Capgemini's slower sales hit shares, to invest 2 billion euros in AI

By Lina Golovnya and Stephanie Hamel

(Reuters) -French IT consulting group Capgemini posted weaker quarterly growth due to a slowdown across its regions, marked by a softer-than-expected U.S. market as clients cut costs.

Its shares were down 5% at 1050 GMT, the biggest decliner among French blue-chip stocks.

"The U.S. market is a little bit softer than what we expected. We see more clients in cost cutting in the U.S., and that basically has put a bit more pressure on the U.S. market," CEO Aiman Ezzat told analysts on a call.

Its second-quarter sales grew 5.2% at constant exchange rates, down from 10.7% in the first quarter. Revenue in the U.S., Capgemini's second-biggest market, was up 3% versus 6.1% in the prior quarter.

Clients were in a "wait and see" mode in some industries, especially in the U.S., Chief Operating Officer Olivier Sevillia said, adding they were not dropping deals but shifting the timing of orders.

"Maybe Q4 is a bit too early," Sevillia said about a possible tipping point. He expected demand to resume strongly once the tides turned.

Capgemini's half-year revenue rose 7.9% at constant rates to 11.43 billion euros ($12.53 billion) aided by demand for digital transformation, including artificial intelligence (AI).

"I am convinced that generative AI will play a major role in this transition," Ezzat said in a statement.

Generative AI, a powerful form of AI able to generate text, images, and other content, has become popular since the release of OpenAI's ChatGPT chatbot last November, increasing concerns over issues such as copyright, cybersecurity, privacy and AI replacing human jobs.

The company, which aims to help businesses to adopt AI technology through recent partnerships with Microsoft and Google Cloud, said it planned to invest 2 billion euros in AI over three years.

This should double the workforce of its data and AI teams to 60,000 people, it said. The group's total headcount was 349,500 at end-June, down 1% from a year earlier.

($1 = 0.9122 euros)

(Reporting by Lina Golovnya and Stéphanie Hamel in Gdansk; Editing by Milla Nissi and Sharon Singleton)