Capgemini Se Unsp/Adr

Good day and thank you for standing by. Welcome to the Capgemini Q3 2026 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 automated message advising your hand is raised. To withdraw your question, please press star 1 and 1 again. We will kindly ask you to restrict yourself to one single question. You may then rejoin the queue for a follow-up if need be. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Aiman Ezzat, CEO. Sir, please go ahead.

Thank you. Good morning and thank you for joining us for the Q3 2026 revenue call and I'm joined today by our CFO Nivi Bhagat. So let me start with the headline. So Q3 was another solid quarter, slightly better than we expected, the growth of 11.7% at constant currency and underlying growth close to Q2 despite a tougher comparison basis. And in a demand environment that remains stable, we continue to outperform the industry and it allows us to raise our revenue growth outlook for the year while confirming our margin and cash objectives. So I will cover four points. First, the strengths and the breadth of our Q3 performance. Second, our progress in intelligent business operation whose performance again confirmed the strategic relevance of the WNS acquisition. Third, the consistent execution of our AI strategy as demand ramps up, leveraging Capgemini assets and platforms. And fourth, our positioning in sovereignty and defense where we are building a leader in Europe. So Q3 was a solid quarter. Revenues reached €6,073,000,000, so up 11.7% year-on-year at constant currency. The scope contributed around seven points, essentially WNS and Cloud4C, so that's about half a point more than in Q2. This means underlying growth is close to Q2, and it was achieved on a tougher comparison basis. Consequentially, the demand environment is broadly unchanged and our momentum is fully intact. The bookings total €5,401,000,000, up 3.4% year-on-year at constant currency. Q3, as you know, is seasonally our smallest quarter for booking. And like every year, the book-to-bill is below 1. The demand momentum continues. The pipeline is up 7% year-on-year, with strategic deals funnel up 9%, lining up for a seasonally strong and many more. Now our Q3 performance shows broad-based growth across geographies, businesses and sectors accelerated by the continuous expansion of AI demand. So let me start with AI because it really shows in the numbers. The clients no longer ask us, as you know, to deploy a tool or validate a proof of concept. They ask us how AI changes their business and how to scale it across the enterprise while keeping control of important elements like governance, cost and security. So that is first the strategy and transformation conversation and that business growth close to 19% accelerating for the fourth consecutive quarter. It's also the modernization conversation. Scaling AI requires modern technology and data foundations and that is what supports demand in application and technology at 3.5% on a high comparison basis. and it is the agentic operation conversation intelligent operations where we transform and operate agentic enterprise processes posted another quarter of double digit like for like growth and I will come back to it. Geographically it's visible first in North America and the UK which both show solid underlying growth and clear out performance. North America underlying growth is in the high single digit and the UK and Ireland is in double digit. By sector, momentum is still very healthy in financial services, consumer goods and retail, and the public sector. Now, let me come on France and manufacturing as the two topics we discussed at the beginning of the year. A year ago, France was declining by almost 5%. This quarter, it grew by almost 5%, the second quarter of growth in a row, and a clear acceleration from under 2% in Q2. Manufacturing is the same story. It returned the growth at the end of last year, and it keeps improving. Above 7% this quarter after 5% in Q2 and 3.5% in Q1. Defense is doing very well. Aerospace is accelerating and automotive is back to growth. The rest of Europe grew 3.4% in line with Q2. So compared with the end of last year, the improvement across continental Europe and in two sectors, manufacturing and consumer goods and retail, diversified the growth drivers. Growth is no longer carried. primarily by North America and Financial Services. Now within this growth, Intelligent Business Operations stands out. With like for like growth of double digit in Q3 and over nine months across both the scope of WNS and Camp Gemini. Now this confirmed the conviction behind the acquisition, two complimentary businesses. WNS bringing deep industry and process expertise, Camp Gemini bringing global scale as well as leadership in AI and business transformation. and the integration remains on track with unified organization in place and revenue and cost synergies progressing as planned. Let me illustrate with three