Capgemini Derives Double-Digit Growth From Financial Services Success, Digital Determination

A strong appetite for cloud and digital solutions among financial services customers enabled Capgemini to notch double-digit growth in its most recent quarter.

The Paris-based solution provider, No. 5 on the 2014 CRN Solution Provider 500, saw global revenue climb 13.9 percent in the first quarter of 2016, from $3.13 billion to $3.5 billion, after factoring out changes in foreign currency exchange rates. North America is leading the way, thanks to last year's $4 billion purchase of iGate, with sales growing 40.1 percent on a constant currency basis, to $1.06 billion.

"Capgemini's growth rate is accelerating this year," Paul Hermelin, Capgemini chairman and CEO, said in a statement about the earnings. "We have diversified our sources of growth by strengthening our global presence and our sectoral capabilities."

[Related: Capgemini Buys 70-Person, Cutting-Edge Design Consultancy]

Capgemini’s earnings were announced before the Euronext stock exchange opened Wednesday. Investors have responded very favorably to the news, as Capgemini's stock climbed 6.4 percent in trading Wednesday, to $94.71 per share.

Strong market demand for cloud and digital services fueled 16.2 percent growth in Capgemini's application services practice, making up 59 percent of the company's business, the company reported. Capgemini’s digital and cloud offerings grew 28 percent in the quarter, with the solution provider launching a practice around the blockchain distributed ledger technology, opening three cloud factories in India and strengthening its collaboration with Amazon Web Services.

"We had a dynamic start to the year," Aiman Ezzat, Capgemini’s group CFO, said in a video statement. "Overall, a strong quarter and good momentum going into Q2."

The company's local professional services and other managed services categories also enjoyed double-digit revenue growth, thanks to iGate’s engineering and business process outsourcing practices, the company said. Capgemini said it has accelerated automation initiatives in its infrastructure and business services groups.

From a sector perspective, financial services led the way, with nearly 30 percent year-over-year growth, thanks to iGate's reinforcement of an already solid footprint and offerings, the company said. The future also looks bright, with a healthy sales pipeline heading into the rest of the year, Ezzat said.

Manufacturing and telecom also performed quite well, with sales jumping 19 percent and 18 percent, respectively, on an annualized basis.

Conversely, Capgemini’s energy, utilities and chemicals sales declined 1 percent year over year on a constant currency basis, because of a marked slowdown in North America over the past nine months, while public sector sales climbed by less than 2 percent over the year-earlier quarter.

Capgemini has been very active on the merger and acquisition front this year, purchasing New York-based, 70-person design consultancy Fahrenheit 212 in February and Oinio, a 100-person leading European Salesforce partner, in January.

Outside of North America, the U.K. and Ireland led the way, with an 8.1 percent growth in constant currency sales, thanks to robust private sector demand, while France had 2 percent sales growth driven by financial services, consumer goods and retail, the company said.

The rest of Europe saw sales jump 6.1 percent, with double-digit growth in Germany and Italy but flat sales in Belgium, the Netherlands and Luxembourg (Benelux).

The solution provider has increased its workforce by 24 percent over the past year, growing from more than 147,000 employees to nearly 183,000 today. Nearly 31,000 of the new positions were in an offshore capacity, the company said, with just a little over 5,000 positions added onshore.

Capgemini said it's continuing to forecast revenue growth of 7.5 percent to 9.5 percent for the remainder of the year.