Good day, and thank you for standing by. Welcome to the Capgemini Q3 2024 Revenues Webcast and Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Aiman Ezzat, CEO. Sir, please go ahead.
Thank you. Good morning, and thank you for joining us for the Q3 2024 results call. So today, I'll be joined by our CFO, Nive Bhagat; and our COO, Olivier Sevillia. So I would like to start with Olivier. It's Olivier's last analyst call. As announced, Olivier will be leaving the group after 34 years to pursue personal interests. He has been a key architect of what the group is today, and I want to thank him for his contribution to the development of Capgemini as a leader in our industry.
Thank you, Aiman.
So coming back to our Q3, the group generated revenue of EUR 5,377 million in Q3, down 1.6% at constant exchange rates. After bottoming out in Q1 2024, our activity trends improved again in Q3, but only marginally. Bookings totaled EUR 5,222 million in Q3, so down 0.8% at constant exchange rate.
The book-to-bill for the period reached a solid 0.97. Now, over the quarter, we did encounter contrasted dynamics affecting us in different ways, depending, of course, on our mix. If you look first from a sector perspective, our two largest sectors, manufacturing and financial services, are currently moving in opposite directions. As mentioned at the end of H1, manufacturing is slowing down, and this materialized across most geographies. Q3 was at - 3.4% compared to Q2, which was at - 1.1%. So we can see the effect of the degradation in manufacturing, which is our largest sector. On the other hand, financial services that we expected to recover through the year is really recovering, with Q2 at - 5.4%, recovering at - 1.3% in Q3, and now an expectation of being back to growth in Q4.
On the geo side, Europe again demonstrated good resilience with growth rates either stable or improving. The U.K. saw good improvement, returning to growth at +0.4%. Conversely, North America stagnated, and there's a slowdown in the manufacturing sector, having offset the visible improvement that we have in financial services. Going to the businesses, the growth in Strategy and Transformation further improved to 6.5% year-on-year, reflecting the strength that we have in our strategic positioning and also aligned with the dynamism of the market in AI and GenAI. Applications and Technology improved again this quarter, where cloud infrastructure services and engineering equally weighed on the Operations and Engineering, which decelerated to -3.4%. When we look at client demand in Q3, it continues to be driven by operational efficiencies and cost reduction, and as anticipated, we are not seeing any increase in discretionary spend.
We have the right set of offerings to meet the demand in each sector, and that led to some noticeable deals in Q3. Just to highlight some of them, we were chosen by an Italian manufacturer eager to leverage data to reduce the development cycle for its core products while modernizing engineering and production. We implemented a forward-looking engineering platform and executed a complex program with multiple partners to lay the foundation of the new PLM system, and this project highlights the connection between physical and digital worlds, our Intelligent Industry play, emphasizing that digital continuity is central to product and process transformation. Another example for a U.S. conglomerate, we have taken over in record time complex and critical end-user managed services in the cloud for over 250,000 users. The transition was smooth, and we have been delivering live services already to the customer.
The deal, which is over EUR 600 million in total contract value, is a good example of our ability to shape and deliver very large deals. Another example for SZC, we are helping to set up a data and digital-centric equipment supply chain, supporting the construction of a new nuclear power station, which will provide 6 million homes with low-carbon electricity over the 60-year operational life. Our work there is focused on increased equipment traceability across the global supply chain, enabling dynamic construction schedule management to protect the critical parts of the construction sequence. Through these digitally enabled techniques, SZC will be able to optimize the use of materials and resources in the construction of the power station.
Our positioning as a business and technology transformation partner of our clients is well recognized, and we see solid traction for most of our focus value offers: Intelligent Industry, cloud, Digital Core, supply chain sustainability, and of course, in data and AI. We see that, of course, reflecting in a pipeline that continues to grow, notably in data and AI, where the pipeline almost doubled year-on-year. Now, moving to GenAI, which, of course, is on top of mind for many of our clients. We continue to see a good increase in demand. The bookings on generative AI for the first nine months is around EUR 600 million, and this does not include some of the resulting data programs. That's really the GenAI focus here.