engagements. First, for distribution company, we are delivering an integrated scope across the customer lifecycle and the product lifecycle, spanning customer service, commercial operations, procurement, supply chain, logistics and finance. It's a front-to-back operating model and a new service line that we can replicate across similar industries. We accelerated the design of the target operating model thanks to an automated platform supporting data-driven decisions on process standardization, automation, and organization. Second, we have entered into partnership with an insurance company covering new business, policy servicing, and claims, creating a platform across its retirement and a number of other partners. We also have a number of other companies that we are working with. We have a number of other companies that we are working with. We have a number of other companies that we are working with. Stronger resilience and sharper decision making in a model designed to scale. Now, what this engagement have in common is our ambition, not simply to run processes more efficiently on behalf of clients, but to deliver measurable business outcomes. Now, this is also our answer to the question we are often asked about agentic AI in operations. When we target outcomes rather than just cost, AI expands the scope We address four clients. It does not shrink it. Now we are executing the AI strategy laid out at our capital market day and demand ramp up validates those orientations. Three examples show it in action across three of our value pools. So enterprise technology modernization. For an asset management firm, we built an AI enabled unified desktop replacing 180 fragmented applications for customer facing staff. Built on enterprise knowledge and client intelligence, it provides real-time guidance during client calls and automates call notes. The results speak for themselves. Employee satisfaction at 43%, UX delivery 30% to 50% faster, and around €3 million savings in the software development lifecycle, thanks to the agentic SDLC acceleration. In the area of control plane for life sciences company, we are deploying an agentic total cost of ownership capability. It's an enterprise-wide AI economics model that ties consumption to cost and to business ownership. AI spend its face back to initiatives, platforms, and users with full transparency on usage and value. It is exactly what client needs to scale AI responsibly and to invest on the basis of data. And finally, In a genetic product and services for a bank, we are unlocking new revenue opportunities by accelerating the delivery of AI-powered data products. This is reducing data friction and enabling the bank to monetize high-value data assets across multiple lines of business. Now, what these programs have in common is a clear ambition to go beyond one-off solution. We are accelerating IP and platforms. Four layers allow us turned a point solution into a defensible reusable assets, proprietary agents and models, reusable accelerators and frameworks, curated domain data, and patents and institutional know-how. A good illustration of that is an agentic system of operation that we run for global shipping and logistics player. It handles more than 27 million transactions every year, so this is no pilot. It's a platform operating on an industrial scale, It delivers 40 to 50% productivity improvement and the impact goes beyond efficiency. For each client, collection times are shortened by five to eight days, which means cash is released faster. Now that is the benefit of building Capgemini assets. What we build once strengthen the platform and expands our capability so that we deploy it from one client to the next faster and more efficiently through industrialization. It is how we unlock value faster for clients and how we protect our economics as AI reshapes delivery. Now behind this project I just mentioned, there is a common enabler, our partner ecosystems. We work with 18 core partners from hyperscalers and major software providers to AI native leaders. In the first half of the year, those 18 partners were associated with approximately 65% of the group booking. This shows how central they have already become. Together with these ecosystems of partners, we are well positioned to make AI real for our clients. We expect this to accelerate our growth across the adjunct value pools, which together will represent $350 to $490 billion by 2030. And this comes on top of the secular growth we continue to see across our traditional value pools. Now for our clients, The breadth of these ecosystems of partnership means greater flexibility to combine the models and platforms that best meet their business needs, and increasingly to do so in a way that is consistent with the sovereignty requirement, which brings me to my last point. In sovereignty and defense, we are building on strong European demand. As I said in July, sovereignty is now systematically addressed by our clients, and