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CGI Inc.

CGI is among the world's largest IT and business consulting firms, compounding per-share earnings for a decade by pairing organic growth with self-funded acquisitions — a model now tested as growth slows and the shares de-rate.

The shares fell from about $96 in mid-January 2026 to a low near $60 in May — a sector-wide markdown of labor-based IT services — and trade at $67.02 in early July.
$67.02
Share price
~$14.1B
Market capitalization
$11.6B
FY2025 revenue
~10x
Forward P/E
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The statements

A cash-rich compounder whose reported profit stalled in FY2025

FY2021 → FY2025as reported · $
Revenue$11.6B+14%
Operating margin14.6%−1.2pp
Net income$1.2B+3%
EPS$5.37+6%
Free cash flow$1.5B+6%
Open the full statements →
Consolidated statements, years ended September 30.
  • Revenue. Sales reached $11.6B in FY2025, up 8.4% — but roughly half of that was currency and acquisitions; constant-currency growth was 4.6%, and just 0.9% the year before.
  • Earnings. Reported diluted EPS was flat at $5.37 against the prior year, as freshly acquired businesses diluted margins; the adjusted figure rose 8.9% to $6.06.
  • Cash. Free cash flow of $1.55B covered about 128% of net earnings, on capital spending under 1% of revenue — the durable strength beneath the reported wobble.
Acquisition math

The busiest deal year, bought at about 40 times acquired earnings

FY2025 acquisitions
TargetPrice ($M)Goodwill ($M)
BJSS (U.K.)917.2835.1
Daugherty (U.S.)250.5173.8
Apside (France)167.9161.7
Novatec, Momentum, other75.151.5
FY2025 business combinations; ~87% of the $1.41B price landed as goodwill.
  • What the price buys. An IT-services deal converts almost entirely into goodwill and client relationships; goodwill now stands at $8.58B — 114% of equity and 60% of assets, and never once impaired in thirty years.
  • The lift has to arrive. The three biggest targets came with a 4.1% net margin against CGI's 10.4%. Close that gap and the ~40x price falls toward 16x; leave it, and the premium is permanent.
  • Early evidence for it. CGI held a 16.6% operating margin in Q4 FY2025 while integrating the deals, and its U.K. unit grew 28% with BJSS folded in — so the risk is in delivery, not the concept.
CGI paid about $1.34 billion — roughly 40 times the $34 million of pro-forma net earnings (a 4.1% net margin against its own 10.4%) — for Daugherty, BJSS and Apside, lifting goodwill to $8.58 billion (114% of its $7.51 billion equity and never impaired), while management attributes the fall in its IP-revenue share from 22.6% to 20.6% (against a 30% IP30 target) to 'the dilutive impact of recent business acquisitions.'
Funding the buy

The year self-funding broke — and how the gap was bridged

FY2025 cash generated vs deployed ($B)
Three uses totaled $2.37B against $1.55B of free cash flow; a $0.67B note issue and cash drawdown covered the ~$0.8B gap.
  • In FY2025 CGI's reported diluted EPS was flat at $5.37 while adjusted diluted EPS rose 8.9% to $6.06 entirely on a $208.2M add-back of recurring restructuring and acquisition/integration costs, and in the same year the $2.37B it spent on acquisitions, buybacks and a first dividend outran $1.55B of free cash flow by ~$0.8B, a gap bridged with a $674.7M note issue that lifted net debt to $2.52B.
  • Not a stretch on solvency. That free cash flow still converted at about 128% of earnings; net debt is roughly 1.0x EBITDA at 31x interest coverage, and 25.1% net-debt-to-capital sits below FY2022's 28.8%.
  • What it forces. For the first time in the cycle, buybacks, deleveraging and the next deal compete for the same cash — a choice made from strength, but a choice all the same.
How it compounds

A decade of per-share compounding, now leaning on the 'Buy' half

Reported diluted EPS ($)
Diluted EPS, FY2021-FY2025; the curve flattened as FY2025 acquisitions were digested.
  • The engine. Reported EPS climbed from FY2021's $3.95 to $5.37 in FY2025, funded almost entirely by CGI's own cash — asset-light, converting over 100% of earnings to free cash.
  • The stall. Organic momentum has faded: constant-currency growth was 0.9% in FY2024, 4.6% in FY2025, and 1.6% in the most recent quarter — reported growth now leans on deals and currency.
Where revenue comes from

A defensive book: government-heavy, recurring, globally spread

FY2025 revenue by client sector
Government is the largest end-market; the U.S. federal government alone is 14.1% of revenue.
  • Recurring core. About 55% of revenue is multi-year managed services — running clients' IT and business processes — and 45% is project-based consulting and systems integration.
  • Government anchor. Government is 38% of sales, led by the U.S. federal government at 14.1% — sticky and defensive, but exposed to budget cycles and shutdowns.
  • No single geography. CGI delivers through nine segments across the U.S., Canada, Europe and Australia, which spreads risk but leaves reported growth carrying a large currency component.
The order book