We have already delivered hundreds of projects, as we mentioned before, and we are engaging with clients now on larger programs to deploy use cases at scale, so just a few examples. For an automotive client, we are customizing LLMs to create specific embedded software. It enables the developers of this client to generate code from natural language, detect errors, and boost productivity, which enables us to accelerate the onboarding and enhancing the development efficiency. Another example for a global logistics client, we are setting up a scalable and value-driven AI factory to accelerate the development and deployment at scale of new AI products and services to enhance profitability and operational excellence, and for a retail client facing high cost and slow pace on marketing content creation, we implemented a custom GenAI solution to automate image creation.
This approach will allow for a quicker and more cost-effective production, ultimately boosting content output and improving search engine visibility. We continue to invest in our capabilities and infuse GenAI in our operations. We have now extended our ecosystem of technology partners to 15 dedicated partnerships. We are expanding our portfolio of offerings to deploy use cases at scale, and we are strengthening, notably, our Intelligent Industry play around generative AI with the launch of engineering and R&D-specific GenAI-infused solutions for clients to accelerate innovation, of course, but also streamline the engineering and R&D processes. An example of a solution that we have launched includes Augmented R&D Discovery, which, of course, as you imagine, has a big impact in pharma, notably. Augmented Software Product Engineering, Augmented Product Support and Services, and Augmented Technical Publications. We are also actively embedding GenAI in all our solutioning and deliveries.
This is ongoing, and the number of projects that are impacted by GenAI keeps increasing on a daily basis. Internally, we are also leveraging GenAI across the organization, prioritizing areas where GenAI adoption with high business impact and synergies across functions that can be deployed in a scaled and secured approach. We are currently looking to scale about 50 use cases internally. Now, coming to the outlook and the update that we have done, we now expect Q4 to be in the same range as Q3 in constant currency, including a scope impact of 40 basis points from M&A. So while improvements will continue to develop in areas such as financial services, there are also some increasing headwinds in manufacturing, which will be weaker than previously anticipated.
In terms of geography, North America will improve but not recover as much as initially expected, while France will further decline, mainly driven by manufacturing, so as a result of that revision on Q4, the full-year constant currency growth outlook is now -2% to -2.4%, including 40 basis points contribution from M&A. We also narrowed down the operating margin to 13.3%-13.4%. It was previously 13.3%-13.6%, and it confirms again the resilience of the margin in view of the top-line evolution, and finally, we do confirm the free cash flow, organic free cash flow at around EUR 1.9 billion. I also mentioned the fact that we are launching a set of targeted actions to simplify our operation to make the group more agile with a stronger emphasis on top-line growth.
I consider today we continue to have what it takes to achieve our growth ambition of a CAGR of 7%-9% over the medium term. I now leave the floor to Nive.
Thank you, Aiman, and good morning, everyone. Let's start with our quarterly revenue growth. As highlighted by Aiman, our activity trends improved again in Q3, as expected, although at a marginal pace. This was due to more marked contrast in sector evolution compared to Q2, something that I will come back to in a moment. In Q3 2024, revenues declined by - 2.1% on an organic basis. This is a 20 basis points improvement from Q2 2024. Accounting for scope impact of 50 basis points, growth at constant currency is - 1.6%, which represents a 30 basis points improvement on Q2 2024. Lastly, FX had a negative impact of 30 basis points in Q3. As a result, reported growth is - 1.9% for the past quarter. At this point in time, we expect FX to have a neutral impact for the full year 2024.
Now, looking first at revenues by sector, as Aiman has already said, financial services confirms their recovery with a 410 basis point improvement on Q2 growth rates. But as anticipated, manufacturing also slowed down significantly, though, from - 1.1%-- 3.4% in Q3. Beyond this, the evolution in the other sectors was varied. Public sector remained quite dynamic with a small sequential improvement in growth rates at + 3.9% year-on-year. TMT improved significantly in Q3, although it is still declining by - 3% year-on-year. Energy and utilities and services were virtually flat as activity trends deteriorated a little bit versus Q2 2024. Lastly, consumer goods and retail further declined in Q3 with a revenue contraction of - 5.2% year-on-year. Moving on now to revenues by region. Now, I'm going to do this slightly differently today.
