Capita plc reaffirms full-year forecast as agentic AI strategy shows early impact

Capita plc (LSE: CPI), the London-based business process outsourcing and professional services provider, has released a trading update for the five-month period ending May 31. The British outsourcing group reaffirmed its full-year financial guidance despite a 4.5% decline in adjusted revenue, as it advances efforts to embed artificial intelligence, improve operating margins, and deliver long-term free cash flow positivity.

The firm’s strategic roadmap, outlined at its June 2024 Capital Markets Day, has entered a more aggressive implementation phase. Analysts tracking Capita plc see steady momentum in operational streamlining and digital reinvention, with investor focus now shifting toward execution strength and cash metrics in the second half.

What has driven Capita plc’s revenue decline in the five months to May 31 2025 and how is it responding?

For the five months through May 31, 2025, Capita plc reported a 4.5% year-on-year drop in adjusted revenue. This performance reflects ongoing pressure in legacy segments, particularly Contact Centre operations, which saw revenue fall by 21.1% due to subdued volumes and the loss of key telecommunications contracts announced earlier. The group expects this impact to annualise in H2 2025.

Capita Public Service—the largest contributor—grew by 2.3%, supported by central government wins that offset the impact of prior-year exits in local government and electronic monitoring services. Pension Solutions declined 1.1% due to short-term contract completions, although client onboarding continues in targeted areas. Regulated Services, which Capita plc is in the process of exiting, posted a 6.4% increase owing to a one-off termination fee and deferred income related to a mortgage software contract.

The firm maintained its guidance of broadly flat revenue for FY25, with margin expansion targeted for the second half via cost rationalisation and digital product rollouts.

How significant is the growth in contract wins and total contract value for Capita plc so far in 2025?

Capita plc reported Total Contract Value (TCV) wins of £969 million during the first five months of 2025, a 24% increase from the same period in 2024. This growth was anchored by a more than 70% surge in TCV in Capita Public Service, driven by renewals and expanded mandates from core government clients. This offset a 49% reduction in TCV from the Contact Centre business.

Notable awards included renewals with Southern Water, the Education Authority of Northern Ireland, and Primary Care Support England, where Capita plc’s PCSE Online self-service platform continues to drive digital transformation in healthcare administration. The Royal Navy also expanded its engagement scope, while a large pension client onboarded new capabilities under the Pension Solutions portfolio.

Institutional investors interpreted these wins as validation of Capita plc’s shift toward more defensible, repeatable service contracts with embedded technology value.

What is agentic AI and how is Capita plc deploying it across its operations?

Agentic AI refers to autonomous, decision-capable software agents that operate independently across workflows, drastically reducing manual intervention. Capita plc has made its first major move in this area with the deployment of Agentforce AI, powered by Salesforce, to handle high-volume recruitment tasks. According to the company, this shift reduced the hiring timeline from weeks to hours.

In parallel, the outsourcing provider has transitioned its internal IT and people support systems to the ServiceNow platform, supporting over 25,000 colleagues. Microsoft Copilot is also in active internal use, with around 150,000 interactions per month.

Capita plc’s in-house AI Catalyst Lab has identified more than 200 agentification use cases. Five AI-powered products have already launched, while five others are in advanced testing. These range from customer engagement automation to internal operational support. Analysts believe the rollout of agentic AI solutions could provide durable margin uplift if scaled responsibly.

How is Capita plc funding its digital transformation while avoiding shareholder dilution?

Capita plc’s digital transition is being funded through its £250 million cost reduction programme, first unveiled in 2024. As of June 13, 2025, the firm had already realised £185 million in annualised cost savings. The initiative is on track to be completed by December, with savings earmarked for reinvestment in technology, talent, and AI infrastructure.

The firm’s AI, Data and Technology Academy has logged more than 10,000 digital learning completions this year, with over 600 employees enrolled in management apprenticeships. Capita plc is positioning itself as “client zero,” deploying technologies internally before rolling them out to external clients—thereby lowering commercial rollout risks and refining solutions in real-time.

Capita plc has not raised equity capital during this transformation phase, preferring to remain operationally lean and cash-disciplined. This has been positively viewed by institutional investors focused on margin restoration and earnings quality.

What are Capita plc’s updated financial guidance and anticipated cash flow position for 2025?

Capita plc reiterated its full-year guidance of flat adjusted revenue with second-half-weighted improvements in operating margin. It expects to deliver its full £250 million annualised savings goal by year-end.

Free cash outflow for the year is forecast between £45 million and £65 million, including £55 million in cash restructuring costs. Cash burn is expected to be front-loaded, with the group aiming to return to a free cash flow positive position by the end of 2025.

Net debt may rise temporarily in the first half, but is projected to stabilise as cost savings and AI efficiencies ramp up in the latter part of the year. The firm continues to target an adjusted operating margin of 6–8% over the medium term.

What is the market sentiment among investors and analysts following this trading update?

Analysts have responded cautiously but positively to the June trading update. While concerns remain over revenue volatility in Contact Centre contracts, there is growing confidence in the group’s digital execution and disciplined cost strategy. The rebound in TCV, particularly in public service and healthcare-related engagements, has been interpreted as a sign of healthy underlying demand.

Institutional investors continue to watch the August H1 2025 results closely, particularly for evidence of operating leverage and progress on AI-related product monetisation.

What strategic next steps could support Capita plc’s future growth beyond 2025?

Looking ahead, Capita plc is expected to continue expanding its AI deployment, with an emphasis on productising more internal tools into client-ready offerings. Partnerships with hyperscalers like Microsoft and Salesforce are likely to deepen, especially as agentic AI use cases mature. The AI Catalyst Lab is anticipated to deliver additional high-impact solutions throughout 2025 and 2026.

Capita plc’s public sector alignment is expected to remain central to its growth strategy, with further digital public infrastructure opportunities under consideration. Analysts believe Capita plc’s ability to scale repeatable AI products across government and commercial contracts will ultimately define its long-term investor appeal.

Capita plc’s trading update reflects a business at the midpoint of a strategic reengineering effort—anchored in cost discipline, AI-first workflows, and a leaner contract portfolio. With margin recovery and free cash flow guidance intact, the focus now shifts to demonstrating tangible outcomes from agentic AI adoption by the time it reports H1 results in August 2025.