Earnings call transcript: Capgemini Q3 2025 sees steady growth and AI focus

Capgemini reported its financial results for the third quarter of 2025, highlighting a steady revenue increase and a strategic emphasis on artificial intelligence. The company’s revenue reached €5,393 million, reflecting a 2.9% growth at constant currency. According to InvestingPro data, Capgemini has generated €25.99 billion in revenue over the last twelve months, maintaining a healthy gross profit margin of 27.26%. The stock market’s immediate reaction was muted, with Capgemini’s shares showing no significant movement post-announcement, though the stock has seen a -21.27% year-to-date return. The company also revised its full-year growth target upward, signaling confidence in its ongoing strategies.

Key Takeaways

• Capgemini’s Q3 2025 revenue grew by 2.9% at constant currency.
• The company launched an AI agent engineering platform, "Raise Builder."
• Full-year growth target increased to 2-2.5%.
• Offshore headcount saw a notable increase, enhancing cost efficiency.
• Demand for AI and cloud services remains robust despite market challenges.

Company Performance

Capgemini’s performance in Q3 2025 demonstrates resilience amid a challenging demand environment. The company achieved a 2.9% growth in revenue at constant currency, improving from 0.7% in Q2. This growth aligns with the company’s strategic focus on digital transformation, cloud services, and AI solutions. InvestingPro analysis shows the company maintains a strong financial health score of 2.72 (rated as GOOD), with a solid Altman Z-Score of 8.07 indicating financial stability. Despite pricing pressures, Capgemini maintained its operating margin target, underscoring effective cost management and achieving a return on invested capital of 10%.

Financial Highlights

• Revenue: €5,393 million, up 2.9% at constant currency
• Organic growth: 2.9%, improved from 0.7% in Q2
• Operating margin target: 13.3-13.4%
• Organic free cash flow target: €1.9 billion

Outlook & Guidance

Capgemini has increased its full-year constant currency growth target to 2-2.5%, reflecting confidence in its strategic initiatives. The company expects Q4 organic growth to mirror Q3 levels, with contributions from the WNS acquisition adding approximately 4 points to growth. Despite market challenges, Capgemini remains optimistic about achieving slightly positive organic growth for 2025.

Executive Commentary

CEO Aiman Ezzat emphasized the expanding scope of transformation contracts, stating, "Clients now consider large transformation contracts with a much broader scope." This indicates Capgemini’s strong positioning in the digital transformation space. CFO Nive Bhagat highlighted the company’s leadership in intelligent operations, saying, "We are uniquely positioned to lead the intelligent operations market."

Risks and Challenges

• Pricing pressures: Continued pressure could impact margins.
• Demand environment: No significant improvement expected, posing growth challenges.
• Data integrity: Aiman Ezzat noted data availability as a key impediment to AI deployment.
• Manufacturing sector: Particularly automotive, remains challenging.
• Attrition rate: Stable at 15.6%, but could affect talent retention.

Q&A

During the Q&A session, analysts inquired about growth drivers and sector challenges. Capgemini highlighted North America’s robust 7% growth and reiterated its focus on AI and data strategy transformation. The company addressed concerns about the manufacturing sector, particularly the automotive industry, which remains under pressure.

Capgemini’s Q3 2025 results reflect a stable performance with a strategic focus on innovation and efficiency. While the demand environment poses challenges, the company’s proactive measures and strategic initiatives position it well for future growth.

Full transcript - Carrefour (CAP) Q3 2025:

Conference Operator: Today, and thank you for standing by. Welcome to the Capgemini 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 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press 1 and 1 again. Please be advised that today’s conference is being recorded. I will now like to hand the conference over to our speaker today, Aiman Ezzat, CEO. Sir, please go ahead.

Aiman Ezzat, CEO, Capgemini: Thank you. Good morning, and thank you for joining us for this Q3 2025 Revenue Call. Today, I’m joined by our CFO, Nive Bhagat. 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 demand environment that remains largely unchanged, our performance improved steadily in 2025. The group generated revenues of €5,393 million, up 2.9% year-on-year at constant currency. This is a 2.2-point improvement compared to the second quarter of 2025, growth rate of 0.7%. This improvement has been pretty broad-based. Bookings totaled €5,161 million in Q3 2025, an increase of 1.5% at constant currency. This represents a book-to-bill ratio of 0.96 for the period, in line with traditional seasonality.

