Capgemini results pleasantly surprise

Published: 2025-05-02 02:26:20 ET CAP.PA

Published on 05/02/2025 at 02:26, updated on 05/02/2025 at 02:26

By Kevin Smith

Capgemini announced on Tuesday a 0.4% decline in revenue at constant exchange rates in Q1, a decline that was considered less severe than expected, thanks to the strength of its business in North America and the United Kingdom & Ireland. After some disappointments, this pleasant surprise has led to a surge in the stock price.

In the first three months of the year, the French group posted revenue of €5.55bn, compared with €5.53bn a year earlier, but the currency effect is eating into this symbolic growth. "We had a first quarter that was slightly better than expected, in a macroeconomic and geopolitical environment that remains challenging," said CEO Aiman Ezzat. In absolute terms, performance remains weak with stagnant activity, but it is the relative performance that matters most at present.

The annual targets have been confirmed, suggesting to the market that the group's visibility is not so bad, even if the targets themselves are not very ambitious. It's always relative and absolute. Capgemini is therefore forecasting revenue growth at constant exchange rates of between -2% and +2%, an operating margin of between 13.3% and 13.5%, and organic free cash flow of around €1.9bn.

"Capgemini only provides general information in the first quarter, but the results are better than expected," summarizes Charles Brennan, analyst at Jefferies. He believes that this should not change investor sentiment in the sector in the long term, but the immediate reaction is clear: Capgemini is worth 8% more than the previous day on the stock market, with its share price hovering around €141 in morning trading in Paris.

Analysts appreciated the strong performance in the United States, which was not a given, and the father of all indicators, the ratio of orders to billings, which improved to 1.06. Capgemini conveniently mentioned that this upturn benefited from the development of contracts related to generative and agentic AI, which accounted for more than 6% of new orders.

Kevin Smith