Capgemini Q1 2025 revenues slide 0.4% on weak Europe; AI, cloud bookings signal strategic shift

How Did Capgemini Perform in Q1 2025?

Capgemini SE, the Paris-headquartered IT services and digital transformation leader, reported a mixed set of results for the first quarter of 2025. Revenue for the quarter stood at €5,553 million, a modest increase of 0.5% on a reported basis, but declined by 0.4% year-on-year at constant exchange rates. While this topline performance signalled a slowdown in client spending in some regions and sectors, the company’s bookings for the period rose to €5,884 million—up 2.8% year-on-year—resulting in a robust book-to-bill ratio of 1.06.

Chief Executive Officer Aiman Ezzat acknowledged that Q1 unfolded amid continued macroeconomic headwinds and geopolitical uncertainties, yet the company slightly outperformed its own internal expectations. Clients remained committed to transformation programs, albeit with a noticeable shift in budget allocations—from growth-oriented investments to cost efficiency, agility, and digital continuity. In a standout trend, over 6% of Capgemini’s bookings in Q1 2025 were linked to generative AI and agentic AI projects, reaffirming the company’s strategic shift toward next-generation digital services.

What Regional Patterns Emerged in Q1?

The company’s performance in Q1 was uneven across geographies, with certain regions reporting growth while others faced persistent weakness. North America, which accounted for 28% of Capgemini’s 2024 Group revenues, returned to growth with a 0.8% year-on-year increase at constant currency. This was mainly driven by steady demand in the Telecom, Media & Technology (TMT) and Financial Services sectors. Manufacturing, however, remained under pressure due to delayed capital spending and supply chain readjustments.

The United Kingdom and Ireland delivered one of the strongest results, growing 3.9% year-on-year. This performance marked a continuation of the region’s recovery that began in Q4 2024. The uptick was led by public sector digitisation programs and a notable revival in Energy & Utilities investments. Financial Services also remained stable in this region, supported by regulatory compliance initiatives and operational digitisation across banks and insurers.

In contrast, the company’s home market of France—which contributed 20% to Group revenues in 2024—faced a sharp 4.9% revenue decline. This downturn was attributed to sustained softness in Manufacturing and Energy & Utilities, where major clients postponed large-scale digital initiatives. The Rest of Europe, the largest contributor at 31%, contracted by 2.3% year-on-year due to similar manufacturing sector headwinds, particularly in Germany and the Nordics.

Asia-Pacific and Latin America, representing 9% of Group revenues, emerged as the fastest-growing region with a 7.6% year-on-year increase. This was fueled by strong public sector investments, TMT digitisation projects, and resurgent activity in Financial Services and Manufacturing. The momentum in these markets reflects a broader trend of digital leapfrogging in emerging economies, supported by cloud-native deployments and agile operating models.

How Did Capgemini’s Business Segments Perform?

Capgemini’s operational segmentation reveals a steady performance in its core business, alongside challenges in commoditised service lines. The Applications & Technology segment, which forms the backbone of the company and contributed 62% to 2024 revenues, grew by 1.9% year-on-year at constant currency. This segment includes enterprise software development, ERP integration, and cloud migration services—all of which remained in demand as clients upgraded legacy infrastructure.

The Strategy & Transformation segment, which includes management consulting, innovation roadmapping, and business model design, saw a moderate 1.2% revenue increase. At 9% of Group revenues, this segment holds strategic importance, especially in enabling cross-selling into technology-led execution layers. However, its growth was tempered by cautious client spending on advisory services amid budget reallocations.

The Operations & Engineering segment faced a 2.6% year-on-year decline. Encompassing BPO, cloud infrastructure services, and engineering/R&D support, this segment has been sensitive to cost-cutting cycles, especially as clients defer non-critical transformation programs. However, Capgemini expects stabilisation in the second half of 2025 as clients ramp up cloud operations in response to increasing regulatory and cybersecurity needs.

What Strategic Themes Are Driving Demand?