The constant 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, 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 is in financial services and TMT sectors, which is still showing a high single digit. The manufacturing sector continues to improve, but is still slightly declining year-on-year. By business, application and technology services posted a solid growth of 5.7%. Operation and engineering total revenue also increased by 1.3%, with 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. 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 services, digital core data estate modernization, and artificial intelligence solutions and generative AI solutions. 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 journeys, dynamic pricing, and seamless system integration. This will enhance customer experience, accelerate product launches, and ensure consistency across all digital touchpoints. This also lays the foundation for agility 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 operation. Finally, Capgemini will deliver and manage a sovereign cloud infrastructure for a European public sector client. 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. Our positioning as a business and technology transformation partner for our clients is well recognized. Leading industry analyst firms consistently rank Capgemini as a 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 a leader in areas such as application modernization and multi-cloud managed services, which 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 in industry-specific AI capabilities. This underscores our ability to deliver tangible business value for our clients 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 scale and unlocks new value with agentic AI-enabled intelligent operations. We continue to lead in the 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. Speaking of AI, we are accelerating the integration of AI across all our service portfolio 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. Today, I want to focus on Raise. Moving AI proof of concept to AI in production and operated is complex for a large-scale organization. To get the benefits from AI transformation, enterprise needs AI for business.

AI agents that can move to production and be operated. It’s 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 us 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. Our investment in proprietary platform delivery frameworks and talent combined with strategic partnerships positions us as a recognized leader in AI. This is reflected in robust deal wins, bringing generative AI and agentic 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 crimes, leveraging AI. We will not only simplify and hyper-automate operations, but also deliver best-in-class and innovative experience for customers and bankers.

This strategic partnership also helps DOQ access scale AI operation 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 with 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 intelligent operation market, addressing a new and fast-growing demand for agentic AI-powered business operations. Since the advent of generative AI, enterprises have focused significant attention and increasing investment on generative AI and more broadly AI.

Today, clients are gaining maturity around how to best leverage generative 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’re 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 generative AI and agentic AI. It’s about delivering business value, shifting to outcome-based pricing for next-gen IP-led services.

To achieve this, intelligent operation must combine consulting-led process re-engineering, industry-specific solution and platform, domain knowledge, DPI expertise, technology, of course, and digital operations at scale. With the acquisition of WNS, we are uniquely positioned to capture the demand for intelligent operation and lead in this fast-growing market opportunity. Going to the outlook, we had another good progression in terms of growth. We update the outlook for the year. We raise again our growth objective, now our operating margin target, and keep our organic free cash flow target unchanged. Let’s be clear. Now we expect the demand environment is going to remain unchanged for the coming quarter. We don’t see really any improvements in the demand environment as such. After the solid improvement we delivered in Q3, we’re not counting on an organic growth that will continue to accelerate in Q4.

It also clearly implies that the second half is shaping up to be stronger than we initially expected. 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 4 points to Q4 growth and 1 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 1 to plus 1. This is above the high end of our initial guidance given in February. The top end of this range assumes a 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 Nive.

Nive Bhagat, CFO, Capgemini: Thank you, Aiman, and good morning, everyone. Let’s kick off with our quarterly revenue growth. As Aiman 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 FX.

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 FX 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 and 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. At constant currency, North America saw revenues rise plus 7% year-on-year, driven by financial services, TMT, 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 -4.7%, which is a slight improvement over the previous quarter.

Revenues in the rest of Europe are down by -1.5% compared with -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 +13.6%, with particularly strong growth in financial services, manufacturing, energy and utilities, and TMT sectors. Now looking at our revenues by business. At constant currency, total revenues of strategy and transformation services were slightly up +0.7% year-on-year. Applications and technology services, our core business, posted solid growth of +5.7%. This represents a 260 basis point acceleration when compared to Q2. Lastly, operations and engineering is back to growth in Q3 at +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 3 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 remains 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’re 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, Aiman, I hand back to you for the Q&A session.

