CGI Inc. (GIB.A:CA) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary and Q&A highlight strong financial performance, including revenue growth, improved margins, and increased dividend, which are positive indicators. Although there are challenges like the U.S. government shutdown, the overall outlook is optimistic with AI-driven efficiency gains and robust managed services demand. The positive sentiment is reinforced by successful vendor consolidation and strategic M&A plans. However, the lack of clarity on data platform modernization could be a minor concern. Given these factors, a positive stock price movement of 2% to 8% is expected over the next two weeks.
Key Financial Performance
Revenue $4.1 billion, up 7.7% year-over-year or up 3.4% excluding the impact of foreign exchange. Growth was driven by recent business acquisitions and continued demand for the APAC delivery center, with this segment reporting growth of 5.8%, mainly through delivery of managed services. The U.K. and Australia segment grew by 31% due to the acquisition of BJSS, and the Western and Southern Europe segment grew by 9% due to the acquisition of Apside.
Bookings $4.5 billion for a book-to-bill ratio of 110%, up by more than $300 million year-over-year. Excluding U.S. Federal, the combined book-to-bill was 118%. Growth was led by U.S. commercial and state government at 169%, Finland, Poland, and Baltics at 124%, and Scandinavia, Northwest, and Central East Europe at 113%. Managed services bookings were at 117% book-to-bill, and SI&C book-to-bill was 100%.
Adjusted EBIT $655 million, up 7.1% year-over-year for a margin of 16.1%, down 10 basis points. Results were impacted by the U.S. federal shutdown and an $8 million onetime impact of past service costs related to statutory employee benefits in India due to a change of regulation.
Earnings Before Income Taxes $600 million for a margin of 14.7%. Including acquisition and related integration costs of $26 million. The effective tax rate was 26.3%, 40 basis points higher than last year, mainly due to the statutory tax increase in France.
Adjusted Net Earnings $461 million for a margin of 11.3%. Diluted EPS was $2.12, an accretion of 8% compared to Q1 last year.
Net Earnings $442 million for a margin of 10.8%. Diluted EPS was $2.03, an accretion of 6% compared to Q1 last year.
Cash from Operations $872 million, representing 21.4% of total revenue. This was due to the strength of collection efforts. DSO was 37 days, an 8-day improvement sequentially and a 1-day improvement compared to the prior year.
Managed Services Revenue Increased by more than $600 million or 8% over the past 12 months compared to the previous year. Managed services bookings were up year-over-year and on a trailing 12-month basis, with 40% of wins being new business.
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Operating Highlights
AI-enabled software delivery life cycle: Improving engineering speed and quality with strong adoption of AI development assistance and advanced tooling.
AI-enabled services: Examples include AI-driven application reverse engineering, deep learning AI for healthcare, AI Ops for IT reliability, and AI-enabled developer assistants.
AI exchange platform: Launched to scale and industrialize AI delivery globally while maintaining quality, speed, and cost-effectiveness.
Acquisition of BJSS: Transformative to U.K. operations, adding significant scale and showcasing CGI's end-to-end services.
Acquisition of Apside: Led to 9% growth in Western and Southern Europe, including engineering services.
Comarch division merger: Expanded presence in Poland and Baltic states, deepening public sector expertise and IP portfolio.
Online Business Systems merger: Enhanced capabilities in AI, digital transformation, and cybersecurity in Canada and the U.S.
Revenue growth: $4.1 billion in revenue, up 7.7% year-over-year, driven by acquisitions and demand for APAC delivery center.
Bookings: $4.5 billion in bookings, with a book-to-bill ratio of 110%, led by managed services and SI&C.
Profitability: Adjusted EBIT of $655 million, up 7.1% year-over-year, with a margin of 16.1%.
Cash generation: $872 million in cash from operations, representing 21.4% of total revenue.
AI strategy: Focused on embedding AI into services, leading with AI-integrated platforms, and uniting talent with AI technologies.
Capital allocation priorities: Investing in business, pursuing acquisitions, and share buybacks.
AI partnerships: Multiyear agreement with Google Cloud and global alliance with OpenAI to deploy advanced AI capabilities.
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Risk or Challenges
U.S. Federal Shutdown: The U.S. federal shutdown impacted the company's operations and bookings in the quarter, creating a dynamic and uncertain environment for the U.S. Federal segment. This led to a sequential decline in bookings and operational challenges.
Regulatory Changes in India: A change in statutory employee benefits regulation in India resulted in an $8 million one-time cost, impacting profitability.
