Capgemini Lowers Forecast, Shares Drop Amid Weak Demand

PARIS - Capgemini SE (EURONEXT:CAP) shares fell 6.4% after the IT services and consulting firm lowered its full-year revenue growth forecast due to weaker-than-expected demand in some sectors, particularly manufacturing. The company now expects a revenue decline of 2.0% to 2.4% in constant currency for the fiscal year 2024, a more pessimistic outlook compared to its previous forecast of a 0.5% to 1.5% decline. Capgemini also narrowed its operating margin target from a range of 13.3% to 13.6% to 13.3% to 13.4%, but maintained its estimate for organic free cash flow at approximately €1.9 billion.

For the third quarter, Capgemini reported revenue of €5.38 billion ($5.69 billion), reflecting a 1.6% year-over-year decline in constant currency. Although this represents a slight improvement compared to the second quarter, it reflects ongoing challenges in the IT services market. CEO Aiman Ezzat stated, "Despite stronger than expected headwinds in some sectors, particularly Manufacturing, our growth marginally improved in the third quarter compared to the second quarter." He noted that Financial Services showed signs of recovery, while Telecommunications and Technology sectors continued to face challenges to a lesser extent.

The company's invoice/order ratio for the third quarter stood at 0.97, with orders falling 0.8% in constant currency to €5.22 billion. Capgemini reported increased demand for Cloud and Data & AI/GenAI services, as well as digital core modernization and smart supply chain solutions. Despite the challenging environment, Ezzat emphasized the company's commitment to adapting, stating, "We are also initiating a series of targeted actions to simplify our operations to make the Group more agile and focused on growth."