Aiman Ezzat, CEO, Capgemini: Thank you, Nive. Let’s now open the Q&A. To allow for a maximum number of people in the queue to ask questions, kindly introduce yourself and limit to one question and a single follow-up. Operator, could you please share the Q&A instructions?

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

Hi, good morning. Thanks for taking my questions.

Aiman Ezzat, CEO, Capgemini: Morning.

Morning, Aiman. Glad to see the continued growth recovery and back to positive organic growth. Aiman, the results year to date have been better than expected, despite macro, which probably has been unsupportive at the least. Could you shed color on some of the drivers behind that? In the unchanged demand environment, do you see these actions continue to help you going forward? I have a follow-up question.

Yeah, listen, remember the actions. We launched a whole bunch of them at the end of last year, which is 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. Also, a lot more discipline in terms of execution, to be frank, around our deals, our bids, but also our delivery. Overall, we have put a lot more emphasis to accelerate some of the deployment. 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. 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.

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. 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 you have seen outside of continental Europe, but even in continental Europe in a number of countries.

Thank you. A 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 also a reflection of clients’ cost consideration across regions? How should we think of margin implication of the same?

Yeah, I mean, I say nothing is just cost consideration. It basically is we are declining in Europe. Europe has less offshore leverage. We have more and more headcounts in Europe, so we are reducing headcounts onshore. Headcounts are not coming down in the 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, on the offshore side, notably in India, but not only in India, we really continue to see continued growth that supports basically the growth we have in the UK and the US, as you mentioned. Today, to be frank, 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. That was true in the past. I don’t think today it’s a driver anymore.

Appreciate it. Thank you.

Conference Operator: Thank you. We will now take the next question from the line of Mohammed Mawalla from Goldman Sachs. Please go ahead.

Great. Thank you. Hi, Aiman, hi, Nive, and congrats on the quarter. Just two from me. Firstly, just in terms of sort of the environment, how should we think about your earnings? You mentioned that the kind of STEM 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? Secondly, I know that you called out sort of gross margin and weakness and pricing pressure in July. We’ve seen increasingly more and more players in the industry call this out. How has that sort of evolved in the third quarter? Just a quick clarification, the organic free cash flow guidance, does that include any WNS contribution, or is that being performed? Thank you.

Aiman Ezzat, CEO, Capgemini: Okay. Listen, on the exit rate, 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. 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’ll talk about next year in February. If we can wait until then, we’ll have more visibility, and I think I’ll be in a more comfortable position to comment. 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. There’s no change in the pricing pressure.

The market remains competitive. There’s no change in the environment. Clients have continued to be focused really around operational efficiency, around cost, around productivity. We start to see some green shoots around clients starting to focus on growth. I think it’s really too minimal at this stage to be able to take that into account, which means in that kind of environment with limited growth, the pricing pressure remains quite important.

Nive Bhagat, CFO, Capgemini: Yes, it does include the WNS contribution. Just to note, the full-year contribution from WNS is about $100 million. If you take less than a quarter this year, it doesn’t necessarily make it as material in that context. I think that hopefully answers your question.

Yes, thank you both. That’s great. Thank you.

Aiman Ezzat, CEO, Capgemini: Thank you.

Conference Operator: Thank you. We will now take the next question from the line of Sven Mörk from Barclays, please go ahead.

Great. Good morning.

Aiman Ezzat, CEO, Capgemini: 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 in this region is to the rest of the business? Because it has been.

I’m 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. Maybe a second question on the margin. You lowered that slightly despite a slight accretion from WNS. I hear you pointed out that this is due to regional mix, but is there anything else you would point out?

First on the read across, to be frank, I don’t see a read across. I think we have such differences between regions today. We have different mixes in terms of industries, and the economies are at different stages. 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 annual sign of potential acceleration in Europe. You see the situation in France remains quite unstable, and we don’t see really a big recovery in France. We’re still impacted by manufacturing in a large part of the rest of Europe. We’ll continue to push for improvement, but I would not overread from any to Europe if that’s what’s underlying your question.

On the margin side, we’re tightening the margin because we are now two months before the end of the year. We give a more realistic picture about where we expect to land. Frankly, the WNS impact, we’re talking about a couple of months. It’s really not material on our results. Right now, we still have to consolidate all the numbers and see exactly what is the real impact, but we really see it as being minimal for 2025.

