CGI Group Q1 2026 CGI Group Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q1 2026 CGI Group Inc Earnings Call
Operator: Good morning, ladies and gentlemen. Welcome to CGI's Q1 fiscal 2026 conference call. I would now like to turn the meeting over to Mr. Kevin Linder, SVP of Investor Relations. Please go ahead, Mr. Linder.
Operator: Good morning, ladies and gentlemen. Welcome to CGI's Q1 fiscal 2026 conference call. I would now like to turn the meeting over to Mr. Kevin Linder, SVP of Investor Relations. Please go ahead, Mr. Linder.
Speaker #1: Good morning, ladies and gentlemen. Welcome to CGI's first quarter fiscal 2026 conference call. I would now like to turn the meeting over to Mr. Kevin Linder, SVP of Investor Relations.
Speaker #1: Please go ahead, Mr. Linder.
Speaker #2: Thank you, Julie, and good morning. With me to discuss CGI's first quarter fiscal 2026 results are Francois Boulanger, our President and CEO, and Steve Perron, Executive Vice President and CFO.
Kevin Linder: Thank you, Julie, and good morning. With me to discuss CGI's first quarter fiscal 2026 results are Francois Bélanger, our President and CEO, and Steve Perron, Executive Vice President and CFO. This call is being broadcast on cgi.com and recorded live at 9:00AM Eastern Time on Wednesday, 28 January 2026. Supplemental slides, as well as a press release we issued earlier this morning, are available for download, along with our MD&A financial statements and accompanying notes, all of which have been filed with both SEDAR+ and EDGAR. Please note that some statements made on the call may be forward-looking. Actual events or results may differ materially from those who are expressed or implied, and CGI disclaims any intent or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Kevin Linder: Thank you, Julie, and good morning. With me to discuss CGI's first quarter fiscal 2026 results are Francois Bélanger, our President and CEO, and Steve Perron, Executive Vice President and CFO. This call is being broadcast on cgi.com and recorded live at 9:00AM Eastern Time on Wednesday, 28 January 2026. Supplemental slides, as well as a press release we issued earlier this morning, are available for download, along with our MD&A financial statements and accompanying notes, all of which have been filed with both SEDAR+ and EDGAR. Please note that some statements made on the call may be forward-looking. Actual events or results may differ materially from those who are expressed or implied, and CGI disclaims any intent or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Speaker #2: This call is being broadcast on cgi.com and recorded live at 9:00 a.m. Eastern Time on Wednesday, January 28th, 2026. Supplemental slides, as well as the press release we issued earlier this morning, are available for download, along with our MD&A financial statements and accompanying notes, all of which have been filed with both Cedar Plus and Edgar.
Speaker #2: statements made on the call may be Please note that some forward-looking. Actual events or results may differ materially from those that are expressed or implied, and CGI disclaims any intent or obligation to update or revise any forward-looking statements, whether as a result of new information or future events or otherwise.
Speaker #2: The complete, safe harbor statement is available in both our MD&A and press release, as well as on cgi.com. We recommend our investors read it in its entirety.
Kevin Linder: The complete safe harbor statement is available in both our MD&A and press release, as well as on cgi.com. We recommend our investors read it in its entirety. We're reporting our financial results in accordance with International Financial Reporting Standards, or IFRS. As always, we will also discuss non-GAAP performance measures, which should be viewed as supplemental. The MD&A contains definitions of each one used in our reporting. All of the dollar figures expressed on this call are Canadian, unless otherwise noted. We are also hosting our annual general meeting this morning, so we hope you will join us live via the broadcast at 11:00AM. Now, I'll turn the call over to Steve to review our Q1 financials, and then François will comment on our business and market outlook. Steve?
The complete safe harbor statement is available in both our MD&A and press release, as well as on cgi.com. We recommend our investors read it in its entirety. We're reporting our financial results in accordance with International Financial Reporting Standards, or IFRS. As always, we will also discuss non-GAAP performance measures, which should be viewed as supplemental. The MD&A contains definitions of each one used in our reporting. All of the dollar figures expressed on this call are Canadian, unless otherwise noted. We are also hosting our annual general meeting this morning, so we hope you will join us live via the broadcast at 11:00AM. Now, I'll turn the call over to Steve to review our Q1 financials, and then François will comment on our business and market outlook. Steve?
Speaker #2: We are reporting our financial results in accordance with International Financial Reporting Standards, or IFRS. As always, we will also discuss non-GAAP performance measures, which should be viewed as supplemental.
Speaker #2: The MD&A contains definitions of each one used in our reporting. All of the dollar figures expressed on this call are Canadian, unless otherwise noted.
Speaker #2: We are also hosting our Annual General Meeting this morning, so we hope you will join us live via the broadcast at 11:00 a.m. Now, I'll turn the call over to Steve to review our Q1 financials, and then Francois will comment on our business and market outlook.
Speaker #2: Steve.
Steve Perron: Thank you, Kevin, and good day, everyone. In our Q1 of fiscal 2026, we demonstrated discipline in the management of our operations while continuing to make the necessary investment, guided by our AI strategy. In the quarter, we delivered CAD 4.1 billion of revenue, up 7.7% year-over-year, or up 3.4% when excluding the impact of foreign exchange. Growth was driven by our recent business acquisitions and continued demand for our APAC delivery center, with this segment reporting growth of 5.8%, mainly through delivery of managed services. In our UK and Australia segment, with our acquisition of BJSS, growth was 31%. This acquisition is transformative to our UK operation, adding significant scale, and we can now showcase the breadth of CGI's end-to-end services to our new clients.
Steve Perron: Thank you, Kevin, and good day, everyone. In our Q1 of fiscal 2026, we demonstrated discipline in the management of our operations while continuing to make the necessary investment, guided by our AI strategy. In the quarter, we delivered CAD 4.1 billion of revenue, up 7.7% year-over-year, or up 3.4% when excluding the impact of foreign exchange. Growth was driven by our recent business acquisitions and continued demand for our APAC delivery center, with this segment reporting growth of 5.8%, mainly through delivery of managed services. In our UK and Australia segment, with our acquisition of BJSS, growth was 31%. This acquisition is transformative to our UK operation, adding significant scale, and we can now showcase the breadth of CGI's end-to-end services to our new clients.
Speaker #3: Kevin, and good day everyone. Thank you. In our first quarter of fiscal 2026, we demonstrated discipline in the management of our operations, while continuing to make the necessary investment guided by our AI strategy.
Speaker #3: In the quarter we delivered $4.1 billion of revenue up 7.7% year over year, or up 3.4% when excluding the impact of foreign exchange. Growth was driven by our recent business acquisitions and continued demand for our APAC delivery center, with this segment reporting growth of 5.8% mainly through delivery of managed services.
Speaker #3: In our UK and Australia segment, with our acquisition of 31%. This BJSS, growth was acquisition is transformative to our UK operation adding significant scale and we can now showcase the breadth of CGI's end-to-end services to our new clients.
Speaker #3: In our Western and Southern Europe segment, growth was 9%, led by our acquisition of EPSID, which includes engineering services. As we indicated last quarter, our US operations were impacted by the federal shutdown in the quarter, the timing and related impacts were in line with what we communicated last quarter.
Steve Perron: In our Western and Southern Europe segment, growth was 9%, led by our acquisition of Apside, which includes engineering services. As we indicated last quarter, our US operations were impacted by the federal shutdown in the quarter. The timing and related impacts were in line with what we communicated last quarter. While a sequential improvement is expected in the next quarter, our US Federal segment is still operating in a very dynamic environment. Bookings in the quarter were $4.5 billion, for a book-to-bill ratio of 110%, led by US Commercial and State Government at 169%, Finland, Poland, and Baltics at 124%, and Scandinavia, Northwest and Central East Europe at 113%. Bookings continue to be led by our managed services at a 117% book-to-bill.
In our Western and Southern Europe segment, growth was 9%, led by our acquisition of Apside, which includes engineering services. As we indicated last quarter, our US operations were impacted by the federal shutdown in the quarter. The timing and related impacts were in line with what we communicated last quarter. While a sequential improvement is expected in the next quarter, our US Federal segment is still operating in a very dynamic environment. Bookings in the quarter were $4.5 billion, for a book-to-bill ratio of 110%, led by US Commercial and State Government at 169%, Finland, Poland, and Baltics at 124%, and Scandinavia, Northwest and Central East Europe at 113%. Bookings continue to be led by our managed services at a 117% book-to-bill.
Speaker #3: While a sequential improvement is expected in the next quarter, our US federal segment is still operating in a very dynamic environment. Bookings in the quarter were $4.5 billion for a book-to-bill ratio of 110%, led by US commercial and state government at $169%.
Speaker #3: Finland, Poland, and Baltics at $124%, and Scandinavia, Northwest and Central East Europe at $113%. Bookings continue to be led by our managed services at a $117% book-to-bill.
Speaker #3: As INC book-to-bill was 100%, last reached in our first quarter of fiscal 2025. With the US federal shutdown, we had previously called out that our bookings would be impacted in the quarter.
Steve Perron: SI&C book-to-bill was 100%, last reached in our first quarter of fiscal 2025. With the U.S. Federal shutdown, we had previously called out that our bookings would be impacted in the quarter. This was indeed the case, and excluding U.S. Federal, our teams delivered a combined book-to-bill of 118%. On a trailing twelve-month basis, book-to-bill was 110%, with North America at 122% and Europe at 101%. On the same basis, managed services had a book-to-bill ratio of 122%, and the SI&C book-to-bill ratio was 96%. Our contracted backlog reached CAD 31.3 billion, or 1.9 times revenue. Turning to profitability.
SI&C book-to-bill was 100%, last reached in our first quarter of fiscal 2025. With the U.S. Federal shutdown, we had previously called out that our bookings would be impacted in the quarter. This was indeed the case, and excluding U.S. Federal, our teams delivered a combined book-to-bill of 118%. On a trailing twelve-month basis, book-to-bill was 110%, with North America at 122% and Europe at 101%. On the same basis, managed services had a book-to-bill ratio of 122%, and the SI&C book-to-bill ratio was 96%. Our contracted backlog reached CAD 31.3 billion, or 1.9 times revenue. Turning to profitability.
Speaker #3: This was indeed the case, and excluding US federal, our teams delivered a combined book-to-bill of $118%. On the trading 12-month basis, book-to-bill was $110%, with North America at $122% and Europe at $101%.
Speaker #3: On the same basis, managed services had a book-to-bill ratio of 122%, and the SINC book-to-bill ratio was 96%. Our contracted backlog reached $31.3 billion or 1.9 times revenue.
Speaker #3: Turning to profitability, adjusted EBIT in the quarter was $655 million up 7.1% year over year for a margin of 16.1%, down 10 basis points.
Steve Perron: Adjusted EBIT in the quarter was CAD 655 million, up 7.1% year-over-year, for a margin of 16.1%, down 10 basis points. In the quarter, our results were impacted by the US federal shutdown and a CAD 8 million one-time impact of past service costs related to statutory employee benefits in India due to a change of regulation. Including acquisition and related integration costs of CAD 26 million, earnings before income taxes were CAD 600 million, for a margin of 14.7%. Our effective tax rate in the quarter was 26.3%, 40 basis points higher than last year, mainly explained by the statutory tax increase in France. We expect our tax rate for future quarters to be in the range of 26% to 27%.
Adjusted EBIT in the quarter was CAD 655 million, up 7.1% year-over-year, for a margin of 16.1%, down 10 basis points. In the quarter, our results were impacted by the US federal shutdown and a CAD 8 million one-time impact of past service costs related to statutory employee benefits in India due to a change of regulation. Including acquisition and related integration costs of CAD 26 million, earnings before income taxes were CAD 600 million, for a margin of 14.7%. Our effective tax rate in the quarter was 26.3%, 40 basis points higher than last year, mainly explained by the statutory tax increase in France. We expect our tax rate for future quarters to be in the range of 26% to 27%.
Speaker #3: In the quarter, our results were impacted by the US federal shutdown and an $8 million one-time impact of fast service costs related to statutory employee benefits in India due to a change of regulation.
Speaker #3: Including acquisition and related integration costs of $26 million earnings before income taxes were $600 million for a margin of 14.7%. Our effective tax rate in the quarter was 26.3%, 40 basis points higher than last year, mainly explained by the statutory tax increase in France.
Speaker #3: We expect our tax rate for future quarters to be in the range of 26 to 27%. Adjusted net earnings were $461 million for a margin of 11.3%.
Steve Perron: Adjusted net earnings were CAD 461 million, for a margin of 11.3%. On the same basis, diluted EPS was CAD 2.12, an accretion of 8% when compared to Q1 last year. Net earnings were CAD 442 million, for a margin of 10.8%, and diluted EPS was CAD 2.03, an accretion of six percent when compared to Q1 last year. Turning to cash. We generated a strong CAD 872 million in our cash from operations, representing 21.4% of total revenue, due to the strength of our collection efforts. DSO was 37 days in the quarter, an 8-day improvement sequentially, and a 1-day improvement when compared to the prior year.
Adjusted net earnings were CAD 461 million, for a margin of 11.3%. On the same basis, diluted EPS was CAD 2.12, an accretion of 8% when compared to Q1 last year. Net earnings were CAD 442 million, for a margin of 10.8%, and diluted EPS was CAD 2.03, an accretion of six percent when compared to Q1 last year. Turning to cash. We generated a strong CAD 872 million in our cash from operations, representing 21.4% of total revenue, due to the strength of our collection efforts. DSO was 37 days in the quarter, an 8-day improvement sequentially, and a 1-day improvement when compared to the prior year.
Speaker #3: On the same basis, diluted EPS was $2.12 an accretion of 8% when compared to Q1 last year. Net earnings were $442 million for a margin of 10.8%, and diluted EPS was $2.03 an accretion of 6.6% when compared to Q1 last year.
Speaker #3: Turning to cash, we generated a strong $872 million in our cash from operations, representing 21.4% of total revenue, due to the strength of our collection efforts.
Speaker #3: The SO was $37 days in the quarter, an eight-day improvement sequentially, and a one-day improvement when compared to the prior year. As a reminder, in general, our first quarter as the lowest ESO due mainly to higher levels of client prepayments for annual IP maintenance fees.
Steve Perron: As a reminder, in general, our first quarter has the lowest DSO, due mainly to higher levels of client prepayments or annual IT maintenance fees. In Q1, we continued to deploy our capital and invested CAD 87 million back into the business, including strategic investment in advanced AI, CAD 106 million on business acquisitions, CAD 577 million to buy back our stock, and in addition, we returned CAD 37 million to our shareholder under our dividend program. Yesterday, our board of directors approved the renewal of our NCIB program until February 2027, authorizing us to repurchase for cancellation up to 19 million shares over the next 12 months. At current share price levels, we expect to remain very active in our repurchase program. In addition, our board of directors approved a quarterly cash dividend of CAD 0.17 per share.
