Capgemini Se Ord

Good day and thank you for standing by. Welcome to the CAP Gemini Q3 2025 Revenues Webcast and Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 and 1 on your telephone. You will then hear an automatic message advising your hand is raised. To answer your question, please press star 1 and 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Ayman Esad, CEO. Sir, please go ahead.

Thank you, good morning, and thank you for joining us for this Q3 2025 revenue call. Today I'm joined by our CFO, Miri Bagat. So let's go straight to it. Q3 was a strong quarter. for the group better than expected, and this performance is a result of our team's mobilization, the targeted actions initiated end of last year, and the relevance of our AI-powered business and technology partner positioning. Even in a demanding environment that remains largely unchanged, our performance increased steadily in 2025. The group generated revenues of $5,393,000,000, up 2.9%, year-on-year at constant currency. This is 2.2 points improvement compared to the second quarter of 2025 growth rate of 0.7%. And this improvement has been pretty broad-based. Booking total is $5,161,000,000 in Q3 2025, an increase of 1.5% at constant exchange rate. Now, this represents a book-to-bill ratio of 0.96 for the period in line with traditional seasonality. So the content currency growth rate improved across most regions, businesses, and sectors. By geography, North America recorded the strongest acceleration, reaching 7% year-on-year at constant currency. Growth rates also improved in the UK and Ireland and Asia Pacific and Latin America. And the gradual improvement in continental Europe exists, including in France. It has continued to improve a little bit in the third quarter. From a sector perspective, the strongest growth are in financial services and TMT, which is still showing a high single digit. Manufacturing sector continues to improve, but it's still slightly declining year on year. And finally, by business application and technology services, posted a solid growth of 5.7%. Operation and engineering total revenue also increased by 1.3%, with a very strong growth in business services, while strategy and transformation services are slightly up by 0.7% year-on-year. Qualitatively, clients continue to invest selectively. They prioritize initiatives that support operational efficiency and strategic transformation over growth-oriented projects. This continues to define the demand environment in our industry. So in this context, we continue to see strong interest in technology-led solutions that deliver tangible business value. This translates into sustained demand for cloud, digital core, data estate modernization, and AI and Gen AI solutions. So let me highlight a few deals booked this quarter to illustrate this. For Telia, we are delivering a unified and future-ready digital commerce experience solution, enabling personalized journey, journey dynamic pricing and seamless system integration this will enhance customer experience accelerate product launches and ensure consistency across all digital touch points and this also lays the foundation for agentic solution development for the netherlands police capgemini will carry out a major digital core upgrade this project replaces the current legacy system with a modern integrated and future proof scp platform that enhances service delivery, reduces complexity and cost, and ensures data quality, compliance, and agility across the organization. This project will enable the Netherlands police to modernize and streamline their business operations. And finally, CAD-GNI will deliver and manage the sovereign cloud infrastructure for European public sector clients. This involves transitioning all client IT systems and applications to the sovereign cloud, and safeguarding dedicated hardware in regional data centers. As a strategic partner, Capgemini takes end-to-end responsibility for the operation of the client's critical IT infrastructure and applications. Now, our positioning as a business and technology transformation part of our clients is well-recognized. Leading industry analyst firms consistently rank Capgemini as the leader across the key capabilities of the digital economy. Let me just cite a few over the past few months. In cloud, both Forrester and IDC rank us as the leader in areas such as application modernization and multi-cloud managed services. They are both critical to clients seeking to accelerate their digital transformation. In data and AI, both IDC and Everest have praised our leadership in application development services for AI and AI-enabled transformation and industry-specific AI capabilities. And this underscores our ability to deliver tangible business value for our client by leveraging AI technologies. We are also recognized for our strong foundation in business process services. This position is now further strengthened with the acquisition of WNS, which expands our skill and unlocks new value with agentic AI-enabled intelligent operations. Finally, we continue to lead an intelligent industry where our expertise in connected products, IoT, and engineering services positions us at the forefront of industrial innovation. Now, this recognition validates our strategy and confirms that Capgemini is uniquely positioned to help clients navigate and thrive in an AI-driven world. So speaking of AI, we are accelerating the integration of AI across all our service portfolios in every industry we serve. It enables clients to deliver tangible business value. Our end-to-end AI transformation approach for clients is composed of three main elements. The compass, the Capgemini Resonance AI framework, which helps clients set the right priorities and lay the