French IT consulting group Capgemini has announced the downgrading of its 2024 revenue target for the second time this year. The company cited ongoing weakness in several markets, particularly manufacturing, adversely affecting its third-quarter sales.
The company, known for providing services including enterprise management, cloud computing and assistance in the deployment of artificial intelligence (AI) projects now predicts revenue growth to decrease by between 2% and 2.4%. This marks a significant downward adjustment from its earlier forecast of a 0.5% to 1.5% decline.
Additionally, Capgemini has maintained its operating margin estimate at 13.3% to 13.4%, which remains almost consistent with the previous guidance of 13.3% to 13.6%. The group expects organic free cash flow to be around €1.9bn, unchanged from earlier estimates.
The French company had previously anticipated a decline in annual revenue in July, which it attributed to challenges in the automotive and aerospace industries.
Capgemini Q3 2024 results show drop in revenue and bookings
For the third quarter of 2024 (Q3 2024), Capgemini reported a revenue decline of 1.6%, totalling €5.38bn. In the corresponding quarter of the prior year, the company’s revenue stood at €5.48bn.
The company also reported revenues of €16.5bn for the first nine months of 2024, reflecting a decrease of 2.3% compared to the revenues of €16.9bn in the same period of the prior year.
According to Capgemini, clients are prioritising efficiency through large-scale digital transformation programmes, often at the expense of discretionary deals. This focus is driving strong demand for the company’s cloud, data and AI/generative AI (Gen AI) services, as well as digital core modernisation and intelligent supply chain solutions.
In Q3 2024, bookings reached €5.2bn, reflecting a decline of 0.8%, resulting in a book-to-bill ratio of 0.97 for the period. Additionally, Gen AI bookings totalled approximately €600m over the past nine months, accounting for around 3.5% of the company’s overall bookings.
The company’s strategy and transformation services, which accounted for 9% of total revenues in Q3 2024, experienced a year-on-year (YoY) growth of 6.5%. This increase reflects ongoing client demand for strategic consulting as they transition to more digital and sustainable models, alongside sustained interest in AI and Gen AI opportunities.
In applications and technology services, which represent 63% of the group’s total revenues and constitute Capgemini’s core business, growth rates improved by 170 basis points compared to Q2. As a result, there was a YoY decline of 1.2% in Q3 2024.
On the other hand, Capgemini’s operations and engineering unit’s total revenues fell by 3.4%. This was primarily due to a contraction in infrastructure services and, to a lesser extent, engineering services.
The company’s revenues in the UK and Ireland region, which account for 13% of the group revenues, experienced a positive growth of 0.4%. This growth was driven by the ongoing dynamism in the energy and utilities sector and a resilient manufacturing sector, which offset the decline in the consumer goods and retail sector.
Read more: Don’t count generative AI out just yet, says Capgemini’s Steven Webb