As a reminder, in general, our first quarter has the lowest DSO, due mainly to higher levels of client prepayments or annual IT maintenance fees. In Q1, we continued to deploy our capital and invested CAD 87 million back into the business, including strategic investment in advanced AI, CAD 106 million on business acquisitions, CAD 577 million to buy back our stock, and in addition, we returned CAD 37 million to our shareholder under our dividend program. Yesterday, our board of directors approved the renewal of our NCIB program until February 2027, authorizing us to repurchase for cancellation up to 19 million shares over the next 12 months. At current share price levels, we expect to remain very active in our repurchase program. In addition, our board of directors approved a quarterly cash dividend of CAD 0.17 per share.
Speaker #3: In Q1, we continued to deploy our capital and invested $87 million back into the business, including strategic investment in advanced AI, $106 million on business acquisitions, our stock, and $577 million to buy back. In addition, we returned $37 million to our shareholders under our dividend program.
Speaker #3: Yesterday, our board of directors approved the renewal of our MCIB program until February 2027, authorizing us to repurchase for cancellation up to 19 million shares over the next 12 months.
Speaker #3: At current share price levels, we expect to remain very active in our repurchase program. In addition, our Board of Directors approved a quarterly cash dividend of $0.17 per share.
Speaker #3: This dividend is payable on March 20th, 2026, to shareholder of records as of the close of business on February 18th, 2026. With $2.4 billion in capital resources readily available and a net debt leverage ratio of 1, CGI has the balance sheet strength and capacity to deliver on our profitable growth strategy.
Steve Perron: This dividend is payable on 20 March 2026, to shareholders of record as of the close of business on 18 February 2026. With CAD 2.4 billion in capital resources readily available and a net debt leverage ratio of 1, CGI has the balance sheet strength and capacity to deliver on our profitable growth strategy. CGI's capital allocation priorities have remained consistent, focused on investing back in the business, pursuing accretive acquisition, and share buybacks. Now, I will turn the call over to François to further discuss insights on the quarter, the progress on our AI strategy, and the outlook for our business and markets. François?
This dividend is payable on 20 March 2026, to shareholders of record as of the close of business on 18 February 2026. With CAD 2.4 billion in capital resources readily available and a net debt leverage ratio of 1, CGI has the balance sheet strength and capacity to deliver on our profitable growth strategy. CGI's capital allocation priorities have remained consistent, focused on investing back in the business, pursuing accretive acquisition, and share buybacks. Now, I will turn the call over to François to further discuss insights on the quarter, the progress on our AI strategy, and the outlook for our business and markets. François?
Speaker #3: CGI's capital allocation priorities have remained consistent, focused on investing back in the business, pursuing a creative acquisition, and share buybacks. Now, I will turn the call over to François to further discuss insights on the quarter, the progress on our AI strategy, and the outlook for our business and markets
Speaker #3: François. Thank you, Steve, and good morning,
François Boulanger: Thank you, Steve, and good morning, everyone. We started the year with positive momentum that deepened our position as one of the few firms with a local presence, global scale, capabilities, and commitment to be a partner of choice for our clients, an employer of choice for our people, and an investment of choice for you, our shareholders. In Q1, we delivered year-over-year revenue growth, strong profitability, and record high cash of CAD 872 million. This further expands our capacity to fuel our build and buy profitable growth strategy in line with our capital allocation priorities. The trust clients have in CGI as a partner for delivering on their priorities, including for advanced AI, is evident in our results. This extends to bookings, which reached nearly CAD 4.5 billion in the quarter, up by more than CAD 300 million year over year.
François Boulanger: Thank you, Steve, and good morning, everyone. We started the year with positive momentum that deepened our position as one of the few firms with a local presence, global scale, capabilities, and commitment to be a partner of choice for our clients, an employer of choice for our people, and an investment of choice for you, our shareholders. In Q1, we delivered year-over-year revenue growth, strong profitability, and record high cash of CAD 872 million. This further expands our capacity to fuel our build and buy profitable growth strategy in line with our capital allocation priorities. The trust clients have in CGI as a partner for delivering on their priorities, including for advanced AI, is evident in our results. This extends to bookings, which reached nearly CAD 4.5 billion in the quarter, up by more than CAD 300 million year over year.
Speaker #2: Everyone, we started the year with positive momentum that deepened our position as one of the few firms with a local presence, global scale, capabilities, and commitment to be a partner of choice for our clients, an employer of choice for our people, and an investment of choice for you.
Speaker #2: Our shareholders, in Q1 we delivered year-over-year revenue growth, strong profitability, and record-high cash of $872 million. This further expands our capacity to fuel our build-and-buy profitable growth strategy in line with our capital allocation priorities.
Speaker #2: The trust clients have in CGI as a partner for delivering on their priorities including for advanced AI is evident in our results. This extends to bookings, which reached nearly $4.5 billion in the quarter, up by more than $300 million year over year.
Speaker #2: Just over half of bookings were comprised of new awards, and add-ons, which typically expand our delivery scope with clients. In addition, our win rate on renewals was over 95%, demonstrating the confidence clients have in CGI's ability to continue innovate.
François Boulanger: Just over half of bookings were comprised of new awards and add-ons, which typically expand our delivery scope with clients. In addition, our win rate on renewals was over 95%, demonstrating the confidence clients have in CGI's ability to continuously innovate. On a trailing twelve-month basis, total bookings were up 12%, reaching a high of nearly CAD 18 billion. This was led by managed services, up 16% compared to the previous year. Systems integration and consulting bookings were also up on a sequential quarter, year-over-year, and trailing twelve-month basis. Compared to this time last year, the Q1 SI&C wins were up by more than CAD 360 million.
Just over half of bookings were comprised of new awards and add-ons, which typically expand our delivery scope with clients. In addition, our win rate on renewals was over 95%, demonstrating the confidence clients have in CGI's ability to continuously innovate. On a trailing twelve-month basis, total bookings were up 12%, reaching a high of nearly CAD 18 billion. This was led by managed services, up 16% compared to the previous year. Systems integration and consulting bookings were also up on a sequential quarter, year-over-year, and trailing twelve-month basis. Compared to this time last year, the Q1 SI&C wins were up by more than CAD 360 million.
Speaker #2: On a trailing 12-month basis, total bookings were up 12%, reaching a high of nearly $18 billion. This was led by managed services, which were up 16% compared to the previous year.
Speaker #2: Systems integration and consulting bookings were also up on the sequential quarter, year-over-year, and trading 12-month basis, compared to this time last year, the Q1 SI&C wins were up by more than $360 million.
Speaker #2: From an industry perspective, all commercial segments closed a quarter with a book-to-bill above 100%, led by manufacturing retail and distribution, which was up more than $530 million or 65% year-over-year.
François Boulanger: From an industry perspective, all commercial segments closed the quarter with a book-to-bill above 100%, led by manufacturing, retail, and distribution, which was up more than CAD 530 million or 65% year-over-year. Representative awards in the quarter included: a European-based global manufacturer initiated a new strategic partnership with CGI to modernize critical IT services, including the integration of advanced AI solutions into their operations. A leading global luxury group in France renewed its relationship with CGI to deliver SAP services in support of their retail and manufacturing operations. CGI will also expand the integration of AI through our IP to optimize service quality and productivity in IT management. The Swedish Board of Agriculture expanded its relationship with CGI through a multi-year framework agreement, supporting the agency's digital transformation and expansion of trusted AI capabilities across systems development and operations.
From an industry perspective, all commercial segments closed the quarter with a book-to-bill above 100%, led by manufacturing, retail, and distribution, which was up more than CAD 530 million or 65% year-over-year. Representative awards in the quarter included: a European-based global manufacturer initiated a new strategic partnership with CGI to modernize critical IT services, including the integration of advanced AI solutions into their operations. A leading global luxury group in France renewed its relationship with CGI to deliver SAP services in support of their retail and manufacturing operations. CGI will also expand the integration of AI through our IP to optimize service quality and productivity in IT management. The Swedish Board of Agriculture expanded its relationship with CGI through a multi-year framework agreement, supporting the agency's digital transformation and expansion of trusted AI capabilities across systems development and operations.
Speaker #2: Representative awards in the quarter included a European-based global manufacturer initiating a new strategic partnership with CGI to modernize critical IT services, including the integration of advanced AI operations.
Speaker #2: A leading global luxury group in France renewed its relationship with CGI to deliver SAP services in support of their retail and manufacturing operations.
Speaker #2: CGI will also expand the integration of AI to our IP to optimize service quality and productivity in IT management. The Swedish board of agriculture expanded its relationship with CGI through a multi-year framework agreement, supporting the agency's digital transformation and expansion of trusted AI capabilities across systems development and operations.
Speaker #2: And IMARC, a US health insurer, renewed and expanded its partnership with CGI to accelerate innovation in claims, payment accuracy, and integrity. Through the engagement, CGI will deliver a range of AI-enabled services to our proper pay IP which helps identify potential risk earlier improves efficiency and reduces billing errors at scale.
François Boulanger: Highmark, a US health insurer, renewed and expanded its partnership with CGI to accelerate innovation in claims payment accuracy and integrity. Through the engagement, CGI will deliver a range of AI-enabled services through our Proper Pay IP, which helps identify potential risk earlier, improves efficiency, and reduces billing errors at scale. As shared last quarter, government sector bookings were impacted by the Q1 US government shutdown. On a trailing twelve-month basis, our government wins were 104%, or 113% when excluding our US federal segment. Globally, the pipeline of government sector opportunities continues to increase, up 30% compared to this time last year, as agencies continue to prioritize modernization, cybersecurity, and cost efficiency. Now, I will summarize the progress against CGI AI strategy, starting with embedding AI into our end-to-end services.
Highmark, a US health insurer, renewed and expanded its partnership with CGI to accelerate innovation in claims payment accuracy and integrity. Through the engagement, CGI will deliver a range of AI-enabled services through our Proper Pay IP, which helps identify potential risk earlier, improves efficiency, and reduces billing errors at scale. As shared last quarter, government sector bookings were impacted by the Q1 US government shutdown. On a trailing twelve-month basis, our government wins were 104%, or 113% when excluding our US federal segment. Globally, the pipeline of government sector opportunities continues to increase, up 30% compared to this time last year, as agencies continue to prioritize modernization, cybersecurity, and cost efficiency. Now, I will summarize the progress against CGI AI strategy, starting with embedding AI into our end-to-end services.
Speaker #2: As shared last quarter, government sector bookings were impacted by the Q1 US government shutdown. On the trailing 12-month basis, our government wins were $104% or $113% when excluding our US federal segment.
Speaker #2: Globally, the pipeline of government sector opportunities continues to increase, up 30% compared to this time last year, as agencies continue to prioritize modernization, cybersecurity, and cost efficiency.
Speaker #2: Now, I will summarize the progress against CGI's AI strategy. Starting with embedding AI into our end-to-end services—in Q1, the rollout of our AI-enabled software delivery lifecycle is improving engineering speed and quality, with strong adoption of advanced tooling.
François Boulanger: In Q1, the rollout of our AI-enabled software delivery life cycle is improving engineering speed and quality, with strong adoption of AI development assistance and advanced tooling. We are reinforcing trust and compliance through CGI's responsible use of technology framework, embedding AI risk governance directly into sales and delivery life cycles. In terms of client adoption, we continue to see an evolution from experimentation to enterprise integration. The transition is not a fast or a direct one, as success depends on strong foundation for data quality, platform modernization, and governance, all of it, all of which are strengths for our team. Recent examples of AI projects include launching an agentic AI strategy for a Canadian financial institution to guide their outcome-oriented AI adoption, and delivering AI-driven application reverse engineering for a US federal agency to support faster modernization decisions.
In Q1, the rollout of our AI-enabled software delivery life cycle is improving engineering speed and quality, with strong adoption of AI development assistance and advanced tooling. We are reinforcing trust and compliance through CGI's responsible use of technology framework, embedding AI risk governance directly into sales and delivery life cycles. In terms of client adoption, we continue to see an evolution from experimentation to enterprise integration. The transition is not a fast or a direct one, as success depends on strong foundation for data quality, platform modernization, and governance, all of it, all of which are strengths for our team. Recent examples of AI projects include launching an agentic AI strategy for a Canadian financial institution to guide their outcome-oriented AI adoption, and delivering AI-driven application reverse engineering for a US federal agency to support faster modernization decisions.
Speaker #2: AI development assistance, and we are reinforcing trust and compliance through CGI's responsible use of technology framework, embedding AI risk governance directly into sales and delivery lifecycles.
Speaker #2: In terms of client adoption, we continue to see an evolution from experimentation to enterprise integration. The transition is not a fast or direct one as success depends on strong foundation for data quality, platform modernization, and governance.
Speaker #2: All of which are strengths for our team. Recent examples of AI projects include launching an AI and agentic AI strategy for a Canadian financial institution to guide their outcome-oriented AI adoption.
Speaker #2: Delivering AI-driven application reverse engineering for a US federal agency to support faster modernization decisions. Applying deep learning AI for a UK healthcare provider to improve IVF embryo selection and patient outcomes.
François Boulanger: Applying deep learning AI for a UK healthcare provider to improve IVF embryo selection and patient outcomes. Implementing AI ops at a Canadian retailer to help improve IT reliability, efficiency, and cost optimization. Deploying an AI-enabled developer assistant for a US utility to simplify system integrations and accelerate customer billing implementations. Recognition of CGI as an AI-to-ROI client partner continues to be recognized by leading industry analyst firms. For example, in Q1, CGI was positioned as a leader in the IDC MarketScape for worldwide AI services for state and local government... Moving to how we are leading with AI-integrated platforms and alliances, 65% of CGI's IP solutions incorporate AI-enabled intelligent automation. Our industry-leading solutions are relied upon to enable mission-critical business operations, delivering direct value to clients every day.
Applying deep learning AI for a UK healthcare provider to improve IVF embryo selection and patient outcomes. Implementing AI ops at a Canadian retailer to help improve IT reliability, efficiency, and cost optimization. Deploying an AI-enabled developer assistant for a US utility to simplify system integrations and accelerate customer billing implementations. Recognition of CGI as an AI-to-ROI client partner continues to be recognized by leading industry analyst firms. For example, in Q1, CGI was positioned as a leader in the IDC MarketScape for worldwide AI services for state and local government... Moving to how we are leading with AI-integrated platforms and alliances, 65% of CGI's IP solutions incorporate AI-enabled intelligent automation. Our industry-leading solutions are relied upon to enable mission-critical business operations, delivering direct value to clients every day.
