Capgemini Se Ord

Good day and thank you for standing by. Welcome to Capgemini Quarter 1, 2026 Revenue Webcast and Conference Call. At this time, all parties 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 need to press star 1 and 1 on your telephone. You will then hear an auto-passage message advising your hand is raised. To withdraw 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, Mr. Ayman Azad, CEO. Sir, please go ahead.

Thank you. Good morning and thank you for joining us for this Q1 2026 revenue call. I'll be joined today by our CFO, Nivi Bhagat. So the group had a solid start of the year, actually slightly better than what we anticipated. We generated revenue of €5,943,000,000, which represents a year-on-year growth of 11% at constant exchange rates. Now, this reflects robust underlying momentum in line with Q4, as well as the expected contribution from the acquisition of WNS and Cloud4C. Bookings were up 6.2% at constant exchange rates, reaching €6,054,000,000. which demonstrate a strong commercial momentum. Now, growth rates in Q1 are fueled by solid organic trends, complemented by the scope impact of WNS and C4C. From a sector perspective, all major sectors are growing when excluding acquisitions. Strong underlying growth in financial services, public sector, and TMT supported by AI-led transformation. From a geo standpoint, the strong attraction is in North America and in the UK, backed by solid underlying demand. While continental Europe, including France, is gradually recovering. Finally, from a business perspective, both strategy and transformation and application and technology have maintained their good momentum. Operation and engineering grew by 25%. Beyond the scope impact of WNS and Cloud4C activities, it's important to note the double-digit like-for-like growth for our digital business process services, which confirms that this remains the fastest-growing segment in our business. And what's driving our performance this quarter is very clear. It's focusing on clients' large-scale transformation programs. Clients are accelerating AI adoption, and the conversations have moved to agentic AI, transform end-to-end operation and processes. And that shift is forcing a CEO-level agenda around modernizing core technology stacks, data foundation, and operating models so AI can scale safely and deliver measurable impacts. So in this context, we are seeing strong momentum around the JTKI driven by ClearScience. First, AI is now simply part of every client conversation. Clients are looking at AI either to drive cost efficiency or to improve business outcomes such as faster delivery, higher reliability, stronger compliance, higher customer satisfaction, or better overall operation performance. Second, clients are clearly stepping up the pace of AI-driven transformation. We see a real shift from isolated use cases and standalone tools to AI embedded into end-to-end core processes. To enable that, they have to modernize the core technology stack. That's why we increasingly brought into big architecture discussions at scale, which now includes C-level executives around the table. Now, we are well positioned to capture this demand. Our offering portfolio, now enriched with intelligent operation, is leading to some noticeable dealing to one. Just to mention a couple of them, for U.S. utility provider, we are designing, developing, and scaling an agent TKI operation platform spanning across customer operations, supply chain, support function, and issue resolution. This platform represents a next approach to how large organization harness AI, not as a standalone tool, but as an integrated layer embedded directly in employees' way of working. Also, for European banking clients, we are replacing fragmented processes, notably onboarding and due diligence, with agentic end-to-end automation. This will allow our clients to reduce its operational efforts, strengthen regulatory compliance at lower cost, reinforce data quality, achieve faster processing times, and a more scalable operating model. Thus, realizing measurable business value. So, on AI, the message from clients is very clear. It is we need to see measurable business impact. And to get there, they need to run AI at enterprise scale, which implies getting the foundations right, including data quality, infrastructure readiness, governance, cyber, and trust. And if there's one critical element that people tend to underestimate, it is the human side. This is about people working effectively with AI to ensure that we capture the value at scale. And that's exactly... where we make the difference. We are one of the few partners selected by OpenAI or Anthropic to help enterprises capture value from AI because delivering value from AI requires a much broader set of expertise from strategy and transformation to technology and deep architecture through data and AI engineering and operations. And this needs to be complemented by deep industry knowledge and real domain process expertise. In parallel, we're also accelerating our own AI transformation With four streams, all equally important, solutions, workforce upskilling, delivery, and operations. We are developing, for example, solutions that are AI by design, whether we're talking about SAP implementation or SDLC or others. And the point is simple. With a disciplined end-to-end value approach, we consistently turn AI investments into scalable and sustainable value, both for our clients and also for Capgemini. A quick note on defense. We continue to see stronger momentum in defense, driven by two structural trends, a sharp ramp-up in defense manufacturing across Europe, including new entrants from civilian industry, and a growing demand from European ministries of defense for software-defined, digitally-enabled solutions to modernize systems and architectures. Now, this creates an opportunity to partner in building sovereign European solutions. Our defense business is scaling across three areas, helping industrial players scale manufacturing, especially civilian entrants, with the digital and systems capabilities required, accelerating innovation platforms to develop, integrate, and deploy next-generation defense technologies faster, and expanding our role in cross-border programs by addressing demand for new air and ground system architecture across Europe. Together, these strengths strengthen our position as a key partner in Europe's defense ecosystem, combining scale, digital expertise, and cross-border delivery. Now moving on to the outlook. So Q1 was solid, with underlying growth in line with Q4. For Q2, we expect around 10% constant currency growth, including approximately 6.5% from inorganic contributions. The group's financial targets for 2026 are unchanged, revenue growth of around 6.5% up to 8.5% at constant exchange rates, an operating margin of 13.6% to 13.8%, and on organic free cash flow of around 1.8 to 1.9 billion euros. Our assumptions on inorganic contribution and the impact of the feed for growth initiatives are also unchanged. And with that, I will hand over to Nivi.