Capgemini is sharpening its focus on generative AI, cybersecurity, and digital sovereignty, with particular emphasis on regulated sectors in Europe. The Group has launched multiple initiatives with Google Cloud and Nvidia to strengthen its ecosystem in AI-based solutions. This aligns with client demand for automation, intelligent workflows, and predictive analytics—capabilities that are rapidly becoming mainstream.

In Europe, sovereign cloud and defence-related IT programs are gaining traction due to heightened concerns over national security and digital autonomy. Capgemini’s positioning in these areas is being strengthened through dedicated investment in AI training, ethical AI frameworks, and security operations centres.

The company also continues to benefit from digital continuity programs—long-term initiatives focused on unifying IT and OT systems, particularly in manufacturing, energy, and logistics sectors. These efforts are aligned with industry-wide moves toward Industry 4.0, ESG compliance, and customer-centric supply chains.

What Are Capgemini’s Updated Financial Targets?

Capgemini has maintained its FY2025 guidance, reflecting confidence in its bookings backlog and strategic pipeline. The company expects full-year revenue growth in the range of -2.0% to +2.0% at constant currency. Operating margin is projected to be between 13.3% and 13.5%, while organic free cash flow is targeted at around €1.9 billion.

Management has indicated that these targets are based on a cautious outlook, considering ongoing risks related to international tariffs, geopolitical tensions, and enterprise IT budget pressures. However, the diversified nature of Capgemini’s client base and growing contribution from high-value AI and cybersecurity deals provide some cushion against broader macro shocks.

What Does the Workforce Data Indicate About Strategy?

As of March 31, 2025, Capgemini employed 342,700 individuals worldwide—an increase of 1.6% year-on-year. Offshore headcount rose by 3.9% to 199,400 employees, now comprising 58% of the total workforce. Onshore headcount decreased by 1.4% to 143,300, in line with the Group’s ongoing focus on delivery efficiency and cost rationalisation.

This workforce rebalancing underscores Capgemini’s continued leverage of offshore talent pools, particularly in India, Poland, and Southeast Asia. The company is also increasing its investment in AI and cloud skills among offshore teams, preparing for expanded demand in platform-driven services and software-defined infrastructure.

How Is the Market Reacting to Capgemini’s Results?

Capgemini SE’s stock (Euronext Paris: CAP) responded positively to its Q1 results, surging by approximately 10% on April 25, 2025. This rally was driven by better-than-expected bookings, AI-led deal wins, and a reaffirmation of 2025 guidance despite macroeconomic volatility.

Investor sentiment has shifted from cautious to cautiously optimistic. While the revenue contraction raised initial concerns, the growth in high-margin bookings and strategic focus on generative AI helped offset worries about short-term topline softness. The market appears to be rewarding Capgemini’s ability to adapt its business mix in line with client transformation priorities.

Brokerage consensus currently skews toward “Hold,” with selective “Buy” recommendations. Analysts are closely watching the company’s ability to accelerate revenue growth in H2 2025, especially from cloud-native engagements and AI-led consulting.

Buy-Sell-Hold Perspectives

Buy: Investors with a medium- to long-term outlook may consider Capgemini a strategic buy due to its increasing exposure to AI, strong bookings momentum, and margin discipline. Its alliances with Nvidia and Google Cloud further strengthen this positioning.

Hold: Existing shareholders are likely to maintain their positions, awaiting clearer signs of revenue acceleration and sustained AI monetisation through Q2 and Q3.

Sell: Investors with shorter timeframes or lower risk tolerance may be cautious due to weak performances in key European markets, particularly France and Germany, and delayed manufacturing demand recovery.

Institutional Flow Breakdown

Although Capgemini does not provide specific FII/DII figures, market behaviour indicates increased foreign institutional interest post-results. European fund managers and U.S.-based institutional investors are likely to raise exposure in light of the company’s high-value pivot. Meanwhile, domestic investors in France and Germany are focusing on margin visibility and delivery optimisation as key metrics going forward.