CAP: AI Partnerships And Sovereign Cloud Deals Will Drive Future Upside

Analysts have modestly lowered their price target on Capgemini, with updated modeling for a slightly higher discount rate, softer medium term revenue growth, and a marginally lower profit margin contributing to a reduced fair value and a new Street target of EUR 165, down from EUR 186.

Analyst Commentary

Street research on Capgemini reflects a constructive long term view tempered by near term caution, with the lower price target primarily driven by adjustments to growth and risk assumptions rather than a fundamental change in the company narrative.

Bullish Takeaways

Bullish analysts maintain a Buy stance, indicating confidence that the current share price already discounts softer medium term growth and leaves room for upside toward the revised target.
They see Capgemini's diversified digital and consulting portfolio as well positioned to capture structural IT transformation demand, supporting a solid medium term growth algorithm despite cyclical headwinds.
Execution on cost efficiencies and mix shift toward higher value services is expected to underpin resilient margins, which in turn supports a higher through the cycle earnings power than the market is pricing in.
The reduced target still embeds a premium to broader IT services peers, reflecting analysts' view that Capgemini can deliver superior returns on invested capital over time.

Bearish Takeaways

Bearish analysts highlight that the higher discount rate applied in valuation models signals increased perceived risk around macro conditions and project spending visibility.
Concerns around softer medium term revenue growth, particularly in discretionary digital projects, raise questions about the pace at which Capgemini can re accelerate top line momentum.
Assumptions for slightly lower margins suggest less room for operational upside, limiting the potential for meaningful earnings surprises in the near term.
The cut to the fair value indicates that, while the stock remains supported by longer term fundamentals, the risk reward profile has become more balanced and sensitive to execution missteps.

What's in the News

Deutsche Bank cut its Capgemini price target to EUR 165 from EUR 186 while reiterating a Buy rating, signaling ongoing confidence despite moderated expectations (Deutsche Bank research).
Capgemini and SAP announced a Sovereign Technology Partnership to deliver agentic AI driven, sovereign cloud based transformation solutions for highly regulated European sectors, initially in France, Germany, the Netherlands, and the UK (company announcement).
Siemens and Capgemini expanded their strategic partnership to co develop AI native digital solutions for engineering, manufacturing, and operations, targeting measurable gains in efficiency, quality, and sustainability (company announcement).
Capgemini raised its 2025 revenue growth guidance to between 2.0 percent and 2.5 percent at constant currency, up from a prior range of minus 1.0 percent to plus 1.0 percent (company guidance).
A consortium including Capgemini, Giesecke+Devrient, and Nexi was selected as first ranked tenderer by the ECB to develop and help operate the offline payments solution for a potential digital euro, enabling private, cash like transactions (ECB and company announcement).

Valuation Changes

Fair Value: essentially unchanged at about €171.93, reflecting only a negligible downward revision.
Discount Rate: risen slightly from 9.16 percent to about 9.25 percent, indicating a modest increase in perceived risk.
Revenue Growth: trimmed modestly from roughly 5.27 percent to about 4.94 percent, signaling slightly softer medium term expectations.
Net Profit Margin: reduced slightly from about 8.08 percent to roughly 7.91 percent, pointing to marginally lower profitability assumptions.
Future P/E: increased modestly from around 18.2x to about 18.8x, implying a slightly higher valuation multiple on forward earnings.

Advanced cloud, AI, and automation leadership position Capgemini for higher-margin contracts and sustained revenue as demand for digital transformation accelerates.
Strategic workforce realignment and investments in digital solutions and acquisitions support improved profitability and earnings growth amid global digitalization trends.
Weak demand, intense competition, restructuring costs, foreign exchange volatility, and macroeconomic uncertainties all threaten Capgemini's revenue growth, margins, and long-term earnings stability.

Catalysts

About Capgemini

Provides consulting, digital transformation, technology, and engineering services primarily in North America, France, the United Kingdom, Ireland, the rest of Europe, the Asia-Pacific, and Latin America.What are the underlying business or industry changes driving this perspective?

Capgemini's expanding leadership and strong deal wins in advanced cloud, data, and artificial intelligence (including Gen AI and Agentic AI) are positioning the company to benefit from the accelerating client demand for digital transformation, supporting a pipeline for higher-value, higher-margin contracts that should drive long-term revenue and margin expansion.
The ongoing transition in clients' business priorities toward cost efficiency and operational optimization-where Capgemini's automation, intelligent operations, and AI-powered business process services are gaining traction-indicates that as discretionary spending recovers, the company is well placed to convert solid bookings (book-to-bill of 1.08) into sustained organic revenue growth.
Capgemini's increased offshore leverage (now at 59%) and the realignment of workforce toward high-growth areas like North America, APAC, and financial services are likely to boost profitability by optimizing delivery costs, which should support improvements in operating margins over time.
The multiyear shift in portfolio mix towards value-added digital, cloud, and data/AI solutions, along with disciplined SG&A management and operational efficiency, is designed to offset near-term gross margin pressures, setting up the group for normalized EPS growth and operating margin resilience as growth returns.
Recent and ongoing investments in strategic frameworks (such as the Resonance AI framework and RAISE platform) and targeted acquisitions (e.g., WNS), aimed at deepening capabilities in high-demand sectors and services, position Capgemini to accelerate earnings growth through both revenue expansion and integration synergies as large-scale digital transformation and automation trends intensify globally.

Capgemini Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Capgemini's revenue will grow by 3.6% annually over the next 3 years.
Analysts assume that profit margins will increase from 7.1% today to 8.2% in 3 years time.
Analysts expect earnings to reach €2.0 billion (and earnings per share of €11.89) by about September 2028, up from €1.6 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €2.3 billion in earnings, and the most bearish expecting €1.8 billion.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 19.1x on those 2028 earnings, up from 13.3x today. This future PE is greater than the current PE for the GB IT industry at 14.5x.
Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
To value all of this in today's terms, we will use a discount rate of 9.1%, as per the Simply Wall St company report.

Capgemini Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Persistent revenue declines and stagnant growth in key regions such as France and Continental Europe-driven by weak demand in manufacturing, automotive, and consumer goods-risk constraining Capgemini's overall top-line growth, especially given its continued high regional exposure.
Downward pressure on gross and operating margins from intense pricing competition, client expectations for Gen AI-driven cost savings, and large vendor consolidation deals could persist or worsen, impacting long-term profitability and EPS growth.
Higher restructuring costs, driven by shifting demand and workforce reductions in Europe, combined with a rising attrition rate, signal margin headwinds and increased operational risk that could erode net margins over time.
Volatility from FX headwinds, especially Euro strength against the USD and other currencies, and increased tax rates could continue to negatively impact reported revenue, net profit, and free cash flow.
Uncertainty from macroeconomic, geopolitical, and client spend volatility-along with slow recovery in parts of the operations and engineering portfolio-raises risks of delayed revenue inflection and makes sustained long-term earnings growth less certain.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of €175.929 for Capgemini based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €214.0, and the most bearish reporting a price target of just €134.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €24.5 billion, earnings will come to €2.0 billion, and it would be trading on a PE ratio of 19.1x, assuming you use a discount rate of 9.1%.
Given the current share price of €121.7, the analyst price target of €175.93 is 30.8% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Analyst Commentary Signals Mixed Outlook for Capgemini Amid Modest Valuation Adjustments

CAP: AI Partnerships And Sovereign Cloud Deals Will Drive Future Upside