Capgemini gives a muted revenue guidance for 2023, sees uptick in offshoring demand

In its Q4 earnings call, the company called out a slowing demand for its cloud, data and artificial intelligence services. The company has also seen an uptick in demand for offshoring delivery as European clients have struggled with economic constraints.

The company reported a constant currency revenue growth of 16.6%, above the 2022 target range of 14-15% which was revised upwards after announcing the half-year results.

However, it expects revenue to grow between 4% and 7% in constant currency for the 2023 fiscal.

“Q4 growth came in a bit lower than the high- level of growth enjoyed in the previous quarters. As previously discussed, it reflects a certain level of cautiousness of some of our clients regarding discretionary spend or transformation projects,” chief executive Aiman Ezzat said in the earnings call.

Total headcount stood at 359,600, up 11% year-on-year. Around 210,300 employees work in offshore centres, 58.5% of the total headcount. This is up 0.5 points compared to December 2021.

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While the company does not disclose country- specific headcounts, over 50% of its employee base is expected to be based out of India.“Yes, there is more appetite (for offshoring) from European clients. Because, notably, the shortage of talent that we have seen has opened appetites for clients in countries like Italy and Spain. We continue to make good progress in countries like France, bit by bit over many years,” said Ezzat.

He added that along with offshoring the company also sees a higher move towards automation which negates some of the talent demand.

“I think over the coming quarters the source of talent will continue to push towards global delivery centres. Here, we are more into the optimisation phase (slower hiring), like everybody with the talent offshore, but it will restart probably in the coming quarters because of the need to be able to find talent, to be able to support the delivery,” said Ezzat.

This comes at a time when Indian IT majors have reported muted hiring during the December quarter and global technology majors like Meta, Microsoft and Google have announced layoffs.

The group’s revenue reached 22 billion euros ($23.48 billion) in 2022, while its bookings totalled 23.7 billion euros, an increase of 16.8% at constant exchange rates.