Capgemini shares rise as Q2 revenue beats, launches €2 bln buyback

Investing.com -- Capgemini (EPA:CAPP) shares traded higher on Wednesday after the French IT services and consulting company reported stronger-than-expected second-quarter revenue growth and announced a €2 billion share buyback. 

The buyback, approved by the board as a multi-year program, will be fully funded by organic free cash flow.

However, the company did not specify how much of the buyback will go toward repurchases versus option neutralization.

Revenue rose 0.7% year-over-year on a constant currency (ex-FX) basis, surpassing analyst expectations and marking a rebound from the 0.4% decline in the first quarter. 

Second-quarter bookings totaled €6.1 billion, up 1.5% ex-FX, with a book-to-bill ratio of 1.10x, slightly above the long-term average of 1.07x. Bookings tied to generative AI accounted for 7% of the total, up from 6% in the previous quarter.

Organic revenue growth for the second quarter was estimated at a 0.3% decline, ahead of the expected 1.3% drop. For the first half, organic revenue declined by 0.8%, compared with a 1.3% decline expected by consensus. 

Analysts at Morgan Stanley (NYSE:MS) noted scope effects of approximately one percentage point in Q2, consistent with this organic performance.

By region, North America, the United Kingdom (TADAWUL:4280), and APAC/LATAM posted revenue growth on an ex-FX basis, while France and the Rest of Europe reported declines. 

Among service lines, Applications & Technology and Strategy & Transformation rose by 3.2% and 1.4%, respectively. In contrast, Operations & Engineering declined by 0.4%.

Adjusted operating profit for the first half of 2025 was in line with estimates, with a flat year-over-year margin of 12.4%. 

This level was consistent with company guidance during its July 7 announcement of a planned acquisition of WNS (NYSE:WNS), which is expected to close in the second half of 2025. Adjusted EBIT came in 1% above expectations, though IFRS EBIT declined by 15% due to €86 million in higher restructuring costs.

Normalized earnings per share beat forecasts, supported by a lower effective tax rate of 26.2%, down from 28% a year earlier. Free cash flow for the first half reached €60 million, outperforming the expected outflow of €35 million.

Headcount increased sequentially by 6,700, a 2% rise from the first quarter, and was up 4% year-over-year by the end of June.

Capgemini maintained its full-year guidance, targeting an operating margin of 13.3% to 13.5% and organic free cash flow of approximately €1.9 billion. 

Revenue growth guidance was narrowed to a range of a 1% decline to a 1% increase ex-FX, compared to the prior range of a 2% decline to a 2% increase. 

Based on an expected M&A impact of 1 to 2 percentage points, this implies organic growth between a 3% decline and flat for the full year.

Analysts at Jefferies described the second-quarter results as “largely solid,” with most key metrics slightly ahead of consensus.