Summary of CGI's Q1 2026 Earnings Call

1Key Financial Results and Metrics

Revenue: $4.1 billion, up 7.7% year-over-year (3.4% excluding foreign exchange).

Adjusted EBIT: $655 million, a 7.1% increase year-over-year, with a margin of 16.1% (down 10 basis points).

Net Earnings: $442 million, with a margin of 10.8%, and diluted EPS of $2.03 (up 6% year-over-year).

Bookings: $4.5 billion, resulting in a book-to-bill ratio of 110%. Managed services led with a 117% book-to-bill.

Contracted Backlog: $31.3 billion, equating to 1.9x revenue.

Cash Flow: Generated $872 million from operations, representing 21.4% of total revenue, with DSO improving to 37 days.

Capital Allocation: Invested $87 million in business, $106 million in acquisitions, and $577 million in share buybacks.

2Strategic Updates and Business Highlights

Acquisitions: Notable acquisitions include BJSS in the U.K. and Apside in Western Europe, enhancing service capabilities and scale.

AI Strategy: Continued investment in AI, with 65% of IT solutions incorporating AI-enabled automation. Partnerships with Google Cloud and OpenAI were highlighted.

Sector Performance: Strong growth in APAC (5.8%) and U.K. (31% due to BJSS acquisition). U.S. operations faced challenges due to federal shutdown.

Client Engagement: High win rates on renewals (over 95%) and a significant portion of bookings from new awards and add-ons.

3Forward Guidance and Outlook

Market Outlook: Anticipation of gradual improvement in revenue growth for the remainder of the fiscal year, contingent on avoiding further U.S. federal shutdowns.

Growth Strategy: Focus on managed services and systems integration consulting, with expectations for continued demand in AI advisory and integration services.

Profitability: Expected improvement in margins as utilization rates recover post-shutdown.

4Bad News, Challenges, or Points of Concern

U.S. Federal Segment: Impacted by the federal shutdown, leading to lower utilization rates and profitability. The environment remains dynamic with potential for further shutdowns.

Regulatory Costs: An $8 million one-time impact from changes in statutory employee benefits in India affected results.

Competitive Pressures: Concerns about pricing pressure in the U.S. Federal sector and the need to maintain competitiveness amid evolving client demands.

5Notable Q&A Insights

Acquisition Strategy: Management remains committed to pursuing acquisitions despite AI market volatility, viewing AI as an enabler for future growth.

U.S. Federal Business: Management expressed confidence in the long-term viability of the U.S. federal market, despite recent challenges.

AI Adoption: Clients are cautious about AI investments, focusing on data quality and infrastructure before fully committing to AI initiatives.

Vendor Consolidation: CGI is benefiting from a trend where clients are reducing the number of IT partners, leading to new business opportunities.

Internal AI Use: Early benefits from AI adoption are being realized, with expectations for margin improvements as AI tools are integrated into operations. This summary encapsulates CGI's performance and strategic direction while addressing potential risks and market dynamics.