Speaker #2: Implementing AI Ops at a Canadian retailer to help improve IT reliability, efficiency, and cost optimization. And deploying an AI-enabled developer assistant for a US utility to simplify system integrations and accelerate customer billing implementations.
Speaker #2: Recognition of CGI as an AI-to-ROI client partner continues to be recognized by leading industry analyst firms. For example, in Q1, CGI was positioned as a leader in the IDC market scape for worldwide AI services for state and local government.
Speaker #2: Moving to how we are leading with AI-integrated platforms and alliances, 65% of CGI's IP AI-enabled intelligent solutions incorporate automation. Our industry-leading solutions are reliant on enabled mission-critical business operations, delivering direct value to clients every day.
Speaker #2: Our technology alliance partner program also continues to expand, introducing new channels to market and growing our relationships with the hyperscalers and AI-native firms. We recently announced a multi-year agreement with Google Cloud to help clients accelerate agentic AI outcomes with Gemini Enterprise.
François Boulanger: Our technology alliance partner program also continues to expand, introducing new channels to market and growing our relationships with the hyperscalers and AI-native firms. We recently announced a multiyear agreement with Google Cloud to help clients accelerate agentic AI outcomes with Gemini Enterprise, and a global go-to-market alliance with OpenAI to help clients deploy advanced AI capabilities securely, responsibly, and at an enterprise scale. Turning to how we are uniting talent and AI technologies. While our CGI partners are naturally using AI as part of their everyday work, approximately 40% of our consultants have expertise in advanced AI and data, more than double the numbers since this time last year. Given this, AI-related training continues to dominate the learning and development courses our experts are completing through our CGI Academia platform. Our learning and hiring investments also contributed to CGI earning new alliance certifications and partner tier status.
Our technology alliance partner program also continues to expand, introducing new channels to market and growing our relationships with the hyperscalers and AI-native firms. We recently announced a multiyear agreement with Google Cloud to help clients accelerate agentic AI outcomes with Gemini Enterprise, and a global go-to-market alliance with OpenAI to help clients deploy advanced AI capabilities securely, responsibly, and at an enterprise scale. Turning to how we are uniting talent and AI technologies. While our CGI partners are naturally using AI as part of their everyday work, approximately 40% of our consultants have expertise in advanced AI and data, more than double the numbers since this time last year. Given this, AI-related training continues to dominate the learning and development courses our experts are completing through our CGI Academia platform. Our learning and hiring investments also contributed to CGI earning new alliance certifications and partner tier status.
Speaker #2: And a global go-to-market alliance with OpenAI to help clients deploy advanced AI capabilities securely and responsibly, and at enterprise scale. Turning to how we are uniting talent and AI technologies: while our CGI partners are naturally using AI as part of their everyday work, approximately 40% of our consultants have expertise in advanced AI and data.
Speaker #2: More than double the numbers since this time last year. Given this, AI-related training continues to dominate the learning and development courses our experts are completing through our CGI academia platform.
Speaker #2: Our learning and hiring investments also contributed to CGI earning new alliance certifications and partner tier status. Over the past quarter, this included progress with AWS, Snowflake, ServiceNow, and UiPath, all of which expand our capabilities and create new business development opportunities in advanced AI, cloud, and data.
François Boulanger: Over the past quarter, this included progress with AWS, Snowflake, ServiceNow, and UiPath, all of which expand our capabilities and create new business development opportunities in advanced AI, cloud, and data. Lastly, we also progress CGI's internal AI adoption. Through the new engagements with Google Cloud and OpenAI, we are expanding our current use of these platforms by equipping and then to show tens of thousands of consultants and experts. We also launched our internal AI Exchange platform with widespread engagement as our teams contribute and reuse proven code assets and best practices, delivery processes, and playbooks. CGI AI Exchange is designed to help us scale and industrialize AI delivery globally while maintaining quality, speed, and cost-effectiveness. As we reflect on the past 50 years in business, and more importantly, our future, I will now outline CGI's value creation strategy for our three stakeholders, and namely you, our shareholders.
Over the past quarter, this included progress with AWS, Snowflake, ServiceNow, and UiPath, all of which expand our capabilities and create new business development opportunities in advanced AI, cloud, and data. Lastly, we also progress CGI's internal AI adoption. Through the new engagements with Google Cloud and OpenAI, we are expanding our current use of these platforms by equipping and then to show tens of thousands of consultants and experts. We also launched our internal AI Exchange platform with widespread engagement as our teams contribute and reuse proven code assets and best practices, delivery processes, and playbooks. CGI AI Exchange is designed to help us scale and industrialize AI delivery globally while maintaining quality, speed, and cost-effectiveness. As we reflect on the past 50 years in business, and more importantly, our future, I will now outline CGI's value creation strategy for our three stakeholders, and namely you, our shareholders.
Speaker #2: Lastly, we also progressed CGI's internal AI adoption. Through the new engagements with Google Cloud and OpenAI, we are expanding our current use of these platforms by equipping an additional tens of thousands of consultants and experts.
Speaker #2: We also launched our internal AI exchange platform with widespread engagement as our teams contribute and reuse proven code assets and best practices delivery processes and playbooks.
Speaker #2: CGI's AI Exchange is designed to help us scale and industrialize AI delivery globally while maintaining quality, speed, and cost-effectiveness. As we reflect on the past 50 years in business, and more importantly, our future, I will now outline CGI's value creation strategy for our three stakeholders—and namely you, our shareholders.
Speaker #2: Our value creation strategy is built on four streams: systems integration and consulting, including the services related to IP; managed services, including our IP solutions; a creative acquisitions; and share buyback and dividend programs.
François Boulanger: Our value creation strategy is built on four streams: systems integration and consulting, including the services related to IP, managed services, including our IP solutions, accretive acquisitions, and share buyback and dividend programs. By design, these streams are complementary and countercyclical to external market dynamics in order to foster continuous revenue growth and EPS accretion for the benefit of our shareholders. This positions CGI to deliver results even as the global business environment remains complex and uneven. Starting with our first value stream, SI&C. In stronger economic markets, client priorities tend to expand to innovation, experimentation, and growth. As clients spend on more discretionary initiatives, our SI&C capabilities support them in business evolution, integrating core systems, and creating and scaling new platforms and applications, regularly including consulting on our IP solutions.
Our value creation strategy is built on four streams: systems integration and consulting, including the services related to IP, managed services, including our IP solutions, accretive acquisitions, and share buyback and dividend programs. By design, these streams are complementary and countercyclical to external market dynamics in order to foster continuous revenue growth and EPS accretion for the benefit of our shareholders. This positions CGI to deliver results even as the global business environment remains complex and uneven. Starting with our first value stream, SI&C. In stronger economic markets, client priorities tend to expand to innovation, experimentation, and growth. As clients spend on more discretionary initiatives, our SI&C capabilities support them in business evolution, integrating core systems, and creating and scaling new platforms and applications, regularly including consulting on our IP solutions.
Speaker #2: By design, these streams are complementary and counter-cyclical to external market dynamics in order to foster continuous revenue growth and EPS accretion for the benefit of our shareholders.
Speaker #2: This positions CGI to deliver results even as the global business environment remains complex and uneven. Starting with our first value stream, SI&C. In stronger economic markets, client priorities tend to expand to innovation, experimentation, and growth.
Speaker #2: As clients spend on more discretionary initiatives, our SI&C capabilities support them in business evolution, integrating core systems, and creating and scaling new platforms and applications regularly including consulting on our IP solutions.
Speaker #2: Today, we are seeing early indications of an uptick in demand in the market, as the pipeline of new opportunities is strong, including for AI adversary and AI integration services related to CGI IP and alliance platforms.
François Boulanger: Today, we are seeing early indication of an uptick in demand in the market as the pipeline of new opportunities is strong, including for AI advisory and AI integration services related to CGI IP and alliance platforms. In fact, our pipeline of SI&C opportunities in advanced stages is up by more than 40% year-over-year. Additionally, in Q1, SI&C revenue grew 9.8% year-over-year in constant currency. As Steve mentioned, the SI&C bookings in the quarter reached 100% of revenue. Turning now to our second stream, CGI's Managed Services, which fully embed advanced AI as a standard practice, making them especially attractive for clients. When there are market uncertainties, clients typically want to reduce spending to increase their financial flexibility, with the goal to reinvest in digitization.
Today, we are seeing early indication of an uptick in demand in the market as the pipeline of new opportunities is strong, including for AI advisory and AI integration services related to CGI IP and alliance platforms. In fact, our pipeline of SI&C opportunities in advanced stages is up by more than 40% year-over-year. Additionally, in Q1, SI&C revenue grew 9.8% year-over-year in constant currency. As Steve mentioned, the SI&C bookings in the quarter reached 100% of revenue. Turning now to our second stream, CGI's Managed Services, which fully embed advanced AI as a standard practice, making them especially attractive for clients. When there are market uncertainties, clients typically want to reduce spending to increase their financial flexibility, with the goal to reinvest in digitization.
Speaker #2: In fact, our pipeline of SI&C opportunities in advanced phases is up by more than 40% year over year. Additionally, in Q1, SI&C revenue grew 9.8% year over year and constant currency.
Speaker #2: As Steve mentioned, the SI&C bookings in the quarter reached 100% of revenue. Turning now to our second stream, CGI's managed services, which fully embed advanced AI as a standard practice, making them especially attractive for clients.
Speaker #2: When they are market uncertainties, clients typically want to reduce spending to increase their financial flexibility. With the goal to reinvest in digitization. This is why we see demand rise for CGI's managed services which allow clients to benefit from longer-term outcome-based partnerships with clear cost structures and commitments for productivity improvements and innovation.
François Boulanger: This is why we see demand rise for CGI's Managed Services, which allow clients to benefit from longer-term, outcome-based partnerships with clear cost structures and commitments for productivity improvements and innovation. CGI's global delivery capabilities also play a critical role in our managed services, including our Global Capability Center expertise, which was recently recognized by Everest Group. Through our managed services, including those delivered with our IP solutions, we become a core extension of the client teams. This drives longer-term recurring revenue with higher margins for CGI. From a revenue perspective, over the past 12 months, our managed services business increased more than CAD 600 million or 8% compared to the previous year. In Q1, managed services bookings were up on both a year-over-year and trailing twelve-month basis. Notably, since Q1 last year, 40% of our managed services wins were new business.
This is why we see demand rise for CGI's Managed Services, which allow clients to benefit from longer-term, outcome-based partnerships with clear cost structures and commitments for productivity improvements and innovation. CGI's global delivery capabilities also play a critical role in our managed services, including our Global Capability Center expertise, which was recently recognized by Everest Group. Through our managed services, including those delivered with our IP solutions, we become a core extension of the client teams. This drives longer-term recurring revenue with higher margins for CGI. From a revenue perspective, over the past 12 months, our managed services business increased more than CAD 600 million or 8% compared to the previous year. In Q1, managed services bookings were up on both a year-over-year and trailing twelve-month basis. Notably, since Q1 last year, 40% of our managed services wins were new business.
Speaker #2: CGI's global delivery capabilities also play a critical role in our managed services, including our global capability center expertise, which was recently recognized by Everest Group.
Speaker #2: Through our managed services, including those delivered with our IP solutions, we become a core extension of the client teams. This drives longer-term recurring revenue with higher margins for CGI.
Speaker #2: From a revenue perspective, over the past 12 months, our managed services business increased more than 600 million dollars or 8% compared to the previous year.
Speaker #2: In Q1, managed services bookings were up on both a year-over-year and trailing 12-month basis. Notably, since Q1 last year, 40% of our managed services wins were new business.
Speaker #2: And the pipeline of new opportunities reflects this uptick, increasing by more than 20% over this quarter last year. Regarding our third stream, CGI's business buy strategy.
François Boulanger: The pipeline of new opportunities reflects this uptick, increasing by more than 20% over this quarter last year. Regarding our third stream, CGI's business, CGI's buy strategy. Given the ongoing strength of CGI's balance sheet and current market conditions, we continue to pursue accretive acquisitions at pace. In the quarter, we closed two mergers. In Europe, we completed the merger with a division of Comarch, which expands our presence in Poland and the Baltic States, and deepens our public sector expertise and IP portfolio across social security, health, agriculture, and other mission areas. In North America, we expanded our Canadian footprint through the merger with Online Business Systems, an established IT consulting firm based in Winnipeg. Through this agreement, we enhanced our capabilities in AI, digital transformation, and cybersecurity with enterprise clients in Canada and the US.
The pipeline of new opportunities reflects this uptick, increasing by more than 20% over this quarter last year. Regarding our third stream, CGI's business, CGI's buy strategy. Given the ongoing strength of CGI's balance sheet and current market conditions, we continue to pursue accretive acquisitions at pace. In the quarter, we closed two mergers. In Europe, we completed the merger with a division of Comarch, which expands our presence in Poland and the Baltic States, and deepens our public sector expertise and IP portfolio across social security, health, agriculture, and other mission areas. In North America, we expanded our Canadian footprint through the merger with Online Business Systems, an established IT consulting firm based in Winnipeg. Through this agreement, we enhanced our capabilities in AI, digital transformation, and cybersecurity with enterprise clients in Canada and the US.
Speaker #2: Given the ongoing strength of CGI's balance sheet and current market conditions, we continue to pursue creative acquisitions. In the quarter, we closed two mergers.
Speaker #2: In Europe, we completed the merger with a division of COMARC which expands our presence in Poland and the Baltic states and deepens our public sector expertise in IP portfolio across social security, health, agriculture, and other mission areas.
Speaker #2: In North America, we expanded our Canadian footprint through the merger with Online Business Systems, an established IT consulting firm based in Winnipeg. Through this agreement, we enhanced our capabilities in AI, digital transformation, and cybersecurity with enterprise clients in Canada and the US.
Speaker #2: I would like to warmly welcome the more than 800 new consultants who have joined CGI from these mergers. Our pipeline of additional merger targets remains robust.
François Boulanger: I would like to warmly welcome the more than 800 new consultants who have joined CGI from these mergers. Our pipeline of additional merger targets remains robust. We are committed to making sure that we acquire the right companies at the right time and at the right price, all three without exception. The final stream, share buybacks and dividends, provides additional value creation to our shareholders, especially now, given that we believe CGI stock is undervalued. We plan to remain very active in our share repurchase program while these conditions persist. As we look ahead, across the markets we serve, economic conditions and client priorities continue to vary by region and industry. These priorities are influenced by geopolitical uncertainty, shifting regulatory requirements, and the growing importance of IT systems to national resilience, sovereignty, competitiveness, and everyday operations.