groundwork for successful AI adoption. Our portfolio of AI first offerings to turn the promise of AI into reality. And RAISE, our platform that makes large-scale deployments possible. So today, I want to focus on RAISE. Moving AI proof of concept to AI in production and operated is complex for large-scale organizations. To get the benefits from AI transformation, enterprises need AI for business. AI agents that can move to production and be operated is what we call enterprise-grade AI agents, as opposed to what we could call toy agents. To make it real, we have developed the first enterprise-grade AI agent engineering platform, RAISE Builder. The Builder enables to design agents that are reliable, adaptable, and secure through the entire lifecycle. It also avoids vendor lock-in. It's compatible with the three main hyperscalers and enables seamless integration and interoperability with other AI agents. On top of the RAISE Builder, We also have a gallery of 350 pre-built enterprise-grade AI agents. We are also leveraging AI for our own operations. We have recently launched our proprietary and AI-powered data and knowledge management platform to empower our people. It's cost-effective, secure, compliant, and ready for agentic AI at scale, and available across the whole group with an innovative data structure that we are showcasing to our clients. So our investment in proprietary platform delivery frameworks and talent combined with strategic partnerships positioned us as a recognized leader in AI. This is reflected in robust deal wins, bringing generative AI and authentic AI to over 8% of group bookings. Our clients trust us, and we are delivering value for them. Let me take a couple of examples. We recently signed a strategic partnership with Bank of Queensland to entail AI-powered business process and technology transformation. We will completely transform some of the process, such as collections or financial crime, leveraging AI. We will not only simplify and hyper-automate operation, but also deliver best-in-class and innovative experience for customers and bankers. This strategic partnership also helps DOQ access skilled AI operations and equip their teams with an AI academy. Also, in our collaboration with Orano, we are deploying autonomous humanoid robots to replace manual intervention in nuclear radiation zones, directly improving worker safety and operational resilience. This is physical AI, the convergence of AI and robotics into intelligent machines that navigate and act like human-like dexterity. It's a breakthrough that transformed our cutting-edge lab research into real business value today. Now with the acquisition of WNS now complete, we lead on the intelligence operation market, addressing a new and fast-growing demand for agentic AI-powered business operations. Since the advent of Gen AI, enterprises have focused significant attention and increasing investment on Gen AI, and more broadly, AI. Today, clients are gaining maturity around how to best leverage Gen AI and understand the limitation of an approach solely based on developing use cases and trying to scale them. Over the past 12 months, this has led to the emergence of new, sizable business opportunities. Clients now consider large transformation contracts with a much broader scope to cover a significant part of their operations. They are looking for a partner who can not only run their business processes, but who can fundamentally transform their operation, leveraging data, AI, and technology. The objective is not just about efficiency and cost reduction, but a significant improvement in business outcomes. This is why transformation of business processes will be the showcase of Gen AI and Gen TKI. It's about delivering business value, shifting to outcome-based pricing for next-gen IP-led services. And to achieve this, intelligent operation must combine consulting-led process-free engineering, industry-specific solution and platform, domain knowledge, DPI expertise, technology, of course, and digital operations at scale. And with the acquisition of WNS, we are uniquely positioned to capture the demand for intelligent operation and lead in this far-growing market opportunity. Going to the outlook, we had another, after another good progression in terms of growth, we updated the outlook for the year. We raised again our growth objective and our operating margin target and keep our organic free cash flow target unchanged. So let's be clear, now we expect demand environment is going to remain unchanged for the coming quarter. So we don't see really any improvement in the demand environment as such. So after the solid improvement we delivered in Q3, we're not counting on an organic growth that will continue to accelerate in Q4. But it also clearly implies that the second half is shaping up to be stronger than we initially expected. And with this, we are now targeting 2025 organic growth to be slightly positive versus slightly negative to flat previously. With the WNS acquisition complete, we are also updating the scope impact on revenue growth. WNS will contribute around four points to Q4 growth and one point to full-year growth. All in, this brings our constant currency growth target for 2025 to be between 2% and 2.5%. up from previously minus one to plus one and this is above the high end of our initial guidance given in february the top end of this range assumes stable demand environment while the bottom end accounts for some unforeseen headwinds our margin and cash we aim to demonstrate again the resilience of our model despite the challenging environment we target an operating margin of 13.3 to 13.4 and an organic free cash flow of around 1.9 billion Thank you for your attention and now hand over to Nidhi.

