CGI Group Inc. (NYSE:GIB) has announced robust first-quarter results for fiscal 2026, showcasing revenue growth, a healthy book-to-bill ratio, and record operating cash flow. These achievements come despite challenges posed by a U.S. federal government shutdown and a one-time cost associated with regulatory changes in India.
Financial Performance Overview
During the quarter, CGI reported revenue of CAD 4.1 billion, reflecting a year-over-year increase of 7.7% or 3.4% when adjusted for foreign exchange fluctuations. Executive Vice President and Chief Financial Officer Steve Perron attributed this growth to ongoing demand and recent acquisitions, particularly from CGI’s Asia-Pacific delivery center, which experienced growth of 5.8% primarily through managed services.
Perron highlighted that U.S. operations faced impacts from the federal shutdown, though the effects were consistent with prior communications. He anticipated improvements in the upcoming quarter but emphasized the dynamic nature of the U.S. federal segment.
Bookings and Backlog Insights
CGI’s quarterly bookings reached CAD 4.5 billion, resulting in a book-to-bill ratio of 110%. Managed services were the primary contributor, achieving a book-to-bill ratio of 117%. Systems integration and consulting (SI&C) also performed well, posting a ratio of 100%, a benchmark last seen in the first quarter of fiscal 2025. When excluding U.S. federal bookings, the overall book-to-bill ratio improved to 118%.
With a contracted backlog now at CAD 31.3 billion, representing 1.9 times revenue, President and CEO François Boulanger noted that bookings increased by over CAD 300 million compared to the previous year, with over half attributed to new contracts and extensions. The company also boasted a win rate of over 95% on contract renewals.
Profitability metrics showed adjusted earnings before interest and taxes (EBIT) at CAD 655 million, up 7.1% from the previous year, with a margin of 16.1%. The quarter’s effective tax rate was reported at 26.3%, an increase attributed mainly to changes in France’s statutory tax rates. Adjusted net earnings amounted to CAD 461 million, resulting in an adjusted diluted earnings per share (EPS) of CAD 2.12, an 8% year-over-year increase.
CGI generated CAD 872 million from operations, accounting for 21.4% of revenue, with days sales outstanding improving to 37 days.
Capital Allocation and Strategic Investments
In terms of capital allocation, CGI invested CAD 87 million into business initiatives, including investments in advanced artificial intelligence (AI). The company spent CAD 106 million on acquisitions, repurchased CAD 577 million in shares, and returned CAD 37 million in dividends. CGI’s board approved the renewal of its normal course issuer bid (NCIB) through February 2027, allowing for the repurchase of up to 19 million shares in the next year.
Boulanger announced that two significant mergers were completed during the quarter. These included a division of Comarch in Europe, enhancing CGI’s presence in Poland and the Baltic States, and the acquisition of Online Business Systems in North America to strengthen capabilities in AI, digital transformation, and cybersecurity.
Management emphasized that AI-related volatility has not altered CGI’s acquisition strategy, viewing AI as an enabler rather than a deterrent.
AI Strategy and Market Conditions
Boulanger outlined CGI’s commitment to advancing an AI strategy that integrates AI into various services and platforms. The company is fostering internal AI adoption while enhancing its engineering capabilities and governance frameworks. He noted a shift in client adoption from experimentation to broader integration, albeit gradually due to factors like data quality and governance.
Among its strategic partnerships, CGI has established a multi-year agreement with Google Cloud focused on AI outcomes and a global alliance with OpenAI aimed at securely deploying AI within enterprise settings. Currently, 65% of CGI’s intellectual property solutions utilize AI-enabled automation, and nearly 40% of CGI’s consultants possess expertise in advanced AI and data.
Boulanger described current market conditions as complex and uneven, impacted by geopolitical factors and changing regulations. While interest in AI remains strong, the company is beginning to see gradual improvements across various industries and regions.
The impact of the federal shutdown was characterized by reduced utilization, as CGI retained its workforce despite billing challenges during that period. Boulanger reaffirmed the attractiveness of the U.S. federal market, while acknowledging some near-term uncertainties due to potential shutdown risks.
About CGI Group
Founded in 1976 in Quebec by Serge Godin and André Imbeau, CGI Group has evolved from a regional systems integrator into a global leader in information technology and business consulting. The company offers an extensive range of services, including IT consulting, systems integration, application development, managed IT, and business process outsourcing, serving clients across diverse sectors.