I would like to warmly welcome the more than 800 new consultants who have joined CGI from these mergers. Our pipeline of additional merger targets remains robust. We are committed to making sure that we acquire the right companies at the right time and at the right price, all three without exception. The final stream, share buybacks and dividends, provides additional value creation to our shareholders, especially now, given that we believe CGI stock is undervalued. We plan to remain very active in our share repurchase program while these conditions persist. As we look ahead, across the markets we serve, economic conditions and client priorities continue to vary by region and industry. These priorities are influenced by geopolitical uncertainty, shifting regulatory requirements, and the growing importance of IT systems to national resilience, sovereignty, competitiveness, and everyday operations.
Speaker #2: We are committed to making sure that we acquire the right companies at the right time and at the right price—all three, without exception.
Speaker #2: And the final stream, share buybacks and dividends, provide additional value creation to our shareholders, especially now given that we believe CGI's stock is undervalued.
Speaker #2: So we plan to remain very active in our share repurchase program while these conditions persist. As we look ahead, across the markets we serve, economic conditions and client priorities continue to vary by region and industry.
Speaker #2: These priorities are influenced by geopolitical uncertainty, shifting regulatory requirements, and the growing importance of IT systems to national resilience, sovereignty, and competitiveness in everyday operations.
Speaker #2: At the same time, interest in AI remains high, making it even more important for organizations to separate the hype from practical impact. In this environment, trust, deep industry knowledge, and proximity to the client matter more than ever.
François Boulanger: At the same time, interest in AI remains high, making it even more important for organizations to separate the hype from practical impact. In this environment, trust, deep industry knowledge, and proximity to the client matter more than ever. To address their priorities successfully, clients need partners like CGI, who have the end-to-end capabilities and industry expertise necessary to modernize core systems, strengthen cybersecurity, and sustainably integrate AI-led digital capabilities into their operations. In closing, while the environment is still uncertain, we are observing gradual improvement in some industries and geographies. As such, we anticipate continuing improvement for the rest of the year. CGI has been built to grow and last. For 50 years, we've been at the heart of continuous technology innovation and business transformation, combining human ingenuity with the power of technology to help our clients achieve meaningful outcomes.
At the same time, interest in AI remains high, making it even more important for organizations to separate the hype from practical impact. In this environment, trust, deep industry knowledge, and proximity to the client matter more than ever. To address their priorities successfully, clients need partners like CGI, who have the end-to-end capabilities and industry expertise necessary to modernize core systems, strengthen cybersecurity, and sustainably integrate AI-led digital capabilities into their operations. In closing, while the environment is still uncertain, we are observing gradual improvement in some industries and geographies. As such, we anticipate continuing improvement for the rest of the year. CGI has been built to grow and last. For 50 years, we've been at the heart of continuous technology innovation and business transformation, combining human ingenuity with the power of technology to help our clients achieve meaningful outcomes.
Speaker #2: To address their priorities successfully, clients need partners like CGI who have the end-to-end capabilities and industry expertise necessary to modernize core systems, strengthen cybersecurity, and sustainably integrate AI-led digital capabilities into their operations.
Speaker #2: In closing, while the environment is still uncertain, we are observing gradual improvement in some industries and geographies. As such, we anticipate continuing improvement for the rest of the year.
Speaker #2: CGI has been built to grow and last. For 50 years we've been at the heart of continuous technology innovation and business transformation. Combining human ingenuity with the power of technology to help our clients achieve meaningful outcomes.
Speaker #2: As the pace of change accelerates, we remain focused on what matters most: helping our stakeholders succeed. Thank you for your continued interest and support.
François Boulanger: As the pace of change accelerates, we remain focused on what matters most, helping our stakeholders succeed. Thank you for your continued interest and support. Let's go to the question now, Kevin.
As the pace of change accelerates, we remain focused on what matters most, helping our stakeholders succeed. Thank you for your continued interest and support. Let's go to the question now, Kevin.
Speaker #2: Let's go to the question now, Kevin. Thanks, François. Julie, we can now poll for questions.
Kevin Linder: Thanks, François. Julie, we can now poll for questions.
Kevin Linder: Thanks, François. Julie, we can now poll for questions.
Speaker #3: Thank you, ladies and gentlemen. If you'd like to ask a question, press star one (*) on your telephone keypad. If you'd like to withdraw your question, press star two (*).
Operator: Thank you. Ladies and gentlemen, if you'd like to ask a question, press star one on your telephone keypad. If you'd like to withdraw your question, press star two. One moment, please, for your first question. Your first question comes from Richard Tse from National Bank Financial, Canada. Please go ahead.
Operator: Thank you. Ladies and gentlemen, if you'd like to ask a question, press star one on your telephone keypad. If you'd like to withdraw your question, press star two. One moment, please, for your first question. Your first question comes from Richard Tse from National Bank Financial, Canada. Please go ahead.
Speaker #3: One moment, please, for your first question. Your first question comes from Richard Tsek from National Bank Canada. Please go ahead.
Speaker #3: ahead. Yes, thank
Richard Tse: Yes, thank you. With respect to, to acquisitions, does the volatility and uncertainty around AI, has that sort of changed the way you evaluate these transactions, kind of, you know, given that uncertain future?
Richard Tse: Yes, thank you. With respect to, to acquisitions, does the volatility and uncertainty around AI, has that sort of changed the way you evaluate these transactions, kind of, you know, given that uncertain future?
Speaker #4: With respect to the acquisitions, does the volatility and uncertainty around AI—has that sort of changed the way you evaluate these transactions, kind of given that uncertain future?
Speaker #2: No, not at all. Thanks, Richard, for the question. No, we continue to see, anyway, AI as an enabler for the future. So, when it's time to look at acquisition and merger, we're still looking at how we can improve our footprints in our several metro markets where we're lacking presence.
François Boulanger: No, not at all. Thanks, Richard, for the question. No, we continue to see anyway AI as an enabler for the future. So when it's time to look at the acquisition and merger, we're still looking at, you know, how we can improve our footprints in our several metro market where we're lacking presence. And naturally, looking also at the larger ones and the transformational one that can help CGI in the future. So it's not changing anything in our policy or politics or our view of merger and acquisition. We are looking at relationships. We are looking at the, you know, places where we can continue to grow.
François Boulanger: No, not at all. Thanks, Richard, for the question. No, we continue to see anyway AI as an enabler for the future. So when it's time to look at the acquisition and merger, we're still looking at, you know, how we can improve our footprints in our several metro market where we're lacking presence. And naturally, looking also at the larger ones and the transformational one that can help CGI in the future. So it's not changing anything in our policy or politics or our view of merger and acquisition. We are looking at relationships. We are looking at the, you know, places where we can continue to grow.
Speaker #2: And naturally, looking also at the larger ones and the transformational ones, that can help CGI in the future. So it's not changing anything in our policy or politics or view of merger and acquisition.
Speaker #2: We are looking at relationships. We are looking at places where we can continue to grow. And so, AI is actually an enabler and not something that is asking us to change our philosophy on anything.
François Boulanger: And so, AI is actually an enabler and not something that is asking us to change our philosophy on M&A.
And so, AI is actually an enabler and not something that is asking us to change our philosophy on M&A.
Speaker #4: Okay. And just my second question has to do with the US federal government. Obviously, last quarter we had that sort of government shutdown. But as you step back, do you think that there's some things that are maybe happening in the background that structurally sort of resets that business?
Richard Tse: Okay. And just my second question has to do with the US federal government. Obviously, you know, last quarter, we had that sort of a government shutdown. But as you step back, do you think that there's some things that are maybe happening in the background that structurally sort of resets that business? And I guess related to that, at what point and how quickly could you sort of, you know, restructure if needed, you know, if that was the case?
Richard Tse: Okay. And just my second question has to do with the US federal government. Obviously, you know, last quarter, we had that sort of a government shutdown. But as you step back, do you think that there's some things that are maybe happening in the background that structurally sort of resets that business? And I guess related to that, at what point and how quickly could you sort of, you know, restructure if needed, you know, if that was the case?
Speaker #4: And I guess related to that, at what point and how quickly could you sort of restructure if needed if that was the
Speaker #4: And I guess related to that, at what point and how quickly could you sort of restructure if needed if that was the case? Again,
François Boulanger: Again, we still think that the, you know, federal government is a very good client of ours. It's more than 30 years that we're dealing with the federal government. And they need IT to support their operations. So we still think it's a very good market. But sure, you know, we are living in a geopolitical environment that is very dynamic. You know, yes, we finished, we had a shutdown. Now we're talking perhaps another shutdown at the end of this week, we'll see. But that's short-term headwinds. We're still thinking on the long-term basis that that's a very good market for us.
François Boulanger: Again, we still think that the, you know, federal government is a very good client of ours. It's more than 30 years that we're dealing with the federal government. And they need IT to support their operations. So we still think it's a very good market. But sure, you know, we are living in a geopolitical environment that is very dynamic. You know, yes, we finished, we had a shutdown. Now we're talking perhaps another shutdown at the end of this week, we'll see. But that's short-term headwinds. We're still thinking on the long-term basis that that's a very good market for us.
Speaker #2: We still think that the federal government is a very good client of ours. It's more than 30 years that we're dealing with the federal government.
Speaker #2: So they need IT to support their operations. So, we still think it's a very good market. But, sure, we are living in a geopolitical environment that is very dynamic.
Speaker #2: Yes, we finished we had a shutdown. Now we're talking perhaps another shutdown at the end of this week where we'll see. But that's short-term headwinds.
Speaker #2: We're still thinking on the long-term basis that it's a very good market for us.
Speaker #4: Okay. That's helpful. Thank
Suthan Sukumar: Okay, that's helpful. Thank you.
Richard Tse: Okay, that's helpful. Thank you.
Speaker #4: you. Your next question comes
Operator: Your next question comes from Stephanie Price from CIBC. Please go ahead.
Operator: Your next question comes from Stephanie Price from CIBC. Please go ahead.
Speaker #3: Stephanie Price from CIBC, please go ahead.
Stephanie Price: Hi, good morning.
Stephanie Price: Hi, good morning.
Speaker #5: Hi, good morning. Maybe just following up on the US federal question—just curious around margins. Obviously, you'd mentioned that margins were going to be a little bit weaker in US federal, just given the shutdown.
François Boulanger: Hi.
François Boulanger: Hi.
Stephanie Price: Maybe just following up on the US Federal question. Just curious around margins. Obviously, you'd messaged that margins were going to be a little bit weaker in the US Federal, just given the shutdown. How should we think about margins in US Federal going forward, just given, as you noted, it's a pretty dynamic environment here. Are you seeing any pricing pressure? What are you seeing out of the government in terms of pricing here?
Stephanie Price: Maybe just following up on the US Federal question. Just curious around margins. Obviously, you'd messaged that margins were going to be a little bit weaker in the US Federal, just given the shutdown. How should we think about margins in US Federal going forward, just given, as you noted, it's a pretty dynamic environment here. Are you seeing any pricing pressure? What are you seeing out of the government in terms of pricing here?
Speaker #5: How should we think about margins in US federal going forward just given as you noted, it's a pretty dynamic environment here. Are you seeing any pricing pressure?
Speaker #5: What are you seeing out of the government in terms of pricing here?
François Boulanger: Yeah, for sure, you know, the fact that, you know, the revenue and profit was down this quarter was also the fact that, you know, we-- our utilization rate went down. You know, with the shutdown, you know, we had some people that were not able to bill, and so we had the cost and not the revenue. So, you know, when the US government did reopen, we were able to redeploy our people in the contract. And so that improved the utilization rate and thus improving the margin. So it's not necessarily cost pressure or rate pressure that we have in the federal.
François Boulanger: Yeah, for sure, you know, the fact that, you know, the revenue and profit was down this quarter was also the fact that, you know, we-- our utilization rate went down. You know, with the shutdown, you know, we had some people that were not able to bill, and so we had the cost and not the revenue. So, you know, when the US government did reopen, we were able to redeploy our people in the contract. And so that improved the utilization rate and thus improving the margin. So it's not necessarily cost pressure or rate pressure that we have in the federal.
Speaker #2: Sure, the fact—yeah. For that, the revenue and profit was down this quarter was also the fact that our utilization rate went down. With this shutdown, we had some people that were not able to bill.
Speaker #2: And so we had the cost and not the revenue. So with when the US government did reopen, we were able to redeploy our people in the contract.
Speaker #2: And so that improved the utilization rate, and thus improved the margins. So it's not necessarily cost pressure or rate pressure that we have in the federal—it was really, really due to the fact that, with the shutdown and the fact that it's temporary, we wanted to keep our workforce.
François Boulanger: It was really related to the fact that with the shutdown and the fact that it's temporary, you know, we, we wanted to keep our workforce, and so that was, that's why it, it put a pressure on the utilization rate.
It was really related to the fact that with the shutdown and the fact that it's temporary, you know, we, we wanted to keep our workforce, and so that was, that's why it, it put a pressure on the utilization rate.
Speaker #2: And so that was that's why it put a pressure on the utilization rate.
Speaker #5: Okay. Okay. So going forward, we should expect more in line with historical. And then in terms of SINC, it was great to see that bookings were solved in the quarter.
Stephanie Price: Okay. Okay, so going forward, we should expect more, more in line with historical. And then in terms of SI&C, it was great to see that bookings were solid in the quarter, and you mentioned the pipeline for advanced stages was up. Can you talk a little bit about the regions and industries where you're seeing the improvement in SI&C?
Stephanie Price: Okay. Okay, so going forward, we should expect more, more in line with historical. And then in terms of SI&C, it was great to see that bookings were solid in the quarter, and you mentioned the pipeline for advanced stages was up. Can you talk a little bit about the regions and industries where you're seeing the improvement in SI&C?
Speaker #5: And you mentioned the pipeline for advanced stages was up. Can you talk a little bit about the regions and industries where you're seeing the improvement in
Speaker #5: SINC? Yeah.
François Boulanger: Yeah, for sure. Thanks for the question. For sure, we're seeing a SI&C improvement a bit across every industry, and I'll start with an example in the financial sector. You know, they need some advice, for example, in AI. So, we are helping them to deploy some of these AI tools, like I gave some example on that in my script. Same thing in manufacturing. You know, they need consulting again to deploy these tools. So a lot of consulting, not business consulting is still soft, but everything related to CIO consulting, and especially with these tools, we're seeing a lot of new demand, and I would say mostly in all industries.
François Boulanger: Yeah, for sure. Thanks for the question. For sure, we're seeing a SI&C improvement a bit across every industry, and I'll start with an example in the financial sector. You know, they need some advice, for example, in AI. So, we are helping them to deploy some of these AI tools, like I gave some example on that in my script. Same thing in manufacturing. You know, they need consulting again to deploy these tools. So a lot of consulting, not business consulting is still soft, but everything related to CIO consulting, and especially with these tools, we're seeing a lot of new demand, and I would say mostly in all industries.
Speaker #2: For sure. Thanks for the question. For sure, we're seeing SINC improvement a bit across every industry. And I'll start with, for example, on the financial sector.