Thank you Ayman and good morning everyone. Let's kick off with our quarterly revenue growth. As Ayman has just highlighted, we've seen our activity trends improve further in Q3 thanks to the targeted actions we've put in place over the past year. This progress is showing up across most regions, sectors and businesses and I will get into those details in just a moment. At constant currency, Q3 revenues grew by 2.9% year-on-year. That's a 220 basis point improvement over Q2. For the first nine months of the year, our constant currency growth stands at plus 1%. Like in the first half, M&A contributed about one point in Q3. As recently announced, WNS will be consolidated from October 17, 2025, which will lead to a total scope impact of around five points in Q4 and around two points for the full year. Now let's talk about SX. Currency headwinds have picked up, with a negative impact of 2.6 points in Q3, largely driven by the USD depreciation against the Euro. This led to a reported growth of plus 0.3% in Q3. For the first nine months, the SX impact was minus 1.1 points, and the reported growth minus 0.1%. Looking ahead, we expect the FX to represent a 3.5 to 4-point headwind in Q4, which means the full-year negative impact should be within the minus 1.5 to minus 2-point range as shared in July this year. Let's start by looking at our revenues by sector. At constant currency, financial services and TMT delivered strong year-on-year growth in Q3 at plus 8.5% and plus 7.2% respectively, building on their solid momentum from Q2. Consumer goods and retail also picked up, returning to slight growth at plus 1.8% in Q3. Public sector and energy utilities maintained solid momentum at plus 3.4% and plus 2.3% respectively. Manufacturing and services improved in Q3 versus Q2, with declines limited to minus 2.6% and minus 0.5% respectively. To summarize, The strongest acceleration between Q2 and Q3 came from financial services and consumer goods and retail, complemented by a visible improvement in public sector and manufacturing sector, which benefited from growth in life sciences. When looking at the revenues by region, this acceleration between Q2 and Q3 is visible in all the regions of the group. Advanced in currency, North America saw revenues rise plus 7% year-on-year driven by financial services, P&T, and manufacturing, especially in life sciences. UK and Ireland grew by plus 9% with robust broad-based growth led by financial services and TMT. France declined by minus 4.7%, which is a slight improvement over the previous quarter. Revenues in the rest of Europe are down by minus 1.5% compared with minus 2.3% in Q2. Solid growth in public, consumer goods and retail, and financial services was offset by softness in manufacturing. Asia-Pacific and Latin America grew by plus 13.6%, with particularly strong growth in financial services, manufacturing, energy utilities, and TNT. Now looking at our revenues by business. At constant currency, total revenues of strategy and transformation services were slightly up, plus 0.7% year-on-year. Applications and technology services, our core business, posted solid growth of plus 5.7%. This represents a 250 basis point acceleration when compared to Q2. Lastly, operations and engineering is back to growth in Q3 at plus 1.3%. We are particularly pleased with the performance of our business services, which delivered another quarter of strong growth. Turning to bookings. Q3 bookings totaled $5,161 million, up 1.5% at constant currency rates. The book-to-bill ratio for the quarter reached a solid 0.96, in line with our traditional seasonal pattern at this time of year. Our sales pipeline is also up year-on-year, and we continue to see a good funnel of large deal opportunities. Now let's talk about headcount. Total headcount stands at 354,700 employees at the end of September 2025, up by 4.7% year-on-year. Our onshore headcount decreased by about 1% year-on-year, while offshore increased by 9%. Consequently, offshore leverage is now 60%, up by three points compared with September 2024. This is mainly driven by strong traction in segments with higher offshore leverage, such as financial services, North America, and the UK. Finally, attrition remained stable over the past quarter. This brings our last 12-month attrition rate to 15.6% at the end of September 2025, essentially stable year-on-year. Let me now take a moment to highlight a milestone that reflects the confidence of the debt capital market on our strategy. In September, we successfully completed a €4 billion bond issuance to finance the WNS acquisition. The response was remarkable. The offering was oversubscribed more than three times and this allowed us to secure very attractive pricing. With the acquisition of WNS, we uniquely positioned to lead the intelligent operations market and generate profitable growth by serving the fast-growing demand for agentic AI-powered business operations. On that note, Ayman, I hand back to you for the Q&A session.

Thank you, Nivi. So let's now open the Q&A. So to allow for maximum number of people in the queue to ask questions, kindly ask yourself one question and a single follow-up. Operator, could you please share the Q&A instructions?

Thank you. To ask a question, you will need to press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. We will now take the first question. From the line of Balaji Tirupati from Citi, please go ahead.

Hi, good morning. Thanks for taking my questions. Good morning, Iman. I'm glad to see the continued growth recovery and back to positive organic growth. Iman, the results year till date have been better than expected, despite macro, which probably has been unsupportive at the least. Could you share color on some of the drivers behind that? And in the unchanged demand environment, do you see these actions continue to help you going forward? And then I have a follow-up question.