The moat is real but narrow: managed services carries it

Book-to-bill by service line (%)
Above 100% means new bookings outpace revenue delivered; managed services net-adds, consulting barely holds.
  • Two years booked. Contracted backlog is $23.0B — roughly two times annual revenue — and about 62% converts beyond the next twelve months.
  • Recurring engine. Managed services books at 117-122% of revenue and renews rather than churns; consulting sits at or below 100%, the discretionary, cyclical drag.
  • Concentration risk. The U.S. federal book fell to 92.5% book-to-bill in FY2025 and was hit by a shutdown into FY2026 — the lumpiest, most exposed part of the order book.
AI and the labor model

AI looks like a margin defense, not a revenue cure

IP as a share of revenue vs the 30% target
Management's own IP-revenue metric, against its 30% ambition.
  • Priced on outcomes. CGI's default managed-services contracts are outcome-based, so a productivity gain widens the spread rather than shrinking the invoice — AI becomes a cost lever, not a revenue hole.
  • Revenue per head rising. Revenue grew about 11% over FY2023-FY2025 while headcount barely moved; revenue per employee reached roughly $123,000, up near 5% on AI plus offshore delivery.
  • The catch. AI does nothing for the growth stall, and the IP lever that could turn it into growth is going backwards — from 22.6% toward 20.6%, diluted by the labor-heavy acquisitions.
Earnings quality

Cash-backed at the cash line, flattered at the profit line

$5.37
Reported diluted EPSflat year on year
$6.06
Adjusted diluted EPS+8.9%
$208M
'Specific items' added backup from ~$71M in FY2024
~128%
Free cash flow / net earningsthe add-backs are real cash inside it
  • The wedge. The whole of FY2025's earnings 'growth' lives on the adjusted line: reported EPS was flat, while the adjusted figure rose 8.9% entirely on a $208M add-back of restructuring and integration costs.
  • Recurring, not one-off. Under rotating labels the add-back has escalated every year — about $45M, then $71M, then $208M — so the durable base is nearer the reported number, roughly 13% lower.
  • Where it's honest. Those costs are real cash already inside free cash flow, which still converted above 100% — the cash-based valuation is not fooled by the adjusted optics.
Returns on capital

Returns dipped as the acquisitions were digested

Return on invested capital and pre-tax margin (%)
Both slipped in FY2025 as freshly deployed acquisition capital had not yet earned its keep.
  • The dip. Return on invested capital fell to 13.6% in FY2025 from 16.0% in each of the two prior years, and the pre-tax margin to 14.1% from 15.6% — the cost of a busy deal year.
  • Temporary or structural. The bull read is a digestion dip that recovers toward 16% by FY2027; the bear read is that goodwill compounds on each deal and returns stay lower.
  • What settles it. The segment margins where the deals sit — U.S. commercial, U.K., Western Europe — trending back toward the group's mid-teens is the falsifiable test.
The de-rating

Cheaper than its own history, but not the cheap one in the room

Forward P/E — CGI vs peers (x)
External market data as of July 10, 2026; peers are CGI's closest labor-based IT-services comparables.
  • A sector event. The shares fell about a third in a year as the market marked down labor-based IT services against AI; earnings kept rising — cleanly on the adjusted line — while the multiple did the damage.
  • Not a bargain in its group. At ~10x forward earnings CGI carries a premium to Accenture (~7%), Cognizant (~11%) and Capgemini (~48%) — a markup for quality and durability, not the sector's discount name.
  • What you're paid. The undemanding side: a free-cash-flow yield near 11% and an earnings yield about 9.4% for a high-single-digit compounder.
Control and succession

Founder-controlled, with a handover underway

Voting power vs economic stake
HolderVotesEquity
Godin family55.6%11.25%
Public (Class A)44.4%88.75%
Class B shares carry ten votes each; the founder cannot be outvoted.
  • The control wedge. Founder Serge Godin holds 55.6% of the votes on 11.25% of the equity through ten-vote Class B shares — the family decides every shareholder vote.
  • Aligned, and stewarded. That control underwrote the disciplined, self-funded compounding; the handover is running through insiders — a third CEO since October 2024, with Julie Godin as Executive Chair.
  • The flags. Minority holders have no binding lever — one asked for more voice in 2025 and was declined — and the founder, in a co-chair role, out-earned the sitting CEO.
Two-year scenarios

The multiple does most of the work from here

Illustrative two-year price outcomes ($)
Illustrative arithmetic from consensus FY2026 EPS and today's price — not forecasts.
  • Downside cushioned. The bear case needs EPS growth near 2% and the multiple compressing to 8.5x at once — below any large Western peer — and even then the price falls only about 17%.
  • Base is modest. Mid-single-digit EPS growth and a partial re-rating to 12x reaches about $88, close to the $89 sell-side target; the bull case to 15x roughly doubles the shares.
  • The swing factor. The low starting valuation matters more than any single operating number — but 1.6% constant-currency growth is not obviously a trough, so the bear case is not a tail.
What to watch

A cash-generative compounder priced for a growth stall — a cyclical air-pocket, or the leading edge of an AI decline.

Read the full report →

This distills a guided study of CGI built chapter by chapter — the statements, the acquisition math, the order book, earnings quality, and what the price implies.

Compiled from the full report · 2026-07-12 · For information, not investment advice.