Okay, thank you.

Conference Operator: Thank you. We will now take the next question. From the line of Laurent Doré from Capgemini, please go ahead.

Yes. Good morning, Aiman, Nive. Congrats for the quarter.

Aiman Ezzat, CEO, Capgemini: Thank you.

I 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. My follow-up is, 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. 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.

First, on our business process services, our growth rate is above 10%, a few points above 10%. I think we are doing extremely well. We did say that we expect pretty strong growth in our business services. On WNS, I cannot really update you on the Q3 at this stage, but it sits in line with the expectation as far as I understand from the numbers. As you know, we don’t have fully audited numbers, but it is from what I have seen in line with the expectation that they have given for their Q2 because it’s their Q2 in their fiscal year. On the margin side, again, we see that the environment is a lot of pricing pressure, if you haven’t noticed. It hasn’t significantly changed. For the margin pressure to go away, it’s not just our growth, but it’s also the overall market. The market is soft.

As long as the overall market is soft, people are really very aggressive on pricing. This is the current situation. This is not going to change unless the overall market expands at a faster pace. 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, Aiman.

Conference Operator: Thank you. We will now take the next question from the line of Frederic Boulin from Bank of America. Please go ahead.

Hey, good morning, Aiman. Good morning, Nive. A question from me on just following up on this pricing question. You say it remains tough, but are you seeing some specific segments where delivery supported by generative AI is driving much more significant pricing pressure? That’s offset by some areas where you see incremental demand around data strategy. Interesting to hear what kind of role generative AI is playing in the pricing environment or not. In particular, interesting around your generative AI slide and platform, etc. From a client perspective, what can you share a little bit what’s entailed in terms of investment in their data strategy, infrastructure choices, etc.? If I may follow up on the free cash flow side, any specific elements you want to call out for this year and next? In particular, there is a discussion around corporate tax rate in France.

Keen to hear your thoughts around that. Any working cap or elements you want to flag? Thank you.

Aiman Ezzat, CEO, Capgemini: Okay. On delivery led by generative AI, there has been a high client expectation at the beginning. I think this is becoming a bit more realistic. It does not change really the pricing environment. 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 is not happening. We’re not saying that there’s no improvement, but it’s quite limited for the moment. I think it’s not playing that much in terms of the pricing. The tension on the pricing environment is much more coming from just a soft market than it is in terms of the real impact of generative AI today on pricing. The question regarding the second question was on.

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

Yeah, yeah. Sorry, listen, it’s a very good question. I spent a couple of weeks in California, and I had a lot of interaction in some events with a number of U.S. CEOs who tend to be a little bit more advanced around trying to deploy and experiencing with generative AI. When you ask them, "What is your number one impediment to deploying AI at scale?" 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 agentic AI and generative AI is a critical aspect. I think you will see over 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. It’s a valid point.

This is really where a lot of the focus is today.

Nive Bhagat, CFO, Capgemini: Coming to the organic free cash flow point, clearly, we maintain our guidance for organic free cash flow. 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. There’s also the currency headwinds and generally lower income from cash. In that context, I think the fact that we maintain that guidance is pretty resilient. Having said that, it is 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, etc. Our teams are on it every single day. It’s not easy, but it’s something that we stick by.

Okay, makes sense.

Conference Operator: Thank you. We will now take the next question. From the line of Nicholas David from AutoVHF, please go ahead.

Yes. Good morning, Aiman and Nive. Thank you for taking the question.

Good morning.

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 acceleration? Because in Q3, you proceeded a nice acceleration. 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 Q1Q, let’s say, compared to seasonality, historical seasonality. Does it mean that there are some sectors that could deteriorate, or do you expect a very, very high level of furlough? I think that last year furloughs were also pretty high. Any color would be helpful. Maybe manufacturing and a bit of manufacturing here would be great. Thank you.