Remember the actions, we launched a whole bunch of them at the end of last year, which really around basically creating a stronger focus in terms of the go-to-market, going beyond some of the large accounts to really expand our focus beyond that, so a lot more discipline in terms of execution, to think around the our deals, our bids, but also our delivery. So overall, we have put a lot more emphasis to actually some of the deployment. And as you know, we also have done some changes from a leadership perspective. And it's paying off. We have a very disciplined approach. We have, of course, reinforced a number of our offerings to be much more AI-led. So we are aligning to the current environment of what our clients are expecting us to do with a strong focus around really delivering tangible results because that's really becoming the key element with clients. I think there is investment possible, but clients want to see tangible value delivered, not just technology deployment. And I think that's really an evolution that we are seeing in the market to which we have adapted, which has been supportive in terms of us being able to continue to expand our market shares notably as we have seen outside of continental Europe, but even in continental Europe in a number of countries.

Thank you. And follow up on the headcount evolution. I appreciate current growth driven by North America and UK. Still, is the contrasting evolution between onshore and offshore headcount is also a reflection of clients' cost consideration across regions? And how should we think of margin implication of the same?

Yeah, I mean, I don't think it's just cost considerations. It basically is we are declining in Europe. So Europe has less offshore leverage. We have more headcounts in Europe. So we are reducing headcounts onshore. I mean, headcounts are not coming down onshore. They're not coming down in the UK or in the US because we are in strong growth. But they are definitely coming down in continental Europe. That's really the driver of headcount reduction onshore. On the other side, yes, I mean, the On the offshore side, notably in India, but not only in India, we really continue to see continued growth that support basically the growth we have in the UK and the US, as you mentioned. I mean, today, frankly, I think all this is priced pretty competitively. I don't think there's a big driver in terms of margin. There's no driver in terms of margin linked to the fact there's more offshore growth. I mean, that was true in the past. I don't think today it's a driver anymore.

I appreciate it. Thank you. Thank you.

We will now take the next question. From the line of Mohammed Mawala from Goldman Sachs, please go ahead.

Great. Thank you. Hi. I'm . And congrats on the quota. Just two from me. Firstly, just in terms of the environment, How should we think about, you mentioned that the kind of spending environment is still quite challenged. How should we think about sort of the implied kind of Q4 exit rates and kind of visibility that you have around sort of organic growth next year? And secondly, I know that you called out sort of gross margin and weakness and pricing pressure in July. We've seen, you know, increasingly more and more players in the industry called us out How was that sort of evolved in the third quarter? And then just a quick clarification, the organic free cash flow guidance, does that include any WNS contribution or is it being performed? Thank you.

Okay.

On the exit rate, I mean, right now, as I said, we don't see an acceleration, but Right now, we expect Q4 to be in line with Q3 on the organic basis. The rest will come from the additional four points in terms of growth coming from the inclusion of WNS. So in all good terms, we should have an exit rate which is similar to what we see in Q3. Next year, it's too early, so I will not comment on next year. We talk about next year in February, if we can wait until then. We have more visibility and I think I'll be in a more comfortable position to comment, but of course we are positive about the fact that we have a positive exit rate at the end of this year. On the pricing pressure, it's still there. I mean, there's no change in the pricing pressure. The market remains competitive. There's no change in the environment. Clients continue to be focused really around operational efficiency, around cost, around productivity. We start to see some green shoots around clients getting to focus, start focusing on growth, but I think it's really too minimal to take that into account, which means in that kind of environment with limited growth, the pricing pressure remains quite important.

So more to your question on organic free cash flow, yes, it does include the WNS contribution. Just to note, the full year a contribution from WNH is about 100 million, but then if you take less than a quarter on this year, it doesn't necessarily make it as material in that context. So I think that hopefully answers your question.

Yes. Thank you both. That's great. Thank you. Thank you.

Thank you. We will now take the next question. From the line of Sven Merigt from Barclays, please go ahead.

Great. Good morning. Thank you for taking my questions. Maybe first the regional questions. North America has been obviously very strong. Can you comment just what the read across from this region is to the rest of the business? Because it has been. Sorry, the read across? From North America to the rest of the business, given that the region has been seen in the past as a leading indicator. And then maybe a second question on the margin. You lowered that slightly despite a slight accretion from WNS. And I hear you pointed out that this is due to regional mix, but is there anything else you would point out?