Speaker #2: They need some advice and example in AI. So we are helping them to deploy some of these AI tools like I gave some example on that in my script.
Speaker #2: Same thing in manufacturing. They need consulting again to deploy these tools. So, a lot of consulting—business consulting—is still soft. But everything related to CIO consulting, and especially with these tools, we're seeing a lot of new demand.
Speaker #2: And I would say mostly in all
Speaker #2: industries. Great.
Stephanie Price: Great. Thank you very much.
Stephanie Price: Great. Thank you very much.
Speaker #5: Thank you very
Speaker #5: Much. Your next question comes from
Operator: Your next question comes from Suthan Sukumar from Stifel Canada. Please go ahead.
Operator: Your next question comes from Suthan Sukumar from Stifel Canada. Please go ahead.
Speaker #3: Sutan Sukumar from Stifel Canada. Please go ahead.
Speaker #6: Good morning, gents. For my first question, I want to touch on the sort of the industry theme around vendor consolidation. Can you speak a little bit around what clients your clients are doing today with their IT partners and roughly what percentage of some of your new business and existing business expansion today is a function of continued vendor consolidation?
Suthan Sukumar: Good morning, gents. For my first question, I want to touch on the sort of the industry theme around vendor consolidation. Can you speak a little bit about around what clients your clients are doing today with with their IT partners? And roughly, you know, what percentage of some of your new business and existing business expansion today is a function of continued vendor consolidation?
Suthan Sukumar: Good morning, gents. For my first question, I want to touch on the sort of the industry theme around vendor consolidation. Can you speak a little bit about around what clients your clients are doing today with with their IT partners? And roughly, you know, what percentage of some of your new business and existing business expansion today is a function of continued vendor consolidation?
Speaker #2: Yeah. That's a great question. For sure, we're seeing a lot of that trend across the world. Clients realize that they need to reduce the number of partners and especially using a lot market.
François Boulanger: Yeah, that's a great question. For sure, we're seeing a lot of that trend across the world. You know, clients realize that, you know, they need to reduce the number of partners, and especially, you know, using a lot of freelancers in the market. So you'll have a lot of- They'll deal with very small companies, and so because of relationships sometimes with the buyers. So, you know, we won several of them, vendor consolidation. We won one, a big one that I think I announced last quarter, with a large bank in Europe. That was actually a vendor consolidation. They went from hundreds of suppliers to four or five suppliers, and we were one of the suppliers.
François Boulanger: Yeah, that's a great question. For sure, we're seeing a lot of that trend across the world. You know, clients realize that, you know, they need to reduce the number of partners, and especially, you know, using a lot of freelancers in the market. So you'll have a lot of- They'll deal with very small companies, and so because of relationships sometimes with the buyers. So, you know, we won several of them, vendor consolidation. We won one, a big one that I think I announced last quarter, with a large bank in Europe. That was actually a vendor consolidation. They went from hundreds of suppliers to four or five suppliers, and we were one of the suppliers.
Speaker #2: So you'll have a lot of they'll deal with very small companies and so because of relationships sometimes with the buyers. So we want several of them vendor consolidation.
Speaker #2: We won a big one that I think I announced last quarter with a large bank in Europe that was actually a vendor consolidation. They went from hundreds of suppliers to four or five suppliers.
Speaker #2: And we were one of these suppliers. And we're seeing that especially in the very large companies and clients. Same thing happened in the in Germany with an automobile company where they had thousands of suppliers.
François Boulanger: And we're seeing that, especially in the very large companies and clients. Same thing happened in Germany with an automobile company, where they had thousands of suppliers and they wanted to reduce, and we were one that gained some activities with this vendor consolidation. So, you know, we see that. We will continue to see that in the future. And the fact that we're very close to our clients, I think that's a tailwind or at least opportunities to us to win new business in our existing clients.
And we're seeing that, especially in the very large companies and clients. Same thing happened in Germany with an automobile company, where they had thousands of suppliers and they wanted to reduce, and we were one that gained some activities with this vendor consolidation. So, you know, we see that. We will continue to see that in the future. And the fact that we're very close to our clients, I think that's a tailwind or at least opportunities to us to win new business in our existing clients.
Speaker #2: And they wanted to reduce and we were one that gained some activities with this vendor consolidation. So we see that. We will continue to see that in the future.
Speaker #2: And the fact that we're very close to our clients, I think that's it's a tailwind or at least opportunities to us to win new business in our existing clients.
Speaker #6: Great, thank you. That's helpful. For my second question, I just want to touch on sort of the broader theme of enterprise AI adoption. So, you've either recently announced new partnerships with OpenAI, Google, Gemini on this front.
Suthan Sukumar: Great, thank you. That's helpful. For my second question, I just wanted to touch on, sort of the broader theme of enterprise AI adoption. So you've, you guys have recently announced new partnerships with OpenAI, Google Gemini on this front, as did some of your global peers also more recently. You know, from where you sit today, where are we at in the enterprise AI adoption cycle? And is AI spending today, is it—do you see it being more additive or still displacing existing IT spend budgets? And how resilient is sort of this AI-related spending, with respect to the macro?
Suthan Sukumar: Great, thank you. That's helpful. For my second question, I just wanted to touch on, sort of the broader theme of enterprise AI adoption. So you've, you guys have recently announced new partnerships with OpenAI, Google Gemini on this front, as did some of your global peers also more recently. You know, from where you sit today, where are we at in the enterprise AI adoption cycle? And is AI spending today, is it—do you see it being more additive or still displacing existing IT spend budgets? And how resilient is sort of this AI-related spending, with respect to the macro?
Speaker #6: As did some of your global peers also more recently. From where you sit today, where are we at in the enterprise AI adoption cycle?
Speaker #6: And is AI spending today, is it do you see it being more additive or still displacing existing IT spend budgets? And how resilient is sort of this AI-related spending with respect to the macro?
François Boulanger: ... you know, what I would say to you, first of all, you know, as for the tools by themselves, I think, a lot of companies already deployed these tools. Now all these tools are, at least for the large companies, they deploy them. Now, what they're-- they need to do is to realize the outcome with these tools, and that's where, you know, they need companies like us to help them, to produce these outcome for them. That's really where we are today, and that's why we have a lot of consulting with these clients, because they don't know what to do to a certain point with these tools. That's where we are helping them.
François Boulanger: ... you know, what I would say to you, first of all, you know, as for the tools by themselves, I think, a lot of companies already deployed these tools. Now all these tools are, at least for the large companies, they deploy them. Now, what they're-- they need to do is to realize the outcome with these tools, and that's where, you know, they need companies like us to help them, to produce these outcome for them. That's really where we are today, and that's why we have a lot of consulting with these clients, because they don't know what to do to a certain point with these tools. That's where we are helping them.
Speaker #2: What I would say to you, first of all, as for the tools by themselves, I think a lot of companies already deploy these tools.
Speaker #2: So, all these tools are, at least for the large companies, they deploy them. Now what they need to do is to realize the outcome with these tools.
Speaker #2: And that's where they need companies like us to help them to produce these outcomes for them. So that's really where we are today. And that's why we have a lot of consulting with these clients, because they don't know what to do, to a certain point, with these tools.
Speaker #2: And so that's where we are helping them. Another good example is a lot of these clients will have old solutions or old applications that didn't touch for the last 15, 20, 25 years.
François Boulanger: Another good example is, you know, a lot of these clients will have old solutions or old applications that they didn't touch for the last 15, 20, 25 years, because it's too complicated, and it's too, you know. They don't want to touch it to break it. And now with tools like, like AI, it's, you know, they can see it in another way, and having these tools helping to do the conversion or the refreshment of these applications. So that's brand-new demand and services that they were not existing in the past.
Another good example is, you know, a lot of these clients will have old solutions or old applications that they didn't touch for the last 15, 20, 25 years, because it's too complicated, and it's too, you know. They don't want to touch it to break it. And now with tools like, like AI, it's, you know, they can see it in another way, and having these tools helping to do the conversion or the refreshment of these applications. So that's brand-new demand and services that they were not existing in the past.
Speaker #2: Because it's too complicated and it's too they don't want to touch it to break it. And now with tools like AI, it's they can see it in another way and having these tools helping to do the conversion or the refreshment of these applications.
Speaker #2: So that's brand new demand and services that they were not existing in the past. People were saying, "Let's not touch that." And let's maintain them.
François Boulanger: People were saying, "Let's not touch that, and let's maintain them, but let's forget about them." Now they're saying, "Well, perhaps we can reduce our run cost by changing these applications." And so that's brand-new demand that we didn't see in the past. So I think that we will see that to continue. And finally, again, in managed services, you know, that is still very relevant, and people wants to have savings on their run of application. I know AI is a tool to help to achieve these savings. I know we had the offshoring, but now we have offshoring and AI to help to create these savings for clients. So that's why we still think that that will open doors to new demand in the managed services side.
People were saying, "Let's not touch that, and let's maintain them, but let's forget about them." Now they're saying, "Well, perhaps we can reduce our run cost by changing these applications." And so that's brand-new demand that we didn't see in the past. So I think that we will see that to continue. And finally, again, in managed services, you know, that is still very relevant, and people wants to have savings on their run of application. I know AI is a tool to help to achieve these savings. I know we had the offshoring, but now we have offshoring and AI to help to create these savings for clients. So that's why we still think that that will open doors to new demand in the managed services side.
Speaker #2: But let's forget about them. And now they're saying, "Well, perhaps we can reduce our run costs by changing these applications." And so that's brand new demand that we didn't see in the past.
Speaker #2: So I think that we will see that continue. And finally, again, in managed services, that is still very relevant, and people want to have savings on their run of application.
Speaker #2: AI is a tool to help to achieve these savings. We had the offshoring, but now we have offshoring and AI. To help to create these savings for clients.
Speaker #2: So that's why we still think that that will open doors to new demand in the managed services side.
Suthan Sukumar: Thank you for the feedback. I'll pass to the next.
Suthan Sukumar: Thank you for the feedback. I'll pass to the next.
Speaker #6: feedback. I'll pass the Thank you for the line.
Operator: Your next question comes from Thanos Moschopoulos from BMO Capital Markets, Canada. Please go ahead.
Operator: Your next question comes from Thanos Moschopoulos from BMO Capital Markets, Canada. Please go ahead.
Speaker #3: Your next question comes from Thanos Moscopoulos from BMO Capital Markets, Canada. Please go ahead.
Speaker #3: ahead. Hi, good
Thanos Moschopoulos: Hi, good morning. First of all, just given the very strong ROI that I presume clients can get from AI, if we just look at, you know, the most recent quarter of your scaling numbers and what's been holding back growth, is it that the CIO understands the value of AI, but the CFO is constraining the budget? Is it that just, you know, more education was needed about what AI can do for them, and now you're starting to see more implementation? Just what's been the holdback in terms of clients putting the pedal to the metal on these AI initiatives?
Thanos Moschopoulos: Hi, good morning. First of all, just given the very strong ROI that I presume clients can get from AI, if we just look at, you know, the most recent quarter of your scaling numbers and what's been holding back growth, is it that the CIO understands the value of AI, but the CFO is constraining the budget? Is it that just, you know, more education was needed about what AI can do for them, and now you're starting to see more implementation? Just what's been the holdback in terms of clients putting the pedal to the metal on these AI initiatives?
Speaker #7: morning. First of all, just given the very strong ROI that I presume clients can get from AI, if we just look at the most recent quarter, we're failing numbers and what's been holding back growth.
Speaker #7: Is it that the CIO understands the value of AI, but the CFO is constraining the budget? Is it that just more education was needed about what AI can do for them, and now you're starting to see more implementation?
Speaker #7: Just what's been the holdback in terms of clients putting the pedal to the metal on these AI
Speaker #7: initiatives?
François Boulanger: I don't think it's necessarily a holdback. I think, like I'm saying, I think people realize that it's a little, a lot more complicated than people thought. And so that's one thing. The other thing also is data quality. You know, it's nice to say that, you know, you have AI and you deployed AI, but AI will be as good as your data is good. And I think that's also, again, one of the challenge that a lot of these company has. And so they... That's where the work needs to be done. And again, they're saying, like, as a CFO, yeah, the CFO is seeing the cost coming in of these tools, coming in on a monthly basis, but they don't see necessarily the outcome.
François Boulanger: I don't think it's necessarily a holdback. I think, like I'm saying, I think people realize that it's a little, a lot more complicated than people thought. And so that's one thing. The other thing also is data quality. You know, it's nice to say that, you know, you have AI and you deployed AI, but AI will be as good as your data is good. And I think that's also, again, one of the challenge that a lot of these company has. And so they... That's where the work needs to be done. And again, they're saying, like, as a CFO, yeah, the CFO is seeing the cost coming in of these tools, coming in on a monthly basis, but they don't see necessarily the outcome.
Speaker #8: I don't think it's
Speaker #8: Necessarily a holdback. I think, like I'm saying, I think people realize that it's a lot more complicated than people thought. And so that's one thing.
Speaker #8: The other thing also is data quality. It's nice to say that you have AI and you deployed AI, but AI will be as good as your data is good.
Speaker #8: And I think that's also again, one of the challenges that a lot of these companies have. And so that's where the work needs to be done.
Speaker #8: And again, they're saying, like, the CFO—yeah, the CFO is saying the cost coming in, of these tools coming in on a monthly basis.
Speaker #8: But they don't see necessarily the outcome. And that's where, again, the CIOs want to showcase that. But to do that, they need to clean up the quality, and clean up some of the quality of the data, clean up some of these applications.
François Boulanger: And that's where, you know, again, the CIOs wants to showcase that, but to do that, they need to clean up the quality, clean up some of the quality of the data, clean up some of these applications, and that will take some time. So that's really, I think that's... I would say on that specific item. I think overall, the macro is still something that you see in the market. You know, still we're restarting to talk about tariff, for example, in some places. So it's for sure, it's a concern in some places, especially when I'm talking to some clients in Europe. You still see some concern on that side, and that's hurting a bit the pro side.
And that's where, you know, again, the CIOs wants to showcase that, but to do that, they need to clean up the quality, clean up some of the quality of the data, clean up some of these applications, and that will take some time. So that's really, I think that's... I would say on that specific item. I think overall, the macro is still something that you see in the market. You know, still we're restarting to talk about tariff, for example, in some places. So it's for sure, it's a concern in some places, especially when I'm talking to some clients in Europe. You still see some concern on that side, and that's hurting a bit the pro side.
Speaker #8: And that will take some time. So that's really I think that's I would say on that specific item. I think overall, the macro is still something that you see in the market.
Speaker #8: We're still restarting to talk about tariffs, for example, in some places. So it's for sure it's. Concern in some places, especially when I'm talking to some clients in Europe, you still see some concern on that side.
