CGI Group Q2 Earnings Call Highlights

Key Points

• CGI reported Q2 revenue of CAD 4.2 billion, up 3.3% year‑over‑year (1.6% ex‑FX), with adjusted EBIT of CAD 692 million (16.6% margin) and adjusted diluted EPS of CAD 2.27, up 7.1%.
• Bookings and backlog remained robust with quarterly bookings of CAD 4.3 billion (104% book‑to‑bill), trailing‑12‑month bookings at a record CAD 18 billion, and contracted backlog of CAD 31.5 billion (1.9x revenue).
• Management is prioritizing AI—embedding it across managed services (notably the DigiOps offering), deepening partnerships with OpenAI, AWS and Google Cloud, and citing a >40% increase in pipeline and potential project cost savings of 20%–50%.

CGI Group NYSE: GIB reported second-quarter fiscal 2026 results highlighted by revenue growth, steady margin performance, and continued emphasis on applying artificial intelligence across managed services, systems integration, and its intellectual property portfolio.

Second-quarter results and segment trends

Executive Vice President and CFO Steve Perron said CGI generated revenue of CAD 4.2 billion in the quarter, up 3.3% year-over-year, or 1.6% excluding foreign exchange. Perron said growth was driven by recent acquisitions and demand for CGI’s APAC delivery center, particularly from North American clients.

By geography, Perron cited APAC growth of 7.2%, supported by DigiOps, which he described as an “award-winning AI-powered offering for the delivery of managed services.” He said the U.K. and Australia segment grew 16.5% with the acquisition of BJSS, while Western and Southern Europe grew 8.3%, led by the acquisition of Apside. Perron added that the U.S. Federal unit took longer to recover from decision-making delays and the ramp-up of new contracted work following the fall U.S. government shutdown, but improved sequentially. Based on pipeline and booking strength, Perron said CGI expects the federal segment to return to positive organic growth in the third quarter.

Bookings, backlog, and profitability

Bookings in the quarter were CAD 4.3 billion, representing a 104% book-to-bill ratio. Perron said the quarter was led by a rebound in U.S. Federal bookings, which posted a 122% book-to-bill ratio. He also highlighted Germany at 114% and Scandinavia, Northwest and Central East Europe, and Western and Southern Europe at 111%.

On a trailing 12-month basis, Perron said bookings reached a record CAD 18 billion, up 6%, with a book-to-bill ratio of 108%. Contracted backlog stood at CAD 31.5 billion, or 1.9x revenue, including “almost CAD 12 billion” expected to be realized over the next 12 months.

On profitability, Perron said adjusted EBIT was CAD 692 million, up 3.9%, for an adjusted EBIT margin of 16.6%, up 10 basis points. Including acquisition and integration costs of CAD 41 million, earnings before income taxes were CAD 618 million (14.9% margin). He said the effective tax rate was 26.6%, reflecting a new corporate tax surcharge in France, and projected future quarters would be in the 26%–27% range.

Adjusted net earnings were CAD 483 million, with adjusted diluted EPS of CAD 2.27 (up 7.1%). Net earnings were CAD 445 million, with diluted EPS of CAD 2.09 (up 10.6%).

Cash flow and capital allocation

Perron said CGI generated CAD 451 million of cash from operations in the quarter, representing 11% of revenue, with trailing 12-month cash generation of CAD 2.5 billion (15% of revenue). Days sales outstanding were 40 days, unchanged from the prior year.

During the quarter, CGI invested CAD 105 million back into the business, including what Perron described as strategic investment in advanced AI. The company repurchased CAD 397 million of shares and returned CAD 36 million via dividends. Perron said the board approved a quarterly dividend of CAD 0.17 per share, payable June 19, 2026 to shareholders of record as of May 15, 2026.

CGI ended the quarter with over CAD 2.2 billion in readily available capital resources and a net debt leverage ratio “just over 1.” Perron added that CGI increased its credit facility by CAD 1 billion to CAD 2.5 billion to support “build and buy” growth plans.