I will not go into each year-on-year growth rate for Q3 in detail and will let you look at this in the press release. Instead, I will comment on the Q3 year-on-year growth rates compared to the ones reported in July 2024. In our three largest regions, Q3 2024 growth rates at constant currency were pretty similar to those of Q2. Rest of Europe posted a growth of + 0.6%. This is a 20 basis point improvement over Q2 despite the visible headwind from the weakening manufacturing sector. All other sectors actually improved over the period, most notably financial services. In North America, the recovery in financial services is tangible. However, the weakening manufacturing sector created a headwind of more than one point. Overall, though, in North America, Q3 growth was - 3.9%, 20 basis points below Q2. Revenues in France decreased by - 2.5%.
This compares favorably to the - 2.7% reported in Q2 thanks to the improvement in financial services. To note, France also saw degradation in the consumer goods and retail and energy and utility sectors. Moving on to the last two regions, the United Kingdom and Ireland returned to positive growth at + 0.4%, driven by the recovery in financial services combined with a resilient manufacturing sector in the region and an acceleration in energy and utilities. Lastly, revenues in the Asia-Pacific and Latin America region were down - 2.2%. The strong acceleration in the public sector on top of the recovery in financial services did not fully compensate for the degradation in the manufacturing and services sector. Moving on to revenues by business, our management consulting business, Strategy and Transformation further strengthened in Q3 with total revenues up + 6.5% year-on-year.
This reflects continued demand for our strategic consulting offers, including AI and GenAI. In applications and technology services, Capgemini scored business growth rates improved by 170 basis points compared to Q2 2024. Conversely, total revenues in operations and engineering services further decreased in Q3 with a contraction of -3.4%. This was primarily driven by a decline in cloud infrastructure services and to a lesser extent in engineering services due to their larger exposure to the manufacturing sector. Moving on to the bookings evolution, Q3 bookings amounted to EUR 5,220 million, slightly down year-on-year at -0.8% at constant currency. The book-to-bill ratio reached a solid 0.97 in Q3. Now, moving on to the headcount evolution, total headcount increased over the last three months to stand at 338,900 employees at the end of September.
It is still down by -1% year-on-year but up +0.6% since the end of June 2024. The offshore leverage remains at 57%, stable since the end of last year. Lastly, attrition has been stabilizing at the current level, which is 15.4% on a last 12-month basis. On that note, Aiman, I hand back to you.
Okay. Thank you, Nive. So while the group is seeing improvement across a number of sectors, geographies, and business areas, the market is really not what we were expecting a few months ago, as exemplified notably by manufacturing. So I did mention a set of targeted measures to further increase focus on growth. And with the ongoing transition to digital economy, we do remain confident in our ability to deliver our 7%-9% constant currency CAGR ambition. So let's now open the Q&A. And of course, to allow a maximum number of people in the queue to ask questions, may I kindly ask you to restrict yourself to one question and a single follow-up? Operator, could you please share the instructions?
Thank you. As a reminder, to ask a question, please press star one, one on your telephone and wait for your name to be announced. To withdraw your question, please press star one, one again. We will now take the first question from the line of Balajee Tirupati from Citi. Please go ahead.
Thank you. Good morning, Balaji Tirupati from Citi. Two questions from my side, if I may. Firstly, at this point, based on the pipeline and targeted actions you are taking, how do you see growth prospects for 2025? That is, what would you need for the group to have organic growth in 2025? And the follow-up is, if you could share additional color on targeted actions the group has launched. When you mentioned stronger emphasis to growth, does it change a more balanced growth-to-margin approach the group has had till now? Thank you.
Okay. Thank you. Two very good questions, of course. Thank you. So first, on returning to organic growth in 2025, yes, I mean, we do expect to return to organic growth 2025. If you look at how we envisioned the year initially, it was basically facing the headwind, which was pretty stiff around TMT, which is what's happening bit by bit, a recovering financial services sector, which, again, is happening bit by bit, and it will be positive in Q4, a bit slower than what we expected, but it's definitely happening. In a certain way, no more bad news because things had stabilized at the beginning of the year.