Speaker #8: And that's hurting a
Speaker #8: bit. Great.
Thanos Moschopoulos: Great. And then just in terms of your own internal use of AI, when we look at your margins for this quarter, I mean, would you say that you start to capture some, you know, material margin improvement from AI? Is it early days on that front, as we think about kind of the benefits you're already capturing?
Thanos Moschopoulos: Great. And then just in terms of your own internal use of AI, when we look at your margins for this quarter, I mean, would you say that you start to capture some, you know, material margin improvement from AI? Is it early days on that front, as we think about kind of the benefits you're already capturing?
Speaker #7: And then just in terms of your own internal use of AI, when we look at your margins for this quarter, I mean, would you say that you started to capture some material margin improvement from AI?
Speaker #7: Is it early days on that front? As we think about the benefits you're already capturing?
François Boulanger: Yeah, I'll start, and I'll ask Steve to continue. But, for sure, you know, we are seeing already some saving with AI. For sure, some of it we are reinvesting in the business. But, you know, and also in the quarter, you know, it was hit into a certain point with the one-time cost in India, but you will see the margin picking up in the future. Perhaps you can talk a little bit about some of our example.
François Boulanger: Yeah, I'll start, and I'll ask Steve to continue. But, for sure, you know, we are seeing already some saving with AI. For sure, some of it we are reinvesting in the business. But, you know, and also in the quarter, you know, it was hit into a certain point with the one-time cost in India, but you will see the margin picking up in the future. Perhaps you can talk a little bit about some of our example.
Speaker #2: I'll start, and I'll ask Steve to continue. But for sure, we are already seeing some savings with AI. For sure, some of it we aren't reinvesting in the business.
Speaker #2: But and also in the quarter, it was hidden to a certain point with the one-time costs in India. But you will see the margin picking up in the future.
Speaker #2: And perhaps you can talk a little bit about some of our examples.
Speaker #7: Yeah, but look, we are using it, obviously, internally in the team, are using it well. It's bringing efficiency, obviously, but we are continuing to invest in it.
Steve Perron: Yeah, but look, we are using it obviously internally, and the team are using it well. It's bringing efficiency, obviously, but we are continuing to invest in it, and we want further efficiency, we want further improvement. But in terms of, you know, as mentioned, the global margin that we had in the quarter, we're pretty proud with some good improvement in many SBUs. Obviously, there was a one-time in India, and also what we called out at the last quarter in Federal.
Steve Perron: Yeah, but look, we are using it obviously internally, and the team are using it well. It's bringing efficiency, obviously, but we are continuing to invest in it, and we want further efficiency, we want further improvement. But in terms of, you know, as mentioned, the global margin that we had in the quarter, we're pretty proud with some good improvement in many SBUs. Obviously, there was a one-time in India, and also what we called out at the last quarter in Federal.
Speaker #7: We want to further efficiency. We want further improvement. And but in terms of as mentioned, the global margin that we had in the quarter were pretty proud with some good improvement in many SBUs.
Speaker #7: Obviously, there was a one-time in India. And also what we called out at the last quarter in Federal. But if you look at Scandinavia, Northwest, and Central East Europe, a clear improvement in terms of margin.
François Boulanger: ... but, if you look at Scandinavia, Northwest and Central East Europe, a clear improvement in terms of margin. You see also the benefit coming in terms of the margin from the integration of BJSS, and also in France the margin has improved, so Western and Southern Europe also was a good improvement year-over-year. So, quite good activities that has strengthened our margin, and it's quite good for the next future quarters.
... but, if you look at Scandinavia, Northwest and Central East Europe, a clear improvement in terms of margin. You see also the benefit coming in terms of the margin from the integration of BJSS, and also in France the margin has improved, so Western and Southern Europe also was a good improvement year-over-year. So, quite good activities that has strengthened our margin, and it's quite good for the next future quarters.
Speaker #7: You see also the benefit coming in terms of the margin from the integration of BJSS and also in France, the margin as improved. So Western and Southern Europe also is a good improvement year over year.
Speaker #7: So quite good activities that has strengthened our margin. And it's quite good for the next future quarters. That's great. I'll pass the line. Thank
Robert Young: That's great. I'll pass the line. Thank you.
Thanos Moschopoulos: That's great. I'll pass the line. Thank you.
Speaker #7: you. Thank
François Boulanger: Thank you.
François Boulanger: Thank you.
Speaker #6: you. Your next question
Operator: Your next question comes from Robert Young, from Canaccord, Canada. Please go ahead.
Operator: Your next question comes from Robert Young, from Canaccord, Canada. Please go ahead.
Speaker #3: Comes from Robert Young from Canaccord Canada. Please go ahead.
Robert Young: Hello. The comment on the government pipeline up 30%, I was hoping you could parse that out between, you know, US federal, you noted that bookings were impacted and the higher volatility. And then I guess on the other side of that, it looks as though governments around the world are looking for more sovereignty, more control over local technology. Perhaps maybe just talk about, you know, where those bookings growth is, or the pipeline growth is coming from.
Speaker #6: Hello. The comment on government pipeline up 30%—I was hoping you could parse that out between U.S. federal—you noted that bookings were impacted and the higher volatility.
Robert Young: Hello. The comment on the government pipeline up 30%, I was hoping you could parse that out between, you know, US federal, you noted that bookings were impacted and the higher volatility. And then I guess on the other side of that, it looks as though governments around the world are looking for more sovereignty, more control over local technology. Perhaps maybe just talk about, you know, where those bookings growth is, or the pipeline growth is coming from.
Speaker #6: And then I guess on the other side of that, it looks as though governments around the world are looking for more sovereignty, more control over local technology perhaps.
Speaker #6: Maybe just talk about where those bookings growth or the pipeline growth is coming from.
Speaker #2: Yeah, thanks, Robert. So yeah, government—we are seeing good momentum across the world. I'll start with our home here in Canada. As you know, Canada wants to invest a lot in the defense side, for example.
François Boulanger: Yeah. Thanks, Robert. So yeah, government, we are seeing good momentum across the world. You know, I'll start with our home here in Canada. As you know, Canada wants to invest a lot in the defense side, for example, and so defense is including cybersecurity, for example, and so they'll need IT to support them. They want to reduce costs on delivering services to their citizen, and again, that will need to... They'll need to build new systems, and so we are seeing that has good potential in the future, and we have some conversation with the client, with the government client, in Canada to understand when and how it will be deployed.
François Boulanger: Yeah. Thanks, Robert. So yeah, government, we are seeing good momentum across the world. You know, I'll start with our home here in Canada. As you know, Canada wants to invest a lot in the defense side, for example, and so defense is including cybersecurity, for example, and so they'll need IT to support them. They want to reduce costs on delivering services to their citizen, and again, that will need to... They'll need to build new systems, and so we are seeing that has good potential in the future, and we have some conversation with the client, with the government client, in Canada to understand when and how it will be deployed.
Speaker #2: And so defense is including cybersecurity, for example. And so they'll need IT to support them. They want to reduce costs on delivering services to their citizens.
Speaker #2: And again, that will need to they'll need to build a new systems and so we are seeing that as good potential in the future.
Speaker #2: And we have some conversation with the client, with the government client, in Canada to understand when and how it will be deployed. Same thing in the rest of the world.
François Boulanger: Same thing in the rest of the world. In the rest of the world, you know, as you know, they want to invest a lot on the defense side, and we have already some of these defense ministers, ministry, for example, in Germany and UK; already they're clients of ours, and NATO is a client of ours. So, we are seeing momentum and discussion there, so we see good opportunity on that side. Going back in the US, US, I would say, staying local, so everything related to the state and local government in the US, we are seeing good momentum. To some point, they are taking the place of the federal government in some of these investments.
Same thing in the rest of the world. In the rest of the world, you know, as you know, they want to invest a lot on the defense side, and we have already some of these defense ministers, ministry, for example, in Germany and UK; already they're clients of ours, and NATO is a client of ours. So, we are seeing momentum and discussion there, so we see good opportunity on that side. Going back in the US, US, I would say, staying local, so everything related to the state and local government in the US, we are seeing good momentum. To some point, they are taking the place of the federal government in some of these investments.
Speaker #2: We the rest of the world, as you know, they want to invest a lot on the defense side. And we have already some of these defense ministers or ministry example in Germany and UK already clients of ours.
Speaker #2: And NATO is a client of ours. So we are seeing momentum and discussion there. So we see good opportunity on that side. Going back in the US, the US, I would say, state and local so everything related to the states and local government in the US, we are seeing good momentum.
Speaker #2: Some to a certain point, they're taking the place of the federal government in some of these investments. So we are seeing also good momentum on that side.
François Boulanger: So we are seeing also good momentum on that side. On the federal government, for sure, we are seeing a pickup, versus, you know, last year when, you know, we were talking about DOGE, and we had the US shutdown. So we are seeing also opportunities in the pipeline, on that side. Now that, hopefully, we won't have another shutdown, we can see some of these RFP going out and be awarded in the next couple of months.
So we are seeing also good momentum on that side. On the federal government, for sure, we are seeing a pickup, versus, you know, last year when, you know, we were talking about DOGE, and we had the US shutdown. So we are seeing also opportunities in the pipeline, on that side. Now that, hopefully, we won't have another shutdown, we can see some of these RFP going out and be awarded in the next couple of months.
Speaker #2: On the federal government, for sure, we are seeing a pickup versus last year when we were talking about those and we were talking and we had the US the shutdown.
Speaker #2: So we are seeing also opportunities in the pipeline. On that side, now that hopefully we won't have another shutdown, we can see some of these RFP going out.
Speaker #2: And be awarded in the next couple of
Speaker #2: months. Okay.
Robert Young: Okay, so it sounds as though you're pretty confident that that type of pipeline growth is indicative of, you know, sustainable top-line growth in the future, both in the US, US federal, but all around the globe, I guess.
Robert Young: Okay, so it sounds as though you're pretty confident that that type of pipeline growth is indicative of, you know, sustainable top-line growth in the future, both in the US, US federal, but all around the globe, I guess.
Speaker #6: So it sounds as though you're pretty confident that that type of pipeline growth is indicative of sustainable top-line federal, but all around the globe, I growth in the future, both in the US, US
Speaker #6: guess. I would say all around the
François Boulanger: I would say all around the globe, for sure. As for US federal, you know, again, we just need to be, yeah, it can be lumpiness a bit, with everything that's happening there. But at the same time, state and local, in the US, is going pretty well.
François Boulanger: I would say all around the globe, for sure. As for US federal, you know, again, we just need to be, yeah, it can be lumpiness a bit, with everything that's happening there. But at the same time, state and local, in the US, is going pretty well.
Speaker #2: globe. For sure. As for US federal, again, we just need to be yeah, it can be lumpiness a bit. With everything that's happening there, but at the same time, state and local in the US is going pretty well.
Speaker #6: Okay. And then the headcount number was flat quarter over quarter, up year over year, but I mean, the revenue growth is still outpacing your headcount growth.
Robert Young: Okay. And then, the headcount number was flat quarter over quarter, up year over year, but it, it-- I mean, the revenue growth is still outpacing your headcount growth. And that's interesting because you highlighted the utilization headwinds in the US. So just talking a little bit, if you could talk through the revenue per employee growth, and then also, if you could be clear on whether Comarch and OBS are included in the headcount number or if that... So are we gonna expect to see growth in the next quarter?
Robert Young: Okay. And then, the headcount number was flat quarter over quarter, up year over year, but it, it-- I mean, the revenue growth is still outpacing your headcount growth. And that's interesting because you highlighted the utilization headwinds in the US. So just talking a little bit, if you could talk through the revenue per employee growth, and then also, if you could be clear on whether Comarch and OBS are included in the headcount number or if that... So are we gonna expect to see growth in the next quarter?
Speaker #6: And that's interesting because you highlighted the utilization headwinds in the US. So, just talking a little bit, if you could talk through the revenue per employee growth, and then also if you could be clear on whether COMARC and OBS are included in the headcount number or if that—so are we going to expect to see growth in the next—
Speaker #6: quarter? Yeah.
François Boulanger: Yeah. So, Comarch and OBS, yes, are in the headcount numbers since they were closed before end of the quarter. As for the revenue per headcount, for sure, it did grow again, and will continue. You can expect this to continue to grow. Like I said in the past, you know, most of our managed services are outcome-based, and so with the fact that we're using more and more AI in our delivery of managed services, you know, I don't need necessarily the same headcount number or the same number of people to deliver the services.
François Boulanger: Yeah. So, Comarch and OBS, yes, are in the headcount numbers since they were closed before end of the quarter. As for the revenue per headcount, for sure, it did grow again, and will continue. You can expect this to continue to grow. Like I said in the past, you know, most of our managed services are outcome-based, and so with the fact that we're using more and more AI in our delivery of managed services, you know, I don't need necessarily the same headcount number or the same number of people to deliver the services.
Speaker #2: So COMARC and OBS, yes, are in the headcount number since they were closed before end of the quarter. As for the revenue per headcount, for sure, it did grow again and will continue you can expect this to continue to grow.
Speaker #2: Like I said in the past, most of our managed services are outcome-based. And so with the fact that we're using more and more AI in our delivery of managed services, I don't need necessarily the same headcount number or the same number of people to deliver the services.
Speaker #2: So you can still expect this headcount versus revenue or at least the revenue by headcount continue to grow because deploying. of the new technologies that we're
François Boulanger: So, you can still expect this headcount versus revenue, or at least the revenue by headcount continue to grow, because of the new technologies that we're deploying.
So, you can still expect this headcount versus revenue, or at least the revenue by headcount continue to grow, because of the new technologies that we're deploying.
Speaker #6: Okay. Last quick question. Last quarter, you talked about outcome-based pricing and you're talking a lot about outcome-based programs. This quarter, one of your competitors was highlighting a significant growth in fixed-price contracts related to their proprietary platforms.
Robert Young: Okay. Last quick question. Last quarter, you talked about outcome-based pricing, and you're talking a lot about outcome-based programs this quarter. One of your competitors was highlighting a significant growth in fixed-price contracts related to their proprietary platforms. So I'm just curious if you're seeing that and you know, how that might affect the model and margins going forward. Then I'll pass the line.
Robert Young: Okay. Last quick question. Last quarter, you talked about outcome-based pricing, and you're talking a lot about outcome-based programs this quarter. One of your competitors was highlighting a significant growth in fixed-price contracts related to their proprietary platforms. So I'm just curious if you're seeing that and you know, how that might affect the model and margins going forward. Then I'll pass the line.
Speaker #6: And so I'm just curious if you're seeing that, and how that might affect the model and margins going forward. And then I'll pass the...
Speaker #6: line. Yeah.