we see it firsthand in what we deliver. So let me give you three examples. In public safety communications, we are working with a national agency to modernize the country's emergency communication network by 2030. We bring our expertise in planning, architecture and program management, as well as in integration, testing and operational readiness with, of course, strong deep knowledge of telecoms operations. The goal, communication that can be relied upon when it matters most. Another example, we are helping a leading insurer assess its exposure and define resilience strategies so that critical business functions keep running even if cloud or data services from non-European providers are disrupted. The aim is to strengthen the sovereignty and resilience of the client core systems. And finally, for a defense client, we are building secure shared engineering environments that allow defense players from several countries to develop new systems and products quickly and securely. of course in a collaborative environment. By combining digital engineering, cybersecurity, and sovereign cloud capabilities, we create digital continuity across complex European defense program while safeguarding sensitive data and national sovereignty. What this example shows our ability to cover all layers, infrastructure, core systems, AI, and models, of course, and client posture, which is about helping clients understand where the dependencies actually sit. This end-to-end coverage combined with our European footprint and our partnerships with sovereign cloud providers is why we are so well positioned on these markets. So let me turn now to our outlook. Our Q3 performance gives us confidence to raise our revenue growth target for the year in a demand environment that should remain broadly unchanged. We expect to maintain our momentum from Q3 to Q4. Yet there are two effects to keep in mind. First scope, WNS and Cloud 4C were consolidated in Q4 last year. So the inorganic contribution drops from around 7 points in Q3 to around 1 point in Q4. Second, comparison basis Q4 2025 was a strong quarter with a material acceleration underlying growth. This translates mechanically into a target of 3% to 4% constant currency growth in Q4, including 1 point This leads us to raise our full year growth target to 9.5% in ad constant currency from 8.5% to 9.0% previously. The contribution from acquisition is unchanged for the full year at around 5 points, so the upgrade reflects our underlying performance. On profitability, we confirm our operating margin target of 13.6%. to 13.8, feed for growth is on track and its benefits start to come through in the second half. And we confirm as well our organic free cash flow target of around 1.8 to 1.9 billion, which already absorbs around 200 million of additional restructuring cash out linked to feed for growth. So 2026 is shaping up well as the first year of our CMD ambitions, faster underlying growth, a broader base of growth drivers, and AI converting into revenue. We are making AI real for our clients, and it is converting into growth. With that, I hand over to Nivi.

Thank you, Aiman, and good morning, everyone. Q3 was another solid quarter, and we continue to make good progress in the new AI value pools that underpin our medium-term ambition. Let's now look at the quarterly growth trends. Revenues reached €6,073 million in Q3, up 11.7% year-on-year at constant currency. Scope contributed around seven points, about half a point more than in Q2. In underlying terms, our growth was close to Q2, and that is against the comparison basis, which was tougher. Looking ahead into Q4, there are two aspects to keep in mind. First, the scope contribution falls by six points from around seven points to around one point. This reflects the completion of the WNS and Cloud4C acquisitions in Q4 last year. It also takes into account the disposal of CGS at the beginning of this quarter. Second, the comparison basis steps up again from Q3 to Q4 last year. So our underlying growth accelerated by about two points. So for Q4, we expect the momentum to remain the same with the growth of 3% to 4% at constant currency. The two items I just mentioned represent a combined impact of around eight points against the 11.7% growth at Constant Currency we posted in Q3. Turning to currencies, as expected, currency turned positive in Q3, adding 0.9 points, mostly from the US dollar, against the euro. Over nine months, the currency effect is now limited to minus 1.4 points. We expect currency to add one to two points in Q4. That would bring the full year effect to between minus 0.5 and minus one point. Let me now turn to sectors. Our growth continues to be broad-based. Five of our seven sectors grew 10% or more at constant currency. In underlying terms, public sector and consumer goods and retail, our two fastest growing sectors in Q2, remain strong with close to double-digit growth. Manufacturing and energy and utilities improved further