The problem we had is really the deterioration that we have seen in the manufacturing sector, notably, which has been pretty heavy, with a big switch from growth in H1 to now a pretty stiff headwind in H2 and some bad news coming on the French side with the political environment. So again, we do expect that the recovery that we have been seeing in TMT and in financial services will continue. So that will support the positive traction and that some of the manufacturing headwind we're seeing at the end of this year are stiffer than what we'll see in 2025, notably because we consider that some of them are very short-term actions taken by companies more linked to preserving the end of year.
I mean, some of the discussion we have with some of the clients is saying, "Yes, it's pretty tough right now, but we have to revert to investment next year." So that's what, for me, puts us in a better position as we look into 2025 because we consider that some of the actions that are pretty stiff in some areas, notably in a number of manufacturing sectors, are more short-term actions and that investments will have to revert to some extent next year, supporting the return to growth. On the targeted actions, again, I just want to clarify, and of course, I expected that question. In a period of slowdown, you seize the opportunity to change a number of things. And here, what we want to do is the following. It's really we want to simplify somewhat the organization. As you grow fast, you add plenty of things.
You create a bit of complexity. I really see an opportunity over the coming months to really simplify, streamline decision processes, empower more to basically increase really the agility on the front end of people in terms of making decisions and being able to adapt very quickly to a continuous evolving environment. So it is not a big transformation or thing like that, but there are opportunities that we see today to be able to simplify the way we operate and to be able to streamline decision-making and really accelerate the reactivity we have on the front end in terms of pushing for growth.
Very useful. Thank you.
Yes, and just, sorry, to follow up on the rest of your question, it doesn't change the balance. I mean, we continue to focus around how to, notably, through the portfolio and also some operating actions to see how we can continue to improve our margin bit by bit. We're not giving up on the margin at the expense of growth, but we definitely find opportunities. We think there are opportunities for us to be better on the growth front and to react more quickly to some of the evolution in the market.
Thanks a lot, Aiman.
Thank you. We will now take the next question from the line of Sven Merkt from Barclays. Please go ahead.
Great. Good morning.
Morning.
Just a few questions from me as well. So you said, obviously, the emphasis has shifted a bit more towards growth. You have clearly increased also the investment in sales and marketing in H1 and, yeah, already have put some actions into place. When do you expect to see a more material impact from this on growth? And considering that you now took the margin down for this year and, yeah, the outlook for next year is still uncertain, how should we look at the 14% margin target for next year within this context?
Okay. So listen, on the action, to frankly, the action is ongoing. It's not like suddenly we stop and we're making. I think the action has been ongoing. We have already put in place certain things for Q4 to try to maximize the top line. I think there'll be a few more a bit heavier process changes and others to be able to be put in place over the next three to four months. But it's definitely impact that we should see in the course of 2025. On the margin front, we have trimmed down the guidance. It was 13.3%-13.6%. We trimmed it down to 13%-13.4%. And yes, I do consider that today, based on the exit rate we have in Q4, that the 14% margin cannot be achieved next year. But we still aim to see some improvement in margin next year compared to 2024.
Great. Thank you for the details.
Thank you. We will now take the next question from the line of Frederic Boulan from Bank of America. Please go ahead.
Hi. Good morning, Aiman, Olivier, and Nive.
Morning.
My question is around the visibility you have on the business in the short term and then a follow-up on the longer term. So in July, you flagged a number of points around A&D slowdown in auto. You actually said you don't really see a deterioration unless clients want to, I think you said, impact their operations. So what has really changed to drive the kind of reduction in outlook for Q4? Is it what you were mentioning before, clients really holding back investment in the very short term? But it's interesting that you kind of, in July, flagged a lot of points which seem to have happened. Still, it's a fairly meaningful change in your view for Q4. And then a follow-up on the midterm. I mean, you mentioned several times that 7%-9% growth ambition. So interesting commentary in the context of what we're seeing right now.
What kind of time frame do you have in mind to kind of see those normative levels coming back in the business? Thank you.