François Boulanger: ... Yeah, no, and, you know, outcome-based can be fixed price also, especially when it's shorter, you know, duration. If we're talking about a managed service of 2, 3 years, a lot of time we can fix it even for that full 3 years duration, for example. For sure, when it's longer, we need to take into account the volume, and it's both sides. It's good for the client, and it's good for us because by linked to the volumes or the outcome is good on both sides. But yes, we'll have more also fixed price project. I think really the input-based model, that's really what's standing to reduce, and will continue to reduce, to be replaced by these fixed price and outcome-based.
François Boulanger: ... Yeah, no, and, you know, outcome-based can be fixed price also, especially when it's shorter, you know, duration. If we're talking about a managed service of 2, 3 years, a lot of time we can fix it even for that full 3 years duration, for example. For sure, when it's longer, we need to take into account the volume, and it's both sides. It's good for the client, and it's good for us because by linked to the volumes or the outcome is good on both sides. But yes, we'll have more also fixed price project. I think really the input-based model, that's really what's standing to reduce, and will continue to reduce, to be replaced by these fixed price and outcome-based.
Speaker #2: No, and outcome-based can be fixed-price also, especially when it's shorter in duration. If we're talking about a managed service of two, three years, a lot of time we can fix it even for that full three years duration, for example.
Speaker #2: For sure, when it's longer, we need to take out account the volume. And it's both sides. It's good for the client and it's good for us because linked to the volumes or the outcome is good on both sides.
Speaker #2: But yes, we'll have more also fixed-price projects. I think really the input-based model, that's really what's starting to reduce and will continue to reduce, to be replaced by these fixed-price and outcome-based.
Robert Young: But does that have an impact on margins?
Robert Young: But does that have an impact on margins?
Speaker #6: But does that have an impact on
Speaker #6: margins? Well, it won't.
François Boulanger: Well, it won't have a. You know, because even I would say a fixed price will be able to improve our margin in the long term, because, and when after that it's fixed, every way of reducing the cost would go directly in our margin improvement.
François Boulanger: Well, it won't have a. You know, because even I would say a fixed price will be able to improve our margin in the long term, because, and when after that it's fixed, every way of reducing the cost would go directly in our margin improvement.
Speaker #2: I have a, because even I would say a fixed price will be able to improve our margin in the long term. Because after that, it's fixed, every way of reducing the cost would go directly in our margin.
Speaker #2: improvement. Thank
Robert Young: Okay, thank you.
Robert Young: Okay, thank you.
Speaker #6: you.
Operator: Your next question comes from Kevin Krisnaratne from Scotiabank Canada. Please go ahead.
Operator: Your next question comes from Kevin Krisnaratne from Scotiabank Canada. Please go ahead.
Speaker #7: Your next question comes from Kevin Krishnaratne from Scotiabank Canada. Please go ahead.
Speaker #7: ahead. Hey
Kevin Krisnaratne: Hey there. Good morning. Thanks for taking the question. Nice to see the SI&C bookings strength there. You talked about, you know, the early indications of uptick in demand, and you did talk about, you know, more on CIO consulting, less business consulting. I still think the trends look pretty good, a little bit maybe different than what some of your peers are talking about recently. So I'm just wondering, maybe if you can comment on, you know, unpack a little bit further into that, like, what's, you know, maybe unique about, you know, CGI in this segment relative to some of the peers that is leading to sort of some of those earlier signs that you're seeing relative to the broader industry?
Kevin Krishnaratne: Hey there. Good morning. Thanks for taking the question. Nice to see the SI&C bookings strength there. You talked about, you know, the early indications of uptick in demand, and you did talk about, you know, more on CIO consulting, less business consulting. I still think the trends look pretty good, a little bit maybe different than what some of your peers are talking about recently. So I'm just wondering, maybe if you can comment on, you know, unpack a little bit further into that, like, what's, you know, maybe unique about, you know, CGI in this segment relative to some of the peers that is leading to sort of some of those earlier signs that you're seeing relative to the broader industry?
Speaker #8: There. Good morning. Thanks for taking the question. Nice to see the SI&C bookings strength there. You talked about the early indications of an uptick in demand.
Speaker #8: And you did talk more about CIO consulting, less business consulting. I still think the trends look pretty good—a little bit, maybe, different than what some of your peers are talking about recently.
Speaker #8: So I'm just wondering, maybe, if you can comment on or unpack a little bit further into that—like what's maybe unique about CGI in this segment relative to some of the peers—that is leading to sort of some of those earlier signs that you're seeing relative to the broader industry?
Speaker #2: Yeah, I don't know for the other companies, but I'll say for us, our model and the fact our proximity model—I think that's really the differentiator with the competition.
François Boulanger: Yeah, you know, I don't know for the other companies, but I'll say for us, our model and the fact our proximity model, I think that's really the differentiator with the competition. We are close to our clients. We are building relationship with them. We know their business, we know their industry, so I think that's helping us to be there and we're top of the mind of these clients when it's time to find the right expertise and the people to help them in their deployment of new technology, for example. So I think that's really going back to the model that we have, that's helping us to win.
François Boulanger: Yeah, you know, I don't know for the other companies, but I'll say for us, our model and the fact our proximity model, I think that's really the differentiator with the competition. We are close to our clients. We are building relationship with them. We know their business, we know their industry, so I think that's helping us to be there and we're top of the mind of these clients when it's time to find the right expertise and the people to help them in their deployment of new technology, for example. So I think that's really going back to the model that we have, that's helping us to win.
Speaker #2: We are close to our clients. We are building relationships with them. We know their business. We know their industry. So, I think that's helping us to be there, and we're top of mind for these clients when it's time to find the right expertise and the people to help them in their deployment of new technology, for example.
Speaker #2: So I think that's really going back to the model that we have, that's helping us to win.
Speaker #6: Okay, got it. Second question, just more on the theme of enterprise adoption of AI. Can you maybe talk about any differences you're seeing in this technology and the deployment of enterprise AI versus enterprise software, and what that means for CGI and other IT providers?
Kevin Krisnaratne: Okay, got it. Second question, just more on, you know, the theme of enterprise adoption of AI. Can you maybe talk about any differences you're seeing in, in this technology and, you know, the deployment of enterprise AI versus enterprise software and what that means for, from a CGI and other IT providers? For example, you know, some of these AI use cases, they seem to come more from the bottom up, individual workers or teams, might be different than how an ERP deployment, you know, starts from the top. So just any thoughts there now, you know, maybe talk about the entry point of AI into the enterprise, versus prior cycles and, you know, and how you see that, you know, what that might mean for your business.
Kevin Krishnaratne: Okay, got it. Second question, just more on, you know, the theme of enterprise adoption of AI. Can you maybe talk about any differences you're seeing in, in this technology and, you know, the deployment of enterprise AI versus enterprise software and what that means for, from a CGI and other IT providers? For example, you know, some of these AI use cases, they seem to come more from the bottom up, individual workers or teams, might be different than how an ERP deployment, you know, starts from the top. So just any thoughts there now, you know, maybe talk about the entry point of AI into the enterprise, versus prior cycles and, you know, and how you see that, you know, what that might mean for your business.
Speaker #6: For example, some of these AI use cases, they seem to come more from the bottom up. Individual workers or teams might be different than how an ERP deployment starts from the top.
Speaker #6: So just any thoughts there now, maybe talk about the entry point of AI into the enterprise versus prior cycles and how you see that, what that might mean for your business.
Speaker #2: Yeah. For sure. It's a tool that is deployed to everyone. So when it's deployed to everyone, everyone is playing for the tool. And so you'll have the business side that will take the tool, will use it, and try to invent something with it.
François Boulanger: Yeah, for sure. You know, it's a tool that is, you know, deployed to everyone. So when it's deployed to everyone, you know, everyone is playing with the tool. And so, you'll have the business side that will take the tool, will use it and try to invent something with it, and sometimes it's good, sometimes it's less good. I think like anything else, you know, you'll see some balance on that. I'll give you the analogy also with cloud.
François Boulanger: Yeah, for sure. You know, it's a tool that is, you know, deployed to everyone. So when it's deployed to everyone, you know, everyone is playing with the tool. And so, you'll have the business side that will take the tool, will use it and try to invent something with it, and sometimes it's good, sometimes it's less good. I think like anything else, you know, you'll see some balance on that. I'll give you the analogy also with cloud.
Speaker #2: And sometimes it's good, sometimes it's less good. I think like anything else, you'll see some balance on that. I'll give you the analogy also with cloud.
François Boulanger: I think, when cloud went out, you know, everybody say, "Hey, it's way cheaper, it's way easier, you know, let's deploy it." And, and, you know, you saw that happening, and to realize at a certain point in time, the saving were not there anymore because it was not managed. It was, you know, everybody was able to buy cloud, cloud, computing, and so at a certain point, it was even more costly and then than before. So I, I think that's the same thing here. If people are leaving it to only the employees, and they can do what they want with it, I think it will just create more cost in the machine, and, and we'll need to be careful about that.
Speaker #2: I think cloud when cloud went out, everybody said, "Hey, it's way cheaper. It's way easier. Let's deploy it." And you saw that happening. And then to realize at a certain point in time, the savings were not there anymore because it was not managed.
I think, when cloud went out, you know, everybody say, "Hey, it's way cheaper, it's way easier, you know, let's deploy it." And, and, you know, you saw that happening, and to realize at a certain point in time, the saving were not there anymore because it was not managed. It was, you know, everybody was able to buy cloud, cloud, computing, and so at a certain point, it was even more costly and then than before. So I, I think that's the same thing here. If people are leaving it to only the employees, and they can do what they want with it, I think it will just create more cost in the machine, and, and we'll need to be careful about that.
Speaker #2: It was everybody was able to buy a cloud computing. And so at a certain point, it was even more costly. And then before. So I think that's the same thing here.
Speaker #2: If people are leaving it to only the employees, and they can do what they want with it, I think it will just create more cost in the machine.
Speaker #2: And we'll need to be careful about that. So I think that's why once one way it's good for innovation and all that, but on the other way, you need still to put some I would say processes to be sure that it's well managed.
François Boulanger: So I think that's why, one way, it's good for innovation and all that, but on the other way, you need still to put some, I would say, processes to be sure that it's well managed, and that's where we can help clients with the definition, and that's what we're doing today. And a lot of these business consulting or these consulting side is that we're helping them to put some processes so that this approach of bottom up, like you're saying, is not chaos, and that the clients can manage it.
So I think that's why, one way, it's good for innovation and all that, but on the other way, you need still to put some, I would say, processes to be sure that it's well managed, and that's where we can help clients with the definition, and that's what we're doing today. And a lot of these business consulting or these consulting side is that we're helping them to put some processes so that this approach of bottom up, like you're saying, is not chaos, and that the clients can manage it.
Speaker #2: And that's where we can help clients with the definition. And that's what we're doing today. And a lot of these business consulting, or these consulting sites, is that we're helping them to put some processes so that this approach of bottom-up, like you're saying, is still not chaos.
Speaker #2: And that we can the clients can manage it.
Speaker #6: That's helpful, caller. Thanks a lot. I'll pass the line.
Kevin Krisnaratne: That, that's helpful, color. Thanks a lot. I'll pass the line.
Kevin Krishnaratne: That, that's helpful, color. Thanks a lot. I'll pass the line.
Speaker #7: Your next question comes from Surrender Thin from Jefferies, USA. Please go
Operator: Your next question comes from Surinder Thind from Jefferies. Please go ahead.
Operator: Your next question comes from Surinder Thind from Jefferies. Please go ahead.
Speaker #7: ahead. Thank
Surinder Thind: Thank you. François, when we think about just the interest in understanding about how important AI is out there, why isn't there a bigger rush to improve the infrastructure, the data, you know, platform modernization efforts at this point in the cycle, given that if you can get the back end fixed, then you can start to realize the benefits? It just seems like everybody is slow walking this, and, and it's hard to figure out why.
Speaker #9: You, Francois, when we think about just the interest in understanding of how important AI is out there, why isn't there a bigger rush to improve the infrastructure, the data, platform modernization efforts at this point in the cycle, given that if you can get the backend fixed, then you can start to realize the benefits?
Surinder Thind: Thank you. François, when we think about just the interest in understanding about how important AI is out there, why isn't there a bigger rush to improve the infrastructure, the data, you know, platform modernization efforts at this point in the cycle, given that if you can get the back end fixed, then you can start to realize the benefits? It just seems like everybody is slow walking this, and, and it's hard to figure out why.
Speaker #9: It just seems like everybody is slow-walking this, and it's hard to figure out why.
Speaker #2: I think because you're saying, yeah, the backend can be easily done, but again, it's the data itself, and the complexity of all that.
François Boulanger: ... Well, I think because you're saying, yeah, the back end can be easily done, but it, it's again, it's the data itself and the complexity of all that. You have in companies so much data that they are managing, and, you know, people—it's not all necessarily relevant data. And I think that's the hard part, that they need to be sure that they are cleaning up that data to use the right one, to put it in the machine, to have the right outcomes. And that's difficult, it's bringing a lot of complexity, you know. And it's the same thing for agentic, right?
François Boulanger: ... Well, I think because you're saying, yeah, the back end can be easily done, but it, it's again, it's the data itself and the complexity of all that. You have in companies so much data that they are managing, and, you know, people—it's not all necessarily relevant data. And I think that's the hard part, that they need to be sure that they are cleaning up that data to use the right one, to put it in the machine, to have the right outcomes. And that's difficult, it's bringing a lot of complexity, you know. And it's the same thing for agentic, right?
Speaker #2: You have, in companies, so much data that they are managing. And people—it's not all necessarily relevant data. And I think that's the hard part, that they need to be sure that they're cleaning up that data to use the right one, to put it in the machine to have the right outcomes.
Speaker #2: And that's difficult. It's bringing a lot of complexity. And it's the same thing for agentic, right? Because we're talking about data for AI, but when it's time to put AI for processes and agentic AI, you're dealing with applications and big companies.
François Boulanger: Because we're talking about a data for AI, but when it's time to put AI for processes and agentic AI, now you're dealing with applications, and big companies are talking about thousands of applications. So it's not that easy to implement, and so it's something that, you know, people needs to deal with. The other thing also, it's everything related to cybersecurity. You know, we have clients today, and for good reasons, when they were saying, "Oh, we can put some AI in the delivery of the managed services." Some already, other ones are saying, "Well, I need to understand the impact on cybersecurity. I need to..." So it's a lot of different...
Because we're talking about a data for AI, but when it's time to put AI for processes and agentic AI, now you're dealing with applications, and big companies are talking about thousands of applications. So it's not that easy to implement, and so it's something that, you know, people needs to deal with. The other thing also, it's everything related to cybersecurity. You know, we have clients today, and for good reasons, when they were saying, "Oh, we can put some AI in the delivery of the managed services." Some already, other ones are saying, "Well, I need to understand the impact on cybersecurity. I need to..." So it's a lot of different...