after a gradual recovery in Q1 and Q2. TMT and services remained muted in Q3. At constant currency as in previous quarters, WNS and Cloud4C added to this underlying performance most visibly in financial services, consumer goods and retail, energy and utilities, and services. And manufacturing grew 7.3% up from 5% in Q2. Let's now look at geographies. In underlying terms, North America maintained a high single-digit growth rate. The UK and Ireland Accelerated further from an already strong H1. In France, we are particularly pleased with the improvement and the rest of Europe also improved at a more moderate pace. As in previous quarters, the contribution from WNS and Cloud4C remained most visible in North America, the UK and Ireland, and Asia Pacific at constant currency. The UK and Ireland and North America left the performance in Q3 growing 25.2% and 18.3% respectively. Both benefited from strong consumer goods and retail momentum. Public sector was strong in the UK and Ireland while financial services and manufacturing performed well in North America. Asia Pacific and Latin America grew 11.9% supported by WNS and Cloud4C and had good momentum in financial services and consumer goods and retail. Continental Europe continued to improve. In France, this was second consecutive quarter of growth at 4.9% after 1.8% in Q2 led by manufacturing and financial services. The rest of Europe increased 3.4% driven by public sector, energy and utilities and services, and manufacturing, which turned slightly positive. Moving on to business lines. We maintained good momentum in Q3 across all three, both at constant currency and in underlying terms. Most notably, strategy and transformation accelerated further. Total revenue growth reached 18.6% year-on-year at constant currency, up from 12.2% in Q2. This strong performance reflects the clients are increasingly focused on AI-driven value creation and enterprise-wide transformation. It also demonstrates the relevance of Capgemini's deep industry expertise and our understanding of clients' business challenges. Applications and technology grew 3.5% against a comparison basis of 5.7% last year, which was 3.2% in Q2 this year. It continues to benefit from demand for the modernization of legacy technologies. This is important because modernization is a critical prerequisite for building the new agenda technology stack, something we discussed at the Capital Markets Day. Finally, operations and engineering grew 26.9%. In underlying terms, the performance was solid, driven mainly by intelligent business operations. This delivered double-digit life-for-life growth with strong traction across both Capgemini and WNS activities. Turning now to bookings, they amounted to 5,401 million euros in Q3, up 3.4% year-on-year at constant currency. The book-to-bill was 0.89 in Q3, which is seasonally our smallest quarter for bookings. Over the last 12 months, the book-to-bill was slightly above 1.04, and importantly, generative and agentic AI bookings continued to grow at a solid double-digit rate this quarter. As Aiman mentioned earlier, We're seeing tangible business traction in new AI-related value pools, such as enterprise technology debt modernization and agentic enterprise operations. We also see growing business opportunities around sovereignty, reflecting increased client focus on control and strategic resilience, and we continue to see further opportunities emerging in the defense sector. Let me now come to headcount. We closed the quarter at 417,500, up 18% year-on-year, mainly reflecting the integration of WNS since Q4 last year. Headcount was broadly stable versus June as we onboarded our graduates. Since the beginning of the year, headcount is 5,900 lower, including 2,300 onshore. At the same time, we continue to higher where the demand is. The offshore leverage stood at 66% at the end of September. Now lastly, a few words on our Fit for Growth initiatives. We continue to progress according to plan and we're starting to see this in the numbers with the bench in continental Europe gradually coming down. We're confident that the benefits come through from H2 and continue to build through into 2027. This gives us room to keep innovating in AI and other capabilities and we need to capture the new growth opportunities. The last 12-month attrition stands at 18.4%, 0.9 points lower year-on-year and broadly stable since the end of June. Now, before I hand back to Aiman, there is one more point I'd like to make. In the appendix of today's presentation, you will find a slide that summarizes two changes to our financial reporting from 2027. First, as discussed at the CMD from our 2027 outlook, our headline profitability metric, becomes adjusted operating profit. This is more comprehensive. It's an all-in metric that notably includes share-based compensation and restructuring costs. The second is the implementation of the new IFRS 18 standard. So on that note, Aiman, I hand back to you.