So first on the Rideaucross, I mean, to think I don't see a Rideaucross. I think we have such differences between regions today. I don't. We have different mixes in terms of industries, and the economies are at different stages. So I don't really read across. We're trying to see how we can improve our position and our growth in our region, but I would not see the acceleration in North America as being like an early sign of potential acceleration in Europe. I mean, you see the situation in France remains quite unstable, and we don't see really a big recovery in France, and we see the impact by manufacturing in a large part of the rest of Europe. So we'll continue to push for improvement, But I will not over read from NA to Europe if that's what's underlying your question. On the margin side, we just, you know, we're tightening the margin because we are now, you know, two months before the end of the year. So we give a more realistic picture about where we expect to land. In fact, the WNS impact, we're talking about a couple of months, it's really not material in our results. And then right now we still have to, all the numbers and see exactly what is the impact that we really see it as being minimal for 2025.

Thank you.

Thank you. We will now take the next question. From the line of Laurent Doré from Kepler-Chevre, please go ahead.

Yes, good morning Emman Nevi. Congrats for the quarter. We also have two questions. The first is if you could update us on the trend in your BPO business and potentially could share the performance of WNS in the third quarter. And my follow-up. Sorry to ask again on the margin side, but you have an acceleration of the organic growth of roughly 2% in the second half instead of being flat, and we don't see that translating into margins. So going to next year, what kind of acceleration in growth rate would be needed to start to have some kind of leverage on the profitability? Thank you.

So first on our business process services, you know, our growth rate is above 10%, you know, a few points above 10%. So I think we are doing extremely well, and we did say that we expect a pretty strong growth in our business services. On WNS, you know, I cannot really update you on the accuracy at this stage, but it is, It is in line with the expectation as far as I understand from the numbers. As you know, we don't have fully audited numbers. So, but it is from what I have seen in line with the expectation that they have given for their Q2, because it's a Q2 in the fiscal year. On the margin side, you know, again, you know, we see that the environment is a lot of pricing pressure, if you haven't noticed. It hasn't significantly changed. So, I mean, for the margin pressure to go away, it's our growth, but it's also the overall market. The market is soft. As long as the overall market is soft, you know, people are really very aggressive on pricing. And this is the current situation. And this is not going to change unless the overall market, you know, expands at a faster pace. So it's our growth, but it's also the growth of the overall market that has to be taken into account.

That's very clear. Thank you, Eman.

Thank you. We will now take the next question from the line of Frederic Boulan from Bank of America. Please go ahead.

Good morning, Eman. Good morning, Yves. So a question for me on just following up on this pricing question. So you say it remains tough, but are you seeing some specific segments where delivery supported by GNI is driving much more significant pricing pressure and that's offset by some areas where you see incremental demand around data strategy. So interesting to hear what kind of role Gen AI is playing in the pricing environment or not. And then in particular, interesting around your Gen AI slide and platform, etc. From a client perspective, can you share a little bit what Intel in terms of investment in their data strategy, infrastructure, choices, etc. And then if I may follow up on the free cash flow side, any specific elements you want to call out for this year and next? I mean, in particular, there is a discussion around corporate tax rate in France. So, you know, Kim, to hear your thoughts around that, any working cap or element you want to flag. Thank you.

So, listen, I believe we're led by Kenya. I mean, there have been High client expectation at the beginning. I think this is becoming a bit more realistic. It doesn't change really the pricing environment. But as we have seen, not only us, but a number of companies in our sector have small growth that continue to add headcount. It shows that for the moment, the expected impact that everybody expects in terms of significant improvement in productivity has not happened. We're not saying that there's no improvement, but it's quite limited for the moment. And I think it's not playing that much in terms of the pricing. I think the tension of the pricing environment is much more coming from just the soft market than it is in terms of the real impact of GNI today on pricing.

On the question regarding the second question, hold on.

The question was around any specific investments you think from a client perspective around their data strategy or infrastructure.

Yes, so it's a very good question. You know, I spent a couple of weeks in California and I had lots of interaction in some events with a number of US CEOs who tend to be a little bit more advanced around trying to deploy and experiencing with GNI. When you ask them what is your number one impediment to deploying AI skills, the answer is, to a large extent, data integrity and data availability. It's clear that the modernization of data estates and providing ready data to be able to feed a genetic AI in general is a critical aspect. So I think you'll see over the The coming 12 to 24 months, a significant increase in work around data, as clients now realize that this is really the main impediment to deploying AI at scale. So it's a valid point. This is really where a lot of the focus is today.

