Capgemini predicts unexpected revenue decline due to automotive, aerospace sector weakness

French IT giant Capgemini stunned investors on Friday with a forecast of a surprising revenue decline for the year, driven by downturns in the automotive and aerospace sectors. The announcement led to a dramatic 9.4% drop in Capgemini’s shares, placing them at the bottom of the CAC40 index by 0728 GMT.

The Paris-based company now anticipates its organic sales for 2024 will fall between 0.5% and 1.5%, a notable revision from its earlier forecast of a 0% to 3% increase. This unexpected downturn reflects significant challenges within key industry sectors, including automotive and aerospace, alongside a slower-than-expected recovery in financial services.

Capgemini CEO Aiman Ezzat commented on the situation, noting, "The slope of recovery in the second half will be affected by the recent deterioration of the outlook in the automotive and aerospace sectors and the slower recovery in financial services." Ezzat highlighted that supply chain disruptions were impacting the aerospace industry, although he assured that these issues would likely affect only short-term growth.

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In its recent financial disclosures, Capgemini reported a 3.7% decline in North American revenue for the second quarter, an improvement from the 7.1% drop recorded in the first quarter of 2024. Over the first half of the year, North American revenue fell by 5.4%. Despite these figures, Ezzat observed that North America exhibited the strongest recovery between the first and second quarters, with this market contributing 28% of the group's revenue in the first half of the year.

The company’s global headcount stood at 336,900 at the end of June, marking a 4% reduction from the previous year. Capgemini has notably slowed its hiring practices since 2023, ending the year with 5% fewer employees than it started, a shift not seen since 2009.

For the first half of 2024, Capgemini reported revenue of EURO 11.14 billion (USD 12.09 billion), reflecting a 2.5% decrease year-on-year on a reported basis. Despite the revenue shortfall, the company confirmed its commitment to maintaining its 2024 operating margin and organic free cash flow targets.