Thank you, Ayman, and good morning, everyone. Let me start with the top line. Q1 2026 represents a solid start to the year. Group revenues came in at 5,943 million euros slightly ahead of our expectations, up 7% year-on-year on a reported basis. Underlying trends remain steady across the group, and I'll come back to that in a moment. At constant currency, revenue growth was 11% in the quarter, including around 6.5 percentage points of scope, primarily from the WNS and Cloud4C acquisitions. As anticipated, foreign exchange was a headwind in Q1 with a negative impact of 400 basis points. Based on current exchange rates, we expect FX to be less of a drag going forward with an impact of around minus 1 to minus 1.5 points in Q2 and broadly similar for the full year of 2026. Turning to revenues by sector, we saw a solid underlying performance in Q1. On a like-for-like basis, financial services, TMT, and the public sector continued to grow at good pace. Manufacturing saw a modest improvement, although it remained subdued. This underlying momentum was further supported by the contributions from WNS and Cloud for CF positions, with the impact most visible across financial services, energy and utilities, services, and consumer goods and retail. At constant currency, financial services was the strongest sector, growing by 21.9%, followed by services at 17.4%. All other sectors delivered growth of around 10%, broadly in line with Q4 2025, apart from manufacturing at 3.5%. Revenues by region. Looking at the business geographically, momentum remained strong in Q1. On a like-for-like basis, North America and UK and Ireland delivered another quarter of robust growth. France showed improvement, while still slightly negative, and the rest of Europe remained broadly flat. As in the previous quarter, the scope impact from WNS and cloud-based acquisitions was most visible in North America, the UK, and Asia-Pacific. At constant currency, North America grew by 20.7% driven by strong performances in financial services alongside solid growth in TNC and manufacturing. UK and Ireland delivered 21.7% with strong growth across almost all sectors. France declined by minus 1%. Growth in financial services and energy utilities was more than offset by weakness in consumer goods and retail and the public sector, while manufacturing improved, albeit remaining slightly negative. The rest of Europe grew by 1.7% with strong public sector performance and a return to growth in consumer goods and retail, more than compensating for ongoing manufacturing softness. Finally, Asia-Pacific and Latin America recorded the strongest growth at 26.9%, primarily driven by financial services, with solid traction also seen in consumer goods and retail and energy and utilities. Moving to revenues by business line. Strategy and transformation delivered growth of 6.2% at constant exchange rates. Application for technology services, which is our core business, posted a 4.8% growth. Operations and engineering services grew by 25.2%. This reflects solid underlying growth across the portfolio, further reinforced by the contribution from the WNS and Cloud3C acquisitions. At this moment, I would like to highlight one important point. Digital business process services maintained double digit growth in Q1 on a like-for-like basis across both Capgemini and WNS. This clearly confirms the strategic rationale and the strong commercial traction we're seeing in this space. Turning to bookings, we recorded €6.1 billion in Q1, up 6.2% in constant currency. Our books bill came in at 1.02, which is slightly above our 10-year average for the quarter. What is particularly encouraging is the continued momentum we're seeing in large transformation deals and longer-term client commitments. This is especially evident around areas such as EI, intelligent operations, and defense, which remain key drivers of demand. Now, before moving to headcount, a quick update on the Fed for Growth initiative. You will see the bulk of the 2026 charges in H1 with the benefits starting to come through in H2 of this year. Finally, a quick word on headcount. We closed the quarter at 421,000 employees, up 23% year-on-year, reflecting the integration of WNS since Q4 last year. Compared to year-end 2025, headcount is broadly stable, down around 0.6%. Offshore leverage stands at 66%, up 8 points year-on-year with the WNS integration, and flat versus the end of 2025. Since 1st January 2026, our last 12-month attrition rate now includes WNS and stood at 18.6% in Q1. On a like-for-like basis, this represents a 1.2 point decrease year-on-year. On that note, Ayman, I will hand back to you for the Q&A.