Key insights
- Capgemini's stock fell due to investor concerns about AI execution risks, despite exceeding medium-term financial targets. The IT services sector faces potential shifts in contract structures, pricing, and labor models. While Capgemini sees AI as a growth driver, the market is pricing in uncertainty, potentially impacting similar companies in the sector and their ability to meet future growth and profitability goals.
Investing.com -- French IT services group Capgemini fell more than 4% on Wednesday after investors looked past medium-term financial targets that exceeded analyst expectations, focusing instead on execution risks facing the sector as artificial intelligence reshapes the industry.
The shares dropped after the company, at an investor day in London, forecast annual constant-currency revenue growth of 5.5% to 7.5% through 2028.
Morgan Stanley, which rates the stock “equal-weight” with a €117 price target, had expected a modestly positive market reaction. Instead, investors appeared concerned about AI’s potential impact on contract structures, pricing and labour models across the IT services industry, which has faced a weak recent reporting season.
“While the organic targets could imply high-single digit percentage EBIT upside versus our estimates, we expect the market to price execution risk to those targets today,” Morgan Stanley analysts wrote.
Capgemini, which reported 2025 revenue of €22.5 billion, also introduced a new profitability metric, adjusted operating profit before acquisition-related expenses, restating its 2025 margin to 10.8% from a reported 13.3%.
The company expects that measure to improve by 130 to 150 basis points by 2028, reaching 12.1% to 12.3% of revenue. Morgan Stanley said the target was 50 to 70 basis points above its own 11.6% forecast.
Capgemini also projected cumulative organic free cash flow of more than €6 billion over 2026-2028, broadly in line with analyst expectations. Morgan Stanley estimated about €6 billion, while Visible Alpha consensus stood at €6.2 billion.
For 2026, the company reiterated guidance for constant-currency revenue growth of 6.5% to 8.5% and an operating margin of 13.6% to 13.8%.
Chief executive Aiman Ezzat said AI would drive growth rather than disrupt the business. “Agentic AI represents a step change in terms of value creation for global corporations and creates a significant growth opportunity for Capgemini,” Ezzat said. “It is an enterprise revolution rather than technology deployment.”
Capgemini’s first-quarter organic growth of around 4.5% outpaced many peers. Morgan Stanley said the company’s medium-term targets implied an organic growth corridor of roughly 3.5% to 5.5%, above its prior 3% estimate, though still close to the lower end of Visible Alpha consensus expectations.
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