Statutory Tax Increase in France: The statutory tax increase in France raised the company's effective tax rate by 40 basis points, affecting financial performance.
Geopolitical Uncertainty: Geopolitical uncertainty and shifting regulatory requirements are influencing client priorities and creating challenges in addressing market demands.
Economic Variability by Region and Industry: Economic conditions and client priorities vary significantly by region and industry, adding complexity to strategic planning and execution.
AI Integration Challenges: The transition from experimentation to enterprise integration of AI is slow and complex, requiring strong foundations in data quality, platform modernization, and governance, which could delay client adoption and project timelines.
Market Uncertainty: Market uncertainties are driving clients to reduce spending, which could impact revenue growth, particularly in discretionary initiatives.
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Guidance & Outlook
Tax Rate: The company expects its tax rate for future quarters to be in the range of 26% to 27%.
Share Buyback Program: The Board of Directors approved the renewal of the NCIB program until February 2027, authorizing the repurchase of up to 19 million shares over the next 12 months. The company plans to remain very active in its repurchase program given current share price levels.
Dividend Program: The Board of Directors approved a quarterly cash dividend of $0.17 per share, payable on March 20, 2026, to shareholders of record as of February 18, 2026.
Managed Services Growth: Managed Services bookings were up on both a year-over-year and trailing 12-month basis. Over the past 12 months, Managed Services business increased by more than $600 million or 8% compared to the previous year. The pipeline of new opportunities increased by more than 20% year-over-year.
Systems Integration and Consulting (SI&C) Growth: SI&C revenue grew 9.8% year-over-year in constant currency. The pipeline of SI&C opportunities in advanced stages is up by more than 40% year-over-year.
AI Strategy and Adoption: The company is embedding AI into its services and solutions, with 65% of IT solutions incorporating AI-enabled intelligent automation. The pipeline of AI-related SI&C opportunities is strong, with increasing client adoption of AI for enterprise integration. Recent AI projects include partnerships with Google Cloud and OpenAI to accelerate AI adoption.
Acquisition Strategy: The company continues to pursue accretive acquisitions, with a robust pipeline of merger targets. Recent acquisitions include a division of Comarch in Europe and Online Business Systems in North America, enhancing capabilities in AI, digital transformation, and cybersecurity.
Market Outlook: The company anticipates gradual improvement in some industries and geographies for the rest of the year, despite ongoing geopolitical uncertainty and varying economic conditions.
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Shareholder Return Plan
Dividend Program: The Board of Directors approved a quarterly cash dividend of $0.17 per share. This dividend is payable on March 20, 2026, to shareholders of record as of the close of business on February 18, 2026.
Share Buyback Program: The company invested $577 million to buy back its stock in Q1. The Board of Directors approved the renewal of the NCIB program until February 2027, authorizing the repurchase for cancellation of up to 19 million shares over the next 12 months. The company plans to remain very active in its repurchase program at current share price levels.
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Key Q&A
Q:Does the volatility and uncertainty around AI change the way CGI evaluates acquisitions?
A:No, CGI continues to see AI as an enabler for the future and does not change its policy or view on mergers and acquisitions. They focus on improving their footprint in metro markets and transformational opportunities.
Q:What is CGI's perspective on the U.S. Federal government as a client, especially considering the recent government shutdown?
A:CGI views the U.S. Federal government as a strong client with over 30 years of collaboration. Despite short-term headwinds like shutdowns, they see it as a good long-term market.
Q:How should we think about margins in the U.S. Federal segment going forward?
A:Margins were impacted by the government shutdown, which reduced utilization rates. Once operations resumed, utilization and margins improved. There is no significant cost or rate pressure, and margins should align with historical levels going forward.
Q:Where is CGI seeing improvement in SI&C bookings and pipeline?
A:CGI is seeing improvement across industries, particularly in financial services and manufacturing, driven by demand for consulting and deployment of AI tools.
Q:What trends are observed in vendor consolidation among CGI's clients?
A:Clients are reducing the number of IT partners, moving away from freelancers and small companies. CGI has won significant vendor consolidation deals, such as with a large European bank and a German automobile company.
Q:What is CGI's perspective on enterprise AI adoption and its impact on IT spending?
A:Enterprise AI adoption is progressing, with companies deploying tools but needing help to realize outcomes. AI spending is seen as additive, creating new demand for services like application modernization and managed services.
Q:What is holding back growth in AI adoption among clients?
A:Challenges include data quality, complexity of applications, and the need for ROI demonstration. Clients are cautious about investments due to past experiences and macroeconomic concerns.
