CGI Group Q3 Earnings Call Highlights

Key Points

• CGI delivered solid third-quarter results: Revenue rose 2.5% year over year to CAD 4.2 billion, adjusted EPS increased 9% to CAD 2.29, and operating cash flow reached CAD 605 million. The adjusted EBIT margin remained strong at 16.3%.
• AI and managed-services demand is accelerating. The AI-related pipeline nearly doubled to approximately CAD 10 billion, while managed-services proposals awaiting decisions more than doubled year over year; total contracted backlog reached CAD 31.8 billion.
• CGI continued returning capital through CAD 413 million in share repurchases and CAD 36 million in dividends, while maintaining low leverage and CAD 3.2 billion in available capital. Management also said it remains positioned to pursue larger strategic acquisitions.

CGI Group NYSE: GIB reported third-quarter fiscal 2026 revenue growth, higher earnings per share and strong operating cash flow, while management said demand for AI-enabled services, managed services and consulting continues to expand.

Revenue for the quarter totaled CAD 4.2 billion, up 2.5% from a year earlier, or 1.3% excluding foreign-exchange effects. Chief Financial Officer Steve Perron said recent acquisitions accounted for roughly 2.5% of growth. The company’s Asia-Pacific segment posted 9.7% organic growth, aided by North American financial-services clients using CGI’s global delivery centers, while Western and Southern Europe grew 8.6% with the contribution from the Apside acquisition.

CGI’s U.S. Federal segment returned to growth, reporting 2.5% year-over-year organic growth after sequential improvement. Perron said quarterly bookings were CAD 4.2 billion, producing a book-to-bill ratio of 100%. U.S. Federal posted a 115% book-to-bill ratio, while Germany reached 114%.

Profitability and capital returns

Adjusted EBIT rose 2.3% year over year to CAD 682 million, with the adjusted EBIT margin holding at 16.3%. GAAP net earnings increased by CAD 57 million to CAD 465 million, while diluted earnings per share rose 22.5% to CAD 2.23. On an adjusted basis, net earnings were CAD 478 million and diluted EPS was CAD 2.29, up 9% from the prior-year quarter.

Cash from operations reached CAD 605 million, or 14.4% of revenue. On a trailing 12-month basis, operating cash flow totaled CAD 2.6 billion, representing 15.8% of revenue. Days sales outstanding were unchanged year over year at 43 days.

The company deployed capital during the quarter through CAD 105 million of investments in the business, CAD 50 million for acquisitions, CAD 413 million in share repurchases and CAD 36 million in dividends. CGI’s board approved a quarterly dividend of CAD 0.17 per share, payable Sept. 18 to shareholders of record on Aug. 14.

At quarter-end, CGI had CAD 3.2 billion of readily available capital resources and a net-debt leverage ratio of just over one, Perron said. The company expects its future tax rate to be between 26% and 27%, reflecting enacted rates and its profitability mix. The third-quarter tax rate was 26.5%, including an impact from France’s new corporate tax surcharge.

Backlog and AI-related opportunity pipeline

Contracted backlog stood at CAD 31.8 billion, or 1.9 times annual revenue. More than CAD 12 billion of that backlog is scheduled to convert into revenue during the next 12 months, a 5% increase from the second quarter, according to Perron.

President and CEO Tim Hurlebaus said client demand is increasingly focused on enterprise-scale initiatives that incorporate advanced AI. For the first nine months of fiscal 2026, CGI generated CAD 12.4 billion in revenue, up 4.4%, or 2.1% in constant currency. Adjusted EBIT increased 4% to CAD 2 billion and adjusted EPS rose 8% to CAD 6.67.

Hurlebaus said managed-services bookings over the trailing 12 months totaled CAD 10.3 billion, up 5% from the previous period, for a 115% book-to-bill ratio. The number of managed-services proposals awaiting client decisions has more than doubled from a year earlier, while their total contract value is more than 50% higher, he said.

The company also cited improving demand for systems integration and consulting, with client awards in consulting up 11% year over year. CGI reported book-to-bill ratios of at least 103% across financial services, government and manufacturing in the quarter.

• The managed-services opportunity pipeline increased 20% year over year.
• Systems integration and consulting opportunities rose more than 30%.
• The pipeline for intellectual-property opportunities increased more than 30%.
• The portion of the overall pipeline involving AI-based services was nearly CAD 10 billion, roughly double its size a year earlier.

Client demand and strategy

Hurlebaus said customers are moving from AI experimentation toward operational deployment, with emphasis on data modernization, cybersecurity, engineering, organizational readiness and cost management. He said clients increasingly want fewer strategic technology partners that can help them implement and govern AI over time.

CGI is investing in sovereign AI capabilities, high-security platforms and sovereign-cloud partnerships, according to Hurlebaus. He said these investments are intended to help organizations maintain control of sensitive data while addressing regulatory and national-security requirements.

Management highlighted several new or expanded contracts, including a $251 million modernization award from the U.S. General Services Administration, an expanded partnership with steel manufacturer SSAB, work for the U.K. Ministry of Defence, and technology-transformation engagements with Orange, the City of Munich, Posti and Poland’s Social Insurance Institution.

Hiring rose more than 10% sequentially and 50% from the prior-year third quarter, led by U.S. operations as recent bookings move into implementation. Hurlebaus said some hiring also reflected staffing changes within certain private-sector client engagements.

M&A and market outlook

Hurlebaus said CGI’s fundamental strategy remains unchanged, though the company is prioritizing capabilities, partnerships and industry expertise needed to address client demand. He said the company did not see a late-quarter broad pullback in discretionary spending, though some Nordic client decisions were delayed and are expected to be resolved in the current quarter.

CGI continues to see an active acquisition pipeline spanning smaller metro-market opportunities and larger strategic targets. Hurlebaus said the company is pursuing acquisitions that deepen industry expertise, expand local-market presence and create accretive value, while Perron said the balance sheet remains positioned to support larger transactions.

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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