Coming to the organic free cash flow point, clearly we maintain our guidance on organic free cash flow, but I'd like to remind you that this year we have a higher cash tax rate in comparison to the previous year. because, of course, we've got the impact of the French surtax that we have to pay out, but there's, of course, also the currency headwinds and generally lower income from cash. So in that context, I think the fact that we maintain that guidance, I think, is pretty resilient. Now, having said that, it is, of course, a tough environment, and it takes a lot of fiscal discipline to be able to generate that cash, whether it's invoicing or whether it's collection, whether it's billing, et cetera. Our teams are on it every single day. So it's not easy, but it's something that we stick by.

Okay, thank you.

Thank you. We will now take the next question from the line of Nicolas David from AutoBHF. Please go ahead.

Yes, good morning, Eman and Nivi. Thank you for taking the question. The first question is regarding the Q4 organic growth. Could you give us a bit of color regarding the reason why you don't expect further expression because in Q3, you proceed a nice acceleration and when you look at the quarter-on-quarter performance implied by even if you are at 2% again organic in Q4 it would imply a deterioration of the Q&Q let's say compared to seasonality historical seasonality does mean that there is some sectors that could deteriorate it or do you expect very very high level of furlough but I think that last year furlough were also pretty high so Yeah, any color would be good. Maybe manufacturing and a bit of manufacturing here would be great. Thank you.

Well, listen, it's improving, but we see the environment doesn't improve. So, I mean, it's quite challenging to be able to drive improvement. We still have a drag that we continue in Europe, especially in France. So now we have headwinds as well. So I don't think we can continue to improve independent of the environment. I think we are. We have been able to gain market share, we have been able to kind of address some challenges we had, and to be able to get reasonable organic growth, and I think it's good. Now, I don't expect significant accelerations, you know, in the short term without some changes in the environment. The year-on-year comparison with so many changes, you know, of mix of environment, et cetera, is really very difficult to say that that Q4 compared to Q3 would be a bit less than last year or something like that. I think there are too many moving elements to kind of really go to some simplification, I would say, in terms of assessment. I think we are happy to be able to sustain the organic growth and have a good exit rate coming out of Q4 going into next year.

All right, thank you. And my follow-up would be on commercial momentum. Do you see evidence of very large outsourcing deals relying both on IT and BPO with agentic transformation in the market? Do you see more of them already?

If you think about interior operation, yes, definitely I see traction. I see we are well positioned on some very large deals. So yes, I'm quite positive about what we see today and the impact of intelligent operation, you know, on basically winning some very large deals in the near future. Great. Thank you.

And congrats for the performance.

Thank you. We will now take the next question from the line of Charles Brennan from Jefferies. Please go ahead.

Great. Good morning, guys. I'm trying to get my arms around the margin downgrade for the year. I think with new contracts, we're used to margins being low to begin with and then margins building over time. As we move more towards outcome-based pricing, does that get more extreme? Is it more cost-consumptive in the early phase? And is that a contributor to the margin outlook for the year? Or is the margin outlook for the year just as simple as price pressure? And then secondly, on WNS, I think Nivi, you alluded to the fact that cash flow historically hasn't been particularly good at WNS. Are there any levers that you can pull to improve that? Or is it just a more working capital consumptive business than Capgemini? Thank you.

Thank you, Charles. I see that you're making a big effort to be positive. When you take the margin guidance from 13.3, 13.5 to 13.3 to 13.4, I don't consider that as being a margin downgrade. We're talking about 10 bps. I think it's normal that at this time of the year, as we are going the last two months of the year, we are able to give you a bit more precise outlook by tightening a little bit the margin. I consider it's not a margin downgrade, it's just basically tightening a little bit the margin outlook and we are still quite resilient in terms of margin in an environment that's extremely price competitive and it takes a lot of work to sustain the margin in this type of environment. So I am pretty satisfied with what we're delivering. A lot of this UDs have been very competitive basically upfront in terms of investments to be able to start them up. Outcome-based pricing, although it's picking up, it's still a very small part of the revenue over a long period of time. Yes, we do expect to see positive impact from outcome-based pricing.

So, Charles, I think, just to clarify, I think what I said earlier in response to Mo's question was more that, you know, WNS generates a range of about 100 million free cash flow per year, and that wouldn't be very material in the context of what we're talking about this year. But coming back to how we will work with them on it, as we do what we do on various other acquisitions, we will apply very strong financial discipline to the WNS market form of cash flow as well, whether it is in terms of conversion, whether it is in terms of billing, invoicing, etc. So we manage that very, very carefully. So no change there. And of course, I remind you that our free cash flow conversion has been pretty good. So that's something that we will continue to be very focused on.