Okay, so what has changed compared to July? What has changed is some of the bad news of manufacturing have even accelerated furthermore, and you see, what changes is that our predictability is based on the predictability of our clients, so we have intimate relationships with clients, so they share with us their plans, and based on that, we are able to predict what we expect to deliver. Remember, we have a good concentration on the large clients, which represents a good part of our revenue, so this intimate relationship with these clients is what comforts us in terms of the prediction. The challenge we have is that our clients themselves cannot predict, so they come with surprises that themselves are not planning, and they have to react to.
That's really where the challenge is in the short term is our own clients have little visibility in a certain way and little prediction in terms of some of the decisions they're going to make. And this is the part that we cannot anticipate. So it is a degradation compared to what we saw in July, but based on the fact that our client visibility, in a certain way, was not good, and they had to react further. Short-term, that's why I think it's important. It's short-term reaction to a changing environment to be able, in a certain way, to preserve the year-end. And there is, as we can imagine, always some flexibility on trimming down some of the services, and that's what we have seen as being an impact. I'll give you another example. We were in growth in manufacturing in the U.S., and this has changed.
It has changed because we had a number of events in the environment in the U.S. at our clients that ended up turning into negative news for us going into Q4. And I promise you, it's not something we could have predicted because these events were not predicted by the client. There are some clients who were in growth, who suddenly have basically a pretty negative impact in Q4. We know it's transition. We know it's not going to last for a very long period, but in the meantime, it does have an impact for us on Q4. On the midterm, my view around the market in terms of the potential in the market linked to the move towards the digital economy's increased span, the push we have done in Intelligent Industry is there.
Even if clients are slowing down because of their own problems in the short term, the change and the transformation that has to be driven is still there. This is not going to go away, so in the short term, it does have an impact, and again, the impact is higher than what we have predicted even a few months ago, but I'm completely convinced about the fact that because of the discussion we have with them, this transition, they're going to have to do them, and that would require the investment to be able to move towards a digital economy, which will fuel that growth, so my point around the 7-9 is that the fundamentals of what's driving the fact that we can return to 7-9 haven't changed.
The assets that we have built and the positioning we have taken to be able to drive that has not changed. However, the headwinds in the short term because of the environment that our clients are facing is really what is impacting that gap between where we are today and where we expect to come back to in the midterm. And as Olivier specified, the funnel continues to be up. So it's building up to the fact if the funnel was really crashing, especially on the strategic deal and the deal transformation deal, I would not be seeing the same thing. But when I see what's in the funnel, it comforts the belief that it is in clients' plans. It's something that's going to happen. The delays we are seeing and some cuts in areas where we don't expect in the short term is really what's driving the current environment.
That's where we need to create a little bit more agility because there are some opportunities in the short term that we should be able to address.
Thank you. We will now take the next question from the line of Laurent Daure from Kepler Cheuvreux. Please go ahead.
Yes. Thank you. Good morning, all. Also, one question and a follow-up. The question is on the U.S. If I remember you well, you were aiming to have probably a pretty decent exit rate in the U.S. So I understand the manufacturing was a headwind of one point. But did you see something else happening during the quarter in the U.S.? And how do you reconcile your performance in the U.S. versus some of your peers? Is it just a mix, or did you win? Did you lose a couple of opportunities? So any additional granularity on what's happening in the region will be very useful. And my second question is if you could come back quickly on a few management changes that you announced last week. Thank you.
Okay. So, for the U.S., if you look at peers, it's a bit all over the map. Remember, we have some peers who are still declining. I'm going to talk about the global peers: some peers which are still declining, maybe a little bit less than us, but they are declining, and we have some peers who are showing some growth. So, I don't think there's a uniform view today around the U.S. market. It remains a challenging market. It's a mixed place, probably our lack of exposure compared to some of our larger peers to the federal government or healthcare basically weighs unfavorably for us, but again, I think we can do a bit better than what we are doing, and yes, we probably can push a little bit more in the U.S. in terms of improving a little bit more our top line.
On the management changes, I think, I mean, Olivier is next to me, and I think we commented specifically on that before. It's a decision in terms of pursuing some personal interest that Olivier considers it's a time to be able to move on to do something else in life. And I think the other thing are things that are basically opportunities in terms of basically moving some people. One of the big changes is naming Anirban Bose, who is somebody who has a lot of experience in the group, who has been running financial services for many years to lead Americas. I do believe that Anirban Bose will bring a lot following Jim in terms of Jim Bailey's vision. I think Anirban Bose will be able to accelerate the implementation of some of the transformation we have in the US.