Aiman Ezzat, CEO, Capgemini: I mean, it’s improving, but we see the environment doesn’t improve. It’s quite challenging to be able to drive improvement. We still have a drag that we continue in Europe, especially in France. Now we have headwinds as well. I don’t think we can continue to improve independent of the environment. I think we have been able to gain market share. We have been able to address some challenges we had and to be able to get to reasonable, even if slower, organic growth. I think it’s good. I don’t expect significant accelerations in the short term without changing the environment. The year-on-year comparison with so many changes of mix of environment, etc., is really very difficult to say 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 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. 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 AI transformation in the market? Do you see more of them already?

If you think about intelligent operations, yes, definitely. I see traction. I see we are well positioned on some very large deals. Yes, I’m quite positive about what we see today and the impact of intelligent operations on basically winning some very large deals in the near future.

Great. Thank you, and congrats for the performance.

Conference Operator: 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? Is that a contributor to the margin outlook for the year? Is the margin outlook for the year just as simple as pricing pressure? Secondly, on WNS, I think, Nive, 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? Is it just a more working capital consumptive business than Capgemini? Thank you.

Aiman Ezzat, CEO, Capgemini: Thank you, Charles. I see that you’re making a big effort to be positive.

Otherwise.

When you take the margin guidance from 13.3-13.5% to 13.3-13.4%, 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 into 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. We are still quite resilient in terms of margin in an environment that’s extremely price-competitive. It takes a lot of work to sustain the margin in this type of environment. I am pretty satisfied with what we’re delivering. A lot of these new deals 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, is 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.

Nive Bhagat, CFO, Capgemini: Charles, 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. That wouldn’t be very material in the context of what we’re talking about this year. Coming back to how we will work with them on it, as we will, we do what we do on various other acquisitions. We will apply very strong financial discipline to the WNS form of cash flow as well, whether it is in terms of conversion, whether it is in terms of billing, invoicing, etc. We’ll manage that very, very carefully. No change there. Of course, I remind you that our free cash flow conversion has been pretty good. That’s something that we will continue to be very focused on.

Perfect. Thank you.

Aiman Ezzat, CEO, Capgemini: Thank you.

Conference Operator: Thank you. We will now take the next question from the line of Adam Wood from Morgan Stanley. Please go ahead.

Hey, good morning, Aiman. Good morning, Nive. In the sense of life’s in the mood for action on the revenue upgrade, Aiman.

Aiman Ezzat, CEO, Capgemini: Thank you.

I have two questions, if I could. First of all, maybe just on the actions you’ve taken through the year. I think very clearly we’ve seen the impact of that in North America, I guess, as the market as well. When we turn to continental Europe, have the actions that you’ve taken there worked their way through and that’s the limit of what you can do? 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 actions that you take to change the course of business, particularly in France, but also in the rest of Europe? Maybe secondly, on WNS, now you’ve got into the group, could you give us some first impressions there? You talked about some very big transformational deals that you’re better positioned for.

When that happened 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 offers integrated to be willing to commit?

Adam, you have to slow down a little bit because I couldn’t follow all your second question. Can you go back on the question on WNS?

Of course. On WNS, really just first impressions now that you have control of the company, how have you found that? 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 close to give them the confidence that you’d be able to run? 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?

Okay. 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 auto. I think if you nullify auto, the picture looks better, which I think is important. It’s not only auto. Of course, we have a, you know, in France, it’s not just about the auto sector, but definitely in some other countries, really auto has had the significant impact and is still weighing. I think over time, as we stabilize that, it starts getting better, but it’s gradual from that perspective. We continue to take action in Europe. As you imagine, we’re trying to continue to boost the top line. We see some positive impacts. As you see in the rest of Europe, we see the top line improving a little bit.

I think we have still some actions to take there, and to basically bit by bit really stabilize our auto environment, which has been a major drag, including in our manufacturing. On WNS, and you say now that you’re in, you know, we are in for a few days now, so it’s a bit early to be able to really draw, but frankly, there’s no surprise. 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 operations, yes, it has the right credibility. We are closing on a very large deal.

I think the fact that we made the WNS acquisition, not just because of the capability, it’s 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. I think it does have a positive impact. The deal we are about to transform, I don’t know if we’d have got it if we hadn’t made that announcement about the acquisition of WNS. Yes, I am pretty positive about the impact.

Perfect. Thank you very much.