Perfect. Thank you. Thank you.

Thank you. We will now take the next question. from the line of Adam Wood from Morgan Sturley. Please go ahead.

Good morning, Adam. Good morning, Miri. I'm going to attempt to license the movement on the revenue upgrade. So I've got two questions. First of all, maybe just on the actions you've taken through the year. I mean, I think very clearly we've seen The impact of that in North America, I guess, is the market as well. When we turn to continental Europe, I mean, have the actions that you've taken there worked their way through and that's the limit of what you can do. And now it really is just down to the macro turning and the environment improving. Or is there still more that you can do internally with the actions that you take to change the course of business, particularly in France, but also in the rest of Europe? And then maybe secondly, on WNS, now you've got into the group, could you maybe give us some first impressions there? And you talked about some very big transformational deals that you're better positioned for. Can that happen straight away that all you needed was that deal and the scale to happen? Or is there a time lag where customers need to see the businesses get integrated? the office integrated to be willing to commit.

Adam, you had to slow down a little bit because I couldn't follow all your second questions. So can you go back on the question of WNS? Of course.

WNS, really just first impressions now that you have control of the company, have you found that? And then you spoke about big transformational deals in that area. Can you close them almost straight away because all customers needed was to see that deal closed to give them the confidence that you'd be able to run? Or do you need some time to put the offers together, demonstrate that the two companies are working together before customers will commit those very large deals to you?

OK, so thank you. First, on the actions in Europe, I mean, frankly, we still have a pretty big impact in Europe coming from manufacturing, and specifically . I think if you really the picture looks better. which i think is important so it's it's not only auto of course we have you know in france it's not just about the auto sector but definitely in some other countries it's really auto has had the significant impact and it's still weighing i think so i think over time as we stabilize that start getting better but it's gradual from that perspective so we continue to take action in europe as you imagine we're trying to continue to boost the top line and we see some positive impacts You know, you see in the rest of Europe, we see the top line improving a little bit, so I think we have still some actions to take there and to basically, bit by bit, to really stabilize our auto environment, which has been a major drag, including in our manufacturing. On WNS, and you see now that you're in, you know, we are in for a few days or so, a bit early to be able to really draw that, you know, I think there's no surprise so far. The interactions with the leadership have been positive. We already have a number of cross-selling opportunities to be working together. Quite a few, actually. A lot of demands to be able to work together on a number of deals and also from clients. I think on intelligent operation, yes, it has to provide credibility. We are closing on a very large deal. And I think the fact that we made the WLS acquisition, not just because of the capabilities, also I think by making such a big investment, credibility with clients about the fact that this is important to us and we really believe in it, is playing already in some of the deals. So I think it does have a positive impact and the deal we are about to transform is I don't know if we'd have got it if we hadn't made that announcement about the acquisition of WNS. So yes, I am pretty positive about the impact.

Perfect. Thank you very much.

Thank you. We will now take the next question from the line of Michael Reyes from UBS. Please go ahead.

Good morning. Thank you. Just digging into WNS, I appreciate it's only a few days since you closed it, but there's maybe 20, 30 customers that have sizable relationships with it. Can you talk about the overlap and what sort of opportunities you see for the Gemini Heritage business there? And if you already have a relationship with some of those customers? And then, Ayman, you also talked about software and AI. Can you give some context to how big an opportunity you see that? I'm aware of the blur relationship with Microsoft and Orange in France, but where else are you looking to sort of expand there? Thank you.

Well, first on the overlap. Frank, I think the good news is that we have limited overlap. When I look at some of the largest crisis clients where we are not, uh so i think that could use for us because that we provide a lot of cross-selling opportunity and vice versa they're really very very strong in the internal sector here we have some overlapping some clients but also enforces our strategic position with some of these clients but there's also many insurance clients and many banking clients where they are not and where we are present so and here i really see positive cross-selling opportunities and in general i think there are there is There are some very nice clients, which we are not, in the UK, in the US, in Australia, where we're really going to start working on joint account planning and see what we can do in terms of joint proposal. On the sovereign AI opportunity, I mean, it's sovereign, not necessarily AI. AI plays, yes, if you engage the large language model, but I think we have seen an increase of course, this year in terms of requirement for sovereignty. Not always well-defined, but definitely people have become much more sensitive, and not only in Europe. If you go to Asia Pacific or Middle East, I think it's also quite important in terms of how to protect notably the sensitive data and sometimes goes beyond that to continuity of operation. It's a growing opportunity. I think Blue is part of the solution, and it will be coming live in the coming weeks. But I think beyond Blue, there is also the investment we have done in Cloud4C, which really starts looking at providing a very optimized cloud environment, private cloud environment, which I think is going to be part of the sovereignty solution. So you see that the sovereignty solution will move to a much more hybrid environment, in terms of cloud, and the private cloud will become a more significant part of the solution to be able to provide sovereignty. So that's part of what we're working on, and we have a discussion with many actors across Europe and the US to see what are the options to be able to address some of the client concerns around sovereignty.