We promote Kartik, who was one of our very experienced leaders in financial services, global leaders who have been running banking to run financial services. It's a natural succession. Of course, some other changes following Olivier's departure, notably to have Jérôme Siméon, who used to lead one of the SBUs in Europe, as you know, to basically take charge of the front end as Chief Revenue Officer. Of course, we'll be working very closely with Jérôme on the top line growth because that will be his key focus, is basically focusing a lot more around basically driving the top line.
Okay. Great. Thank you.
Thank you. We will now take the next question from the line of Mohammed Moawalla from Goldman Sachs. Please go ahead.
Great. Thank you. Morning, Aiman, Nive, and Olivier. Two for me. Firstly, Aiman, as you go through the kind of budgeting process or the customers start to go through the budgeting process for next year, is there anything you can say around kind of the shape of growth or perhaps seasonality given the significant cuts we've kind of seen in the very short term this year? Does that change how perhaps the shape of next year looks, or is it going to kind of exhibit the usual kind of more back-and-loaded nature? And secondly, one for Nive, I noticed that you haven't really changed your free cash flow guidance.
Can you remind us again of some of the kind of levers that you have there and perhaps the buffers to manage against some of the kind of revenue growth slowdown and obviously the protection on the margin, but how you kind of manage the free cash flow? Thank you.
Well, listen. I think on the budgeting, I think, frankly, it's a little bit early because, as I just mentioned, even going into September, we have seen some clients revising quite a bit the spend for the end of the year because of events that they themselves did not expect. So I think I don't want to speculate at this stage about the shape of next year or what our clients will do. The general consensus is there should be some increase in spend. As we know, the events during the year do have an impact on how clients spend their money. So frankly, I would reserve that a little bit for the full year when we have better visibility of how Q1 is starting and what the clients spend. But the general noise we have is some increase in spend for next year.
As I say, some very steep reactions that we have seen this year are really corrective action for this year, and spend will have to resume in a number of areas next year. Again, supported as well by what I said about the pipeline and the strategic deals in the pipeline. Probably the momentum of GenAI starts really to have an impact. Having EUR 600 million of bookings excluding deals on GenAI, it's 3.5% of our bookings, and that should continue to increase. There are some areas where there is momentum returned to financial services, which basically put us in a positive spin going into 2025. Nive?
More thanks for your question. As far as organic free cash flow is concerned, we have enough of flexibility, if you like, that's been built into that number. Now, having said that, it is a tough environment, and we are doing everything internally across a number of different areas. So whether it is a strong cash mobilization plan, whether it is working capital management, whether it is cost discipline, etc., we're doing a number of these different things to make sure that we're able to hit that target.
Great. Thank you.
Thank you. We will now take the next question from the line of Charles Brennan from Jefferies. Please go ahead.
Hi, Aiman. Thanks for taking the question. I was wondering if you could talk about competition more broadly. I think, as you remarked earlier, if we look at global peers, they're probably delivering slight growth, whereas you're delivering a slight decline. Do you sense any change in your win rates versus competitors, or do you just think you're not active in some of the pockets of demand in the industry? And is that something that you need to address strategically? Thank you.
Good question. Of course, we look at competition, and we look at the performance, and we try to understand basically where some of the gaps are coming from. I would say we deal with a little bit unfavorable mix compared to our competitors. Our big bet on Intelligent Industry is the right one, and it continues to be the right one in the midterm. But this has increased our exposure to sectors like auto and aero, and these are not the ones currently that are increasing the spend. So it has a bit of unfavorable mix here. And I did mention the fact that we expect to slow down in France. Again, I don't think we have any of our competitors that has 20% exposure to France in terms of their revenue. So I think the mix is unfavorable.
But as I said, this is why we're launching some targeted actions. I do believe that we can do a little bit better. And there are, in terms of reactivity, in some pockets, and that's why we're doing some of this action around streamlining a little bit some of the aspects in terms of operation and empowering people more to react faster to some shifts in the market.