Speaker #2: You're talking about thousands of applications, so it's not that easy to implement. And so, it's something that people need to deal with. The other thing also is everything related to cybersecurity.
Speaker #2: We have clients today. And for good reasons, when we're saying, "We can't put some AI in the delivery of the managed services," some already, other ones are saying, "I need to understand the impact on cybersecurity.
Speaker #2: I need to." So it's a lot of different it's a new technology. Like any new technology, it's not that easy to implement in an environment where we're built in the last 20, 25 years.
François Boulanger: It's a new technology, and like any new technology, it's not that easy to implement in an environment that were built in the last 25 years. So I think it's a journey, and that the journey will continue, and that's why they need help from companies like ours.
It's a new technology, and like any new technology, it's not that easy to implement in an environment that were built in the last 25 years. So I think it's a journey, and that the journey will continue, and that's why they need help from companies like ours.
Speaker #2: So I think it's a journey, and that journey will continue in the—and that's why they need help from companies like ours.
Speaker #9: So, I guess as a point of clarification, though, I think the idea here is that we still need to do a lot of the core work before we even tackle the AI problems.
Surinder Thind: So, I guess as a point of clarification, though, I think the idea here is that we still need to do a lot of the core work before we even tackle the AI problems. And I guess that's really where my question is, why isn't there maybe more core work being done, right? Because we need to know to build these data platforms and so forth before we can even get to AI, and I think that's where it is. Is it that companies got burnt after maybe the pandemic, where there was a lot of investment, and they didn't realize the return on that investment, so they've gone to this mindset of, "You know what? I'm going to slow walk this.
Surinder Thind: So, I guess as a point of clarification, though, I think the idea here is that we still need to do a lot of the core work before we even tackle the AI problems. And I guess that's really where my question is, why isn't there maybe more core work being done, right? Because we need to know to build these data platforms and so forth before we can even get to AI, and I think that's where it is. Is it that companies got burnt after maybe the pandemic, where there was a lot of investment, and they didn't realize the return on that investment, so they've gone to this mindset of, "You know what? I'm going to slow walk this.
Speaker #9: And I guess that's really where my question is, is why isn't there maybe more core work being done, right? Because we need to know that we build these data platforms and so forth.
Speaker #9: Before we can even get to AI—and I think that's where it is—is it that companies got burnt after maybe the pandemic, where there was a lot of investment and they didn't realize the return on that investment?
Speaker #9: So they've gone to this mindset of, "You know what? I'm going to slow walk this. I want my ROI calc to be an in-year ROI versus I'm going to make these big investments because we can see in other parts of the infrastructure there is an incredible amount of investment being made.
Surinder Thind: I want my ROI calc to be an in-year ROI," versus, "I'm going to make these big investments." Because we, we can see in other parts of the infrastructure, there is an incredible amount of investment being made, and there is this big rush to be the first to go out there and get some of this done, but it, it just doesn't seem to be happening at the corporate level.
I want my ROI calc to be an in-year ROI," versus, "I'm going to make these big investments." Because we, we can see in other parts of the infrastructure, there is an incredible amount of investment being made, and there is this big rush to be the first to go out there and get some of this done, but it, it just doesn't seem to be happening at the corporate level.
Speaker #9: And there is this big rush to be the first to go out there and get some of this done." But it just doesn't seem to be happening at the corporate
Speaker #9: level. I
François Boulanger: Well, I think when you're saying big investment, we're seeing a lot of big investment in the hyperscalers and these companies to some point. I think, again, I'm meeting a lot of clients, and all these clients, you know, they invested, you know, in the tool itself, and they deploy these tools themselves, but like you're saying, they don't necessarily see the returns. And so that's why they're coming back, and that's why we're saying, you know, yes, we're seeing, you know, some deployment, a lot of experimentation in the past. Now we're seeing some deployment, but it's true that they're going a bit slower just to be sure that, you know, finally, they will see a return on their investment.
François Boulanger: Well, I think when you're saying big investment, we're seeing a lot of big investment in the hyperscalers and these companies to some point. I think, again, I'm meeting a lot of clients, and all these clients, you know, they invested, you know, in the tool itself, and they deploy these tools themselves, but like you're saying, they don't necessarily see the returns. And so that's why they're coming back, and that's why we're saying, you know, yes, we're seeing, you know, some deployment, a lot of experimentation in the past. Now we're seeing some deployment, but it's true that they're going a bit slower just to be sure that, you know, finally, they will see a return on their investment.
Speaker #2: think when you're saying big investment, we're seeing a lot of big investment in the hyperscalers and these companies. To a certain point, I think, again, I'm meaning a lot of clients.
Speaker #2: And all these clients, they invested in the tool itself, and they deploy these tools themselves. But like you're saying, they don't necessarily see the returns.
Speaker #2: And so that's why they're coming back. And that's why we're saying yes, we're seeing some deployment a lot of experimentation in the past. Now we're seeing some deployment.
Speaker #2: But it's true that they're going a bit slower, just to be sure that finally, they will see a return on their investment. Because for now, they put a lot of money in the tools without necessarily seeing the return for now.
François Boulanger: Because for now, they put a lot of money in the tools without necessarily to see the return for now. And so that's why it's a journey, and it will take some time. But people are, you know, and I'll say example, in the financial institutions, they are looking very... And they are doing some very large, larger use cases in the banks to see how they can have a return. In some places, they are seeing a return, but it won't happen in a month, that's for sure, Surinder.
Because for now, they put a lot of money in the tools without necessarily to see the return for now. And so that's why it's a journey, and it will take some time. But people are, you know, and I'll say example, in the financial institutions, they are looking very... And they are doing some very large, larger use cases in the banks to see how they can have a return. In some places, they are seeing a return, but it won't happen in a month, that's for sure, Surinder.
Speaker #2: And so that's why it's a journey, and it will take some time. But people are—I'll say, as an example in the financial institutions—they are looking very, and they are doing some very large use cases in the banks.
Speaker #2: To see how they can have a return. In some places, they are seeing a return. But it won't happen in a month, that's for sure, Surrender.
Speaker #9: Understood. And then, could you elaborate on the earlier comment in your prepared remarks around just expecting continued improvement over the rest of the year?
Surinder Thind: Understood. And then, you know, could you elaborate on the earlier comment in your prepared remarks around just expecting continued improvement over the rest of the year? Is the idea that, you know, things should get sequentially better, and is that on an organic, constant currency basis? How should we think about that part of the journey as you kind of talked about this idea of things getting better?
Surinder Thind: Understood. And then, you know, could you elaborate on the earlier comment in your prepared remarks around just expecting continued improvement over the rest of the year? Is the idea that, you know, things should get sequentially better, and is that on an organic, constant currency basis? How should we think about that part of the journey as you kind of talked about this idea of things getting better?
Speaker #9: Is the idea that things should get sequentially better? And is that on an organic constant currency basis? How should we think about that part of the journey as you kind of talked about this idea of things getting better?
Speaker #2: Yeah, that's actually what I was saying to a certain point. Yes, we are expecting to see some improvement quarter after quarter, especially in places like in Europe, so we are expecting that.
François Boulanger: Yeah, that's actually what I was saying to some point. Yes, we are expecting to see some improvement quarter after quarter, especially in places like in Europe. So we are expecting that. For sure, the caveat I have now is the shutdown. You know, I thought it was behind us. We'll see Friday if we have another shutdown in the US federal government and what can be the potential impact. But if I'm taking that out of the equation, yes, we are seeing some improvement, and we would see improvements on a sequential basis.
François Boulanger: Yeah, that's actually what I was saying to some point. Yes, we are expecting to see some improvement quarter after quarter, especially in places like in Europe. So we are expecting that. For sure, the caveat I have now is the shutdown. You know, I thought it was behind us. We'll see Friday if we have another shutdown in the US federal government and what can be the potential impact. But if I'm taking that out of the equation, yes, we are seeing some improvement, and we would see improvements on a sequential basis.
Speaker #2: For sure, the caveat I have now is the shutdown. I thought it was behind us. We'll see Friday if we have another shutdown in the U.S. federal government.
Speaker #2: And what can be the potential impact? But if I'm taking that out of the equation, yes, we are seeing some improvement. And we would see improvements on a sequential—
Speaker #2: basis. Got it.
Surinder Thind: Got it. And is the expectation then to get back to positive organic constant currency growth by the end of the fiscal year, or, how are you thinking about that?
Surinder Thind: Got it. And is the expectation then to get back to positive organic constant currency growth by the end of the fiscal year, or, how are you thinking about that?
Speaker #9: And is the expectation then to get back to positive organic constant currency growth by the end of the fiscal year? Or how are you thinking about that?
Speaker #9: And is the expectation then to get back to positive organic constant currency growth by the end of the fiscal year, or how are you thinking about
François Boulanger: The idea is to improve the growth, overall growth on a constant currency basis, including the organic side of the equation. So that's the goal. That's what the team is working on, and we're seeing some positive movement on that side.
Speaker #2: The idea is to improve the growth overall growth on the constant currency basis, including the organic side of the equation. So that's the goal.
François Boulanger: The idea is to improve the growth, overall growth on a constant currency basis, including the organic side of the equation. So that's the goal. That's what the team is working on, and we're seeing some positive movement on that side.
Speaker #2: That's what the team is working on, and we're seeing some positive movement on that.
Speaker #2: side. Thank
Speaker #9: you.
Surinder Thind: Thank you.
Surinder Thind: Thank you.
Speaker #1: Julie, we have time for one more question. Please.
Kevin Linder: Julie, we have time for one more question, please.
Kevin Linder: Julie, we have time for one more question, please.
Speaker #4: Perfect. Thank you. And your last question for today comes from Jérôme Dubreuil from Desjardins. Please go ahead.
Operator: Perfect. Thank you. Your last question for today comes from Jerome Dubreuil from Desjardins. Please go ahead.
Operator: Perfect. Thank you. Your last question for today comes from Jerome Dubreuil from Desjardins. Please go ahead.
Speaker #4: ahead.
Speaker #3: Hey, merci
Jerome Dubreuil: ... Hey, merci beaucoup. Thanks for taking my question. Another one that I wanna push a bit more on the contrast that Kevin has highlighted between your comments on the SI&C and or more discretionary with some of the peers. I'm wondering how reliable are the leading indicators in terms of the bookings and the pipeline for this recovery, specifically since we haven't been hearing that from peers? And do you think that we've seen the trough in organic growth this quarter, notwithstanding the shutdown?
Jérôme Dubreuil: ... Hey, merci beaucoup. Thanks for taking my question. Another one that I wanna push a bit more on the contrast that Kevin has highlighted between your comments on the SI&C and or more discretionary with some of the peers. I'm wondering how reliable are the leading indicators in terms of the bookings and the pipeline for this recovery, specifically since we haven't been hearing that from peers? And do you think that we've seen the trough in organic growth this quarter, notwithstanding the shutdown?
Speaker #3: beaucoup. Thanks for taking my question. Another one that I want to push a bit more on the contrast that Kevin has highlighted between your comments on the CINC and/or or more discretionary with some of the peers.
Speaker #3: I'm wondering how reliable are the leading indicators in terms of the bookings and the pipeline for this recovery specifically since we haven't been hearing that from peers?
Speaker #3: And do you think that we've seen the trough in organic growth this quarter, notwithstanding the
Speaker #3: shutdown? At
François Boulanger: At least I won't talk for the other ones, but to us, for us, yes, we're seeing, you know, that we perhaps pretty hit the bottom this quarter, and that we're expecting some gradual improvement in the future quarters. Again, that's a caveat on the shutdown, if we have another one, but that's the idea. And that's what we see, at least for now, is that we are seeing some improvement that would happen on a quarter-over-quarter basis. And Jerome, the SI&C bookings, you know, it's short-term bookings, so that's why when we see that it's going back to, you know, a 100% mark, it's quite... It's giving us confidence on the forecast for sure.
Speaker #2: At least I won't talk for the other ones, but to us—for us—yes, we're seeing that we perhaps pretty much hit the bottom this quarter.
François Boulanger: At least I won't talk for the other ones, but to us, for us, yes, we're seeing, you know, that we perhaps pretty hit the bottom this quarter, and that we're expecting some gradual improvement in the future quarters. Again, that's a caveat on the shutdown, if we have another one, but that's the idea. And that's what we see, at least for now, is that we are seeing some improvement that would happen on a quarter-over-quarter basis. And Jerome, the SI&C bookings, you know, it's short-term bookings, so that's why when we see that it's going back to, you know, a 100% mark, it's quite... It's giving us confidence on the forecast for sure.
Speaker #2: And that we’re expecting some gradual improvement in the future quarters. Again, that’s a caveat on the shutdown—if we have another one. But that’s the idea.
Speaker #2: And that's what we see. At least for now, we are seeing some improvement that would happen on the quarter over.
Speaker #2: And that's what we see, at least for now, is that we are seeing some improvement that would happen on a quarter-over-quarter basis.
Speaker #1: And Jérôme, the SINC bookings, it's short-term bookings. So that's why when we see that it's going back to 100% mark, it's quite it's giving us confidence on the forecast for sure.
Speaker #1: And Jérôme, the SINC bookings, it's short-term bookings. So that's why when we see that it's going back to 100% mark, it's quite it's giving us confidence on the forecast for
Speaker #3: So what do you mean by this is that the higher bookings is not offset by kind of longer-term contracts is what you mean, right?
Jerome Dubreuil: So, what you mean by this is that the higher bookings is not, like, offset by kinda longer-term contracts, is what you mean, right?
Jérôme Dubreuil: So, what you mean by this is that the higher bookings is not, like, offset by kinda longer-term contracts, is what you mean, right?
François Boulanger: We're saying that converting, you know, SI&C booking and revenue is going, it's a lot faster than managed-
François Boulanger: We're saying that converting, you know, SI&C booking and revenue is going, it's a lot faster than managed-
Speaker #2: We're saying that converting SINC booking and revenue is going it's a lot faster than managers.
Jerome Dubreuil: Yeah.
Jérôme Dubreuil: Yeah.
François Boulanger: Than managed service.
François Boulanger: Than managed service.
Jerome Dubreuil: Okay. Yeah, makes sense. And a last one for me. I'm trying to assess maybe the evolution of the industry in this time of AI. Are there areas in which you're winning deals where you used to lose, or maybe losing deals where you used to win? And maybe what are the explanations that our clients giving on this?
Jérôme Dubreuil: Okay. Yeah, makes sense. And a last one for me. I'm trying to assess maybe the evolution of the industry in this time of AI. Are there areas in which you're winning deals where you used to lose, or maybe losing deals where you used to win? And maybe what are the explanations that our clients giving on this?