Thank you.

Thank you. We will now take the next question from the line of Toby Ogg from JP Morgan. Please go ahead.

Yeah. Hi, morning, Eamonn and Nibi. Thanks for the question. Perhaps just following up just on the outcome-based pricing, Eamonn, you mentioned a small part of the revenue and kind of seeing signs that's picking up. Could you just give us some examples of where you've been able to successfully implement outcome-based pricing? and then just how you can actually drive that outcome-based pricing given the competitive intensity of the industry. And then just to follow up just on the margins, appreciate it's a bit early on the growth as discussed, but on the margin side, there should be a bit more visibility around cost evolution, investments, et cetera. Any factors we should be thinking about, puts and takes on the margin for 2026? Thank you.

Okay. Well, outcome-based pricing, listen, again, I think it's early days. So what we have seen outcome-based pricing in areas like, you know, can be transaction-led, for example. So where clients, you know, typically it can be sometimes even in an infrastructure management environment or in a digital BPS environment, but clients are going to be paid by transaction or paid by server or things like that, which is, It's linked to really a volume, not really linked to a team with a cost, etc. And this is something that has been increasing. The other thing is you see also mixed environments. So we have, for example, a client where we have an environment where some of the pricing of the contract is linked to the revenue growth. So it's not a very large part, but part of the contract is linked to actually the top line. We bet on a client that has good growth, so it's supportive in terms of margin. So it's really mixed quite a bit. But where we see a lot is going to be around really delivering tangible results. And I think in intelligent operation, you probably see a bigger proportion where clients do expect cost reduction as part of the contract, but also measuring specific outcomes, improvement in outcomes. And we've seen some of the... It's really part of the discussion. It's part of what they value in terms of what we bring, which is not just commitment around the fact that we're going to reduce costs in some processes. It's also the fact that we are committing to delivering business outcomes out of this process.

On margin particularly, the puts and takes remain not very different to what we've talked about earlier, which is the focus being entirely on the mix shift. Our portfolio shift is an area that we look at very significantly for that margin improvement. So that's an area that doesn't change in any sense. But then the focus on operational effectiveness and control on areas like SG&E, et cetera, continue to be an area of focus. So that will not change going into 2026. All of that will remain. Thank you.

Thank you. We will now take the last question.

the line of ben castillo bernard from bmp paribas please go ahead hi good morning just one for me please on the manufacturing market obviously still declining but we've seen some sort of improvement in the year-over-year rate of decline just wanted to dig in a bit could you comment more specifically on what you've seen in the automotive sector so far in h2 how those conversations evolve now with some improved trade visibility. And perhaps it's early, but thinking into next year, could you share a little bit about how those customers in the auto sector are thinking about their IT budgets into 2026? Thank you.

Yeah. The way I think about the auto sector is not just environment. It's just a model of delivery evolving. So there's going to be an increase in demand, but a demand which is much more offshore driven than what it has been up to now. If I take, for example, the example of engineering, engineering tends to be traditionally delivered onshore for many of our European auto clients, and that's really moving away from that. So as I said before, the structural change, what we see in auto is a structural change in terms of demand, but also in terms of delivery model. And I think that we don't expect to see a rebound in auto, and it weighs heavily on manufacturing. our manufacturing numbers would look much better if auto was flat. So it's really a drag for the moment. So it's good. We know where it's contained. I'd say outside of auto, we see really good growth in some other sectors, like even industrial manufacturing is back to growth. Our life sciences have good growth. So we are positive on the fact that once we are – we are able to address the challenges around auto, we will be back to growth in manufacturing. But for the moment and for probably the next two or three quarters, it will remain a drag on our manufacturing topic.

Understood. Thank you. Thank you all.

I look forward to interacting with you over the coming weeks. If not, see you in February for the full year. Have a great day. Bye-bye.

This concludes today's conference call. Thank you for participating. You may now disconnect.