Q:Has CGI started to capture material margin improvement from AI?
A:Yes, CGI is seeing savings from AI, reinvesting in the business, and expects margins to improve further in the future.
Q:What is driving the 30% growth in government pipeline bookings?
A:Growth is driven by investments in defense, cybersecurity, and IT systems across Canada, Europe, and the U.S. State and local governments in the U.S. are also contributing to the momentum.
Q:How is CGI managing revenue growth relative to headcount growth?
A:Revenue growth is outpacing headcount growth due to the use of AI in managed services, which increases efficiency and reduces the need for additional headcount.
Q:What is CGI's approach to outcome-based pricing and its impact on margins?
A:Outcome-based pricing, including fixed-price contracts, is increasing. This approach is expected to improve margins in the long term as cost reductions directly benefit margins.
Q:What differentiates CGI in the SI&C segment compared to peers?
A:CGI's proximity model, which emphasizes close client relationships and industry expertise, helps them win business and stand out from competitors.
Q:How does the entry point of AI into enterprises differ from previous technology cycles?
A:AI is deployed across all levels, leading to innovation but also potential inefficiencies. CGI helps clients manage and optimize AI deployment to avoid chaos and ensure ROI.
Q:Why isn't there a bigger rush to modernize data platforms for AI adoption?
A:Modernization is slowed by the complexity of data management, cybersecurity concerns, and the need for ROI. Companies are cautious due to past investment experiences.
Q:What is CGI's outlook for organic growth and improvement in the coming quarters?
A:CGI expects gradual improvement in organic growth and overall performance, barring disruptions like another U.S. government shutdown.
Q:Are there areas where CGI is winning or losing deals due to AI?
A:CGI has not observed significant changes in areas of strength or weakness due to AI. They continue to invest in technology and talent to remain competitive.
Q:Review of Unclear Management Responses
A:Management avoided directly addressing why there isn't a bigger rush to modernize data platforms for AI adoption, providing general reasons like complexity and cybersecurity concerns without specific details or examples.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI capability
AI exchange
AI service
CGI AI
Europe
Federal segment
Google Cloud
IP
Managed Services
SIC
Systems
adoption AI
agency
agriculture
alliance
billing
book bill
booking
condition
cost
day improvement
delivery life
development
enterprise
government sector
health
improvement CGI
integration consulting
margin
merger
outcome AI
partner
progress
quality
scale
shutdown
stream
trust
value creation
win
GIB Transcript
CGI Inc. (GIB.A:CA) Q1 2026 Earnings Call Transcript
Positive1-28
The earnings call summary and Q&A highlight strong financial performance, including revenue growth, improved margins, and increased dividend, which are positive indicators. Although there are challenges like the U.S. government shutdown, the overall outlook is optimistic with AI-driven efficiency gains and robust managed services demand. The positive sentiment is reinforced by successful vendor consolidation and strategic M&A plans. However, the lack of clarity on data platform modernization could be a minor concern. Given these factors, a positive stock price movement of 2% to 8% is expected over the next two weeks.
iA Financial Corporation Inc. (IAG:CA) Q3 2025 Earnings Call Transcript
Positive11-5
The earnings call reflects a positive sentiment with strong financial performance, including a 29% increase in net income and growth across all segments. The Q&A highlights optimism about synergies from the RF Capital acquisition and confidence in achieving accretion sooner than expected. Although there are concerns about investment income reduction and unclear management responses, the overall outlook remains positive with favorable acquisition strategies, strong core earnings, and a robust dividend payout ratio.
CGI Inc. (GIB.A:CA) Q4 2025 Earnings Call Transcript
Positive11-5
The earnings call summary and Q&A indicate strong demand in AI services, growing pipelines in managed services and SI&C, and strategic M&A activities. Positive trends in revenue per employee and client spending, combined with a focus on AI and automation, suggest a favorable outlook. Concerns about the federal sector and management's vague responses on growth specifics are noted but outweighed by overall positive developments. No drastic negative factors were present, supporting a positive sentiment.
CGI Inc. (GIB) Q3 2025 Earnings Call Transcript
Positive7-30
The earnings call reveals strong financial performance, strategic growth through acquisitions, and a positive outlook on AI investments and partnerships. Despite challenges in separating organic from acquisition growth and some regional headwinds, CGI's focus on modernization and client-centric approach is promising. The Q&A session highlights optimism in partnerships and AI as competitive advantages, with ongoing share buybacks adding further investor confidence. Overall, the sentiment leans positive, with expectations of continued growth and strategic investments driving stock price upwards.
GIB Report
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