Conference Operator: Thank you. We will now take the next question. From the line of Michael Breas 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 Capgemini Heritage business there? If you already have a relationship with some of those customers, can you elaborate? Aiman, 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.

Aiman Ezzat, CEO, Capgemini: First, on the overlap, frankly, I think the good news is that we have limited overlap when I look at some of the largest clients, clients where we are not. I think that’s good news for us because that will provide a lot of cross-selling opportunity. Vice versa, they’re really very, very strong in the insurance sector. Here, we have some overlap in some clients, but it also reinforces our strategic position with some of these clients. There’s also many insurance clients and many banking clients where they are not and where we are present. Here, I really see positive cross-selling opportunities. In general, I think 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 a joint proposal.

On the sovereign AI opportunity, frankly, it’s sovereign, not necessarily AI. It’s sovereignty. 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 requirements 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. Sometimes it goes beyond that to continuity of operation. It’s a growing opportunity. I think BLEU is part of the solution, and it will be coming live in the coming weeks. Beyond BLEU, 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.

You’ll see that the sovereignty solution will move to a much more hybrid environment in terms of clouds, and the private cloud will become a more significant part of that solution to be able to provide sovereignty. That’s part of what we’re working on. We have a discussion with many actors across Europe and the US to see what are the options to be able to provide to address some of the client’s concerns around sovereignty.

Thank you.

Conference Operator: Thank you. We will now take the next question from the line of Toby Og from JP Morgan. Please go ahead.

Yeah. Hi, morning, Aiman and Nive. Thanks for the question. Perhaps just following up on the outcome-based pricing, Aiman, 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? Could you explain how you can actually drive that outcome-based pricing given the competitive intensity of the industry? To follow up on the margins, I appreciate it’s a bit early on the growth as discussed. On the margin side, there should be a bit more visibility around cost evolution, investments, etc. Any factors we should be thinking about, puts and takes on the margin for 2026? Thank you.

Aiman Ezzat, CEO, Capgemini: Okay. On outcome-based pricing, listen, again, I think it’s early days. What we have seen is outcome-based pricing in areas like, you know, can be transaction-led, for example. Where clients in, you know, typically, it can be sometimes even in an infrastructure managed environment or in a digital BPS environment where clients are going to be paid by transaction or paid by server or things like that, which is linked to really a volume, not really linked to a team with a cost, etc. This is something that has been increasing. The other thing is you see also mixed environments. For example, we have a client where we have an environment where some of the pricing of the contract is linked to the revenue growth. It’s not a very large part, but part of the contract is linked to actually to their top line. It’s good.

We bet on a client that has good growth. It’s supportive in terms of margin. It’s really mixed quite a bit. Where we will see a lot is going to be around really delivering tangible results. I think in intelligent operations, you’ll probably see a bigger proportion where clients do expect cost reduction as part of the contract, but also measuring specific improvements in outcomes. We see in some of the latest deals, 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 on some processes. It’s also the fact that we are committing to delivering business outcome out of these processes.

Nive Bhagat, CFO, Capgemini: 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. That’s an area that doesn’t change in any sense. The focus on operational effectiveness and control on areas like SG&A, etc., continue to be an area of focus. That will not change going into 2026. All of that will remain.

Thank you.

Conference Operator: Thank you. We will now take the last question from the line of Ben Castillo-Bernals from BNP 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? 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.

Aiman Ezzat, CEO, Capgemini: Yeah. I mean, the way I think about the auto sector is not just the environment. It’s just the model of delivery is evolving. You know, 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, you know, delivered onshore for many of our European auto clients, and that’s really moving away from there. As I said before, the structural change is what we see in auto is a structural change in terms of demand, but also in terms of delivery model. I think that it’s not we don’t expect to see a rebound in auto, and it weighs heavily on manufacturing. I think our manufacturing numbers would look much better if auto was flat.

It’s really a drag for the moment. It’s good. We know where it’s contained. I’ll say outside of auto, we see really good growth in some other sectors. Like, you know, even industrial manufacturing is back to growth. Our life sciences have good growth. We are positive on the fact that once we are able to address the challenges around auto, we will be back to growth in manufacturing. For the moment, and for probably the next two or three quarters, it would remain a drag really on our manufacturing top line.

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.

Conference Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.

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