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“Capgemini’s First Quarter Revenue Growth Slows Down”

French IT consulting firm, Capgemini, announced weaker revenue growth for the first quarter of 2023 as compared to the same period last year, citing a tense economic environment in which clients have adopted a wait-and-watch approach. Nevertheless, the company’s quarterly revenue reached €5.73 billion ($6.35 billion), indicating an increase of 10.9% from the first three months of 2022. Investors are now focusing on whether there is a glut in capacity that will lead to investment cuts, as companies deal with rising costs amid soaring inflation, and interest rate hikes have squeezed consumer demand. The downturn in the sector has forced tech giants such as Alphabet, Microsoft, Meta, and Amazon to cut jobs.

Capgemini offers consulting, digital, technical, and engineering services, and in February announced its plan to ease hiring after increasing its workforce by 11% in 2022, citing sluggish demand for artificial intelligence, data, and cloud services. By the end of March, the pace of expansion had dropped to 5% year-on-year, with a headcount of 357,000 workers. Capgemini’s CEO, Aiman Ezzat, told reporters that the company would start recruiting again later this year to achieve its growth targets.

The Paris-based company reiterated its outlook for 2023, pointing to revenue growth ranging from 4% to 7% in constant currency terms, which is down from a 21.1% increase in 2022, and an operating margin of between 13.0% and 13.2%. Despite the economic environment remaining tense, Ezzat mentioned that the digital transformation is still a priority for clients. Furthermore, the CEO specified that growth in new hires remains strong in tech products, including research on generative AI.

Late last month, Capgemini’s German competitor, SAP, announced plans to incorporate OpenAI’s chatbot, ChatGPT, into its products. However, Capgemini remains cautious about AI development, with Ezzat stating that when adopting a new technology, it takes time to find the specific ways of using it to generate high margins. ($1 = 0.9024 euros)

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