CEO highlights: first-half performance and AI strategy

President and CEO François Boulanger summarized first-half performance, saying revenue rose 5.5% year-over-year to more than CAD 8.2 billion (or 2.5% in constant currency). Adjusted EBIT increased 5.4% to CAD 1.35 billion, while adjusted EPS grew 7.4% to CAD 4.38. Cash from operations totaled over CAD 1.3 billion, up more than CAD 238 million, representing 16.1% of revenue. Boulanger called the first-half results “a record high for half year performance.”

On demand and client behavior, Boulanger said CGI met with more than 1,800 current and prospective clients as part of annual strategic planning. He said two-thirds of executives indicated they plan to sustain or increase IT budgets, and CGI’s pipeline over the next year increased by more than 40% in value. He also said one-third of organizations are now at the implementation stage for enterprise AI—particularly generative AI—while “agentic AI integrations” are emerging as a priority.

Boulanger said clients are increasingly looking to consolidate around fewer trusted IT partners capable of delivering end-to-end outcomes, which he said aligns with CGI’s “proximity model,” industry specialization, and experience operating in complex environments.

He also highlighted a range of AI-related initiatives discussed on the call, including embedding AI into managed services proposals as “the rule, not the exception,” and DigiOps, which he said spans “nearly 200 agents and 400 workflows.” He added that CGI is using AI to accelerate IP development, with much of its IP development work done in India.

Client wins, partnerships, and market commentary

Boulanger cited several representative second-quarter wins, including a $188.98 million contract with the U.S. Social Security Administration to provide 24/7 support of mission-critical infrastructure, and an extension with the U.S. Department of Veterans Affairs related to financial management transformation using CGI’s Momentum Enterprise Suite. He also cited an expanded agreement with Schneider Electric in Germany, and a Saint-Gobain subsidiary in France selecting CGI’s Retail Suite IP to modernize point-of-sale systems across 68 locations.

On alliances, Boulanger said CGI expanded joint go-to-market collaboration with AWS, OpenAI, and Google Cloud, and continues to deepen partnerships with Microsoft, SAP, Databricks, and Salesforce. Asked about the OpenAI and Google relationships, Boulanger said he did not “necessarily see some differences” versus traditional partnerships, describing the focus as creating platforms and industry-relevant solutions using partner tools.

Boulanger also addressed how AI could affect implementation economics, saying CGI is seeing savings on portions of projects, “between 20% easily to 40% and sometimes 50%,” and argued lower costs could drive more demand as clients accelerate modernization efforts. On pricing in managed services, he said CGI’s contracts are mostly outcome-based and that AI helps CGI accelerate savings delivery while maintaining its margin goals, stating the company’s objective “to produce our EBIT margin of 16% and up” will not change.

Regarding macro conditions, Boulanger said North American demand remains “very good,” with improved momentum in U.S. Federal procurement reflected in bookings and pipeline. He said government demand globally remains a “growth factor,” including defense-related investments. He characterized manufacturing as “still in flux,” especially in France and Germany, where he cited a “tough economy” contributing to softness.

In Canada, Boulanger said CGI is seeing “a very good pipeline for government,” adding that defense capabilities across regions—including work with NATO and in the U.K.—could support opportunities as Canada seeks closer alignment with Europe.

On capital returns, Perron told analysts CGI’s share buyback pace is adjusted based on quarterly free cash flow and anticipated M&A cash outflows. Boulanger also reiterated that double-digit EPS growth remains an “aspiration,” pointing to levers including growth, acquisitions, share buybacks, and potential margin improvement in lower-performing segments.

In response to a question about geopolitical risk, Boulanger said the Iran conflict is adding pressure in manufacturing and airlines and may affect hardware supply chains, but he said he is not seeing a sales-cycle slowdown tied to it “for now.”

About CGI Group NYSE: GIB

CGI Group Inc is a global information technology and business consulting firm that delivers a broad range of services including IT consulting, systems integration, application development and maintenance, infrastructure and network services, managed IT and business process outsourcing. The company works with clients to design, build and operate IT systems and business solutions, with capabilities spanning cloud and hybrid IT environments, cybersecurity, data analytics and artificial intelligence, digital transformation and enterprise resource planning implementations.

Founded in 1976 in Quebec by Serge Godin and André Imbeau, CGI has grown from a regional systems integrator into a multinational professional services organization.

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