and consulting from these hourly models into a fixed fee or value based model in order to capture any of that additional value or the time savings. Um, and as we've seen, it's in accounting anyway, still really, really hard to eliminate headcount. Ai is not cutting jobs in accounting. We haven't even seen the job market for recent grads decline. As we talked about in the last episode, the job market is steady. There's a shortage of accountants. So we're not cutting headcount and that's not saving them anything. And remember, the larger the organization, the harder it is to change a business model or to integrate new technology. And so I see a real threat to the large accounting firms, from small ones that are more agile, that are able to integrate AI into their systems, switch their billing models, switch the pyramid structure of their firm to something else, and then win work away from the big firms. So it's not like their clients are going to start doing it themselves. But I think that smaller firms are going to be able to win work that used to only go to the midsize firms, because you get that productivity boost that allows your ten person firm to work like a 100 person firm or your hundred person firm to be more like a thousand person firm. Blake Oliver: [00:08:31] And it's not like these midsize firms, like a cbis are going to take work from the big four. I mean, it's possible, I guess, but I think it's going to be more likely that they end up losing work to the smaller firms that are more agile, and they're going to have a hard time retaining managers, directors who would become partners, who can now leave and have their own firms and satisfy serve clients that they used to work with at a at a firm like Cbiz. So I think investors are starting to understand that risk. And I think that's a big risk to the private equity investors in this space, is they're buying into an old business model and private equity. When it comes to large firms, they're not really interested in reinventing the whole model. They tend to be interested in squeezing the lemon or what do you call it. It's like. David Leary: [00:09:24] The diamond. You get that last drip of blood. Blake Oliver: [00:09:26] They find. They find the efficiencies, right? They they figure out how to get more efficient, like marginally, but not like completely reinventing things. That's not what private equity is all about. David Leary: [00:09:37] So, so, so Cbus is in a weird spot where they're not doing like tons of audit work and fortune 500 stuff that the Big four is doing. So they can't go get that. They're not going to get that revenue. They don't have it. But the services and stuff, they offer lots of small to midsize firms. The next 300 sized firms all can offer that. Blake Oliver: [00:09:57] Yeah. Or thousands. Right. David Leary: [00:09:58] Thousands of firms. Blake Oliver: [00:09:59] They have thousands of new competitors potentially. I mean, if you are a solo CPA and you are using cloud Cowork, now, you can do the work of a firm that's dozens of people. You could never do it before. And so my theory is that, like, if you're a firm of like a few dozen people, you can now