Capgemini shares tumble amid weak revenue growth

Investing.com – Shares of Capgemini (EPA:) dropped 10% on Friday after it missed revenue estimates in its first-half year results due to a challenging macroeconomic environment. The IT consulting giant reported a 2.5% year-on-year revenue decline, casting a shadow over its performance.

While the company managed to maintain its operating margin at a steady 12.4%, the market’s focus was firmly on the top line. The softness in key sectors like Financial Services, Telecom, Media, and Technology, as well as Consumer Goods & Retail, coupled with a revised full-year revenue growth forecast to a range of -0.5% to -1.5%, sent its shares down.

Despite a marginal uptick in Q2, the overall picture painted a subdued outlook. The company’s pivot towards services such as cloud, data, AI, and intelligent industry, along with investments in AI training for its workforce, was overshadowed by the short-term revenue challenges.

Jefferies analysts flagged in a note that bookings growth remained flat during the quarter, and the book-to-bill ratio was in line with the historical average for the second quarter. They further added that the FY24 guidance has been revised from organic growth of c1% to c-1.5% versus company-compiled cons at 0.3%, indicating a shortfall of c2% below consensus estimates.

Citi Research, in a note, flagged that the company faces risks from a weakening global economy, intensifying competition for cost-cutting projects, the need to adapt to emerging technologies, and the successful execution of its strategic plans.