Can you just say a word on pricing as well? I hear pockets of pricing pressure. Is that something that's giving you any cause for concern?
No. I mean, as you see, I mean, I think one of the positive things that you have to take out of what we say is that the resilience of the group is very good. The margin, yeah, we have trimmed a little bit the margin guidance, but we are still within our guidance for the full year, and we're still maintaining the health of our free cash flow, which means we are able to resist quite a bit some of the pressure in the market. But is there pricing pressure? Yes. In a market that has slowed down for the last eight quarters, you can imagine there is pricing pressure. But we're also doing a number of operational changes, pushing productivity up to be able to contain some of the impact of some of this price pressure.
So I think the resilience of the group from that perspective has been extremely good and being able to address, actually, the pricing changes, and of course, the mix which continues to improve, which we should not ignore.
Perfect. Thank you.
Thank you, Charles. Next question, please.
We will now take the next question from the line of Toby Ogg from JPMorgan. Please go ahead.
Yes. Hi, morning, and thanks for the questions. Just thinking about the indications earlier that you can return to organic growth in 2025, just to check, does that mean you think you can grow organically in 2025 overall or at some point in 2025? And could you talk through just some of the drivers of your confidence and sort of visibility on that number? As organic growth for the full year would imply a bit of a pickup in the sequential growth from the Q4 exit rate. And then just one more, just on the French tax impact, could you give us an update on what the implications are there for Capgemini? Thank you.
Okay. So, I'm not guiding for next year yet. So yes, we'll return to growth, but we'll need more precision, I think, when we talk about the full-year guidance in February. And listen, the confidence always comes from the same. It comes from the strength that we have in the pipeline, the discussions we have with clients, and where we have seen headwinds, and we expect them to start resolving. I mean, that's what we expected this year. And the headwind, where we expected recovery to happen, has happened. The part that we didn't expect is significant deterioration in sectors like manufacturing, which, to be honest, was not predictable. And going into Q4, the fact that we'd have such a deterioration in France, again, that's not something that was expected at any moment in the year.
And the bad news comes gradually, and we have to absorb them and move on. So the change going into next year is, yes, we don't expect a huge bad news again coming affecting us because I think we've pretty much hit all what we could see as bad news.
It will be on the French tax reforms. The impact on the CIT we expect will be anywhere between two to three percent on the EPS for 2024 and roughly about one to two percent in the EPS of 2025. Now, of course, as you're aware, there's still to be debated in Parliament, so we'll see what comes out of it once the debate actually does happen, and of course, as you also recollect, this is only expected to be for the short term, so 2024, 2025, so that's what we think at this moment.
That's great. Thank you.
Thank you. We will now take the next question from the line of Ben Castillo-Bernaus from BNP Paribas. Please go ahead.
Good morning, Aiman and Nive. Thanks for having me on. Question, the generative AI bookings number. So firstly, nice to have that KPI in there. The question really is, it feels like we're moving now from the discovery phase in generative AI to deployment phase. My question is, how has the pace of that development played out versus perhaps your expectations 12 months, 18 months ago? And then my follow-up would be, are you seeing customer generative AI budgets as incremental, or are they sort of tightening that or offsetting that in other areas to keep overall budgets or be flat or even slightly down? Thank you.
I think, again, two good questions. First, I mean, GenAI, it's a positive evolution. As I said, now that customer expectations have been set at the right level and they understand that they need to drive quite a bit of change and investment if they really want to get the benefits and the maturity has increased, to be frank. From a technology from our side, we really start to see more impact. So is the pace what I would have expected 18 months ago? Yes, because I thought it would take time before we land back on Earth and really get to work. And I think this is what's happening. And I do see now more positive traction coming from GenAI, which I believe over time will drive additional spend. Now, is there an arbitrage at some points? Yes. I mean, there's clients who are under budget pressure.
If they invest in GenAI, they're cutting a little bit somewhere else for those who are under budget pressure. But overall, I do see GenAI as being something that will be incremental because it brings additional value. If they're cutting things, that means there's no value in it. And I think some of the other technology spend is also required in terms of driving value. When we talk about digital core, we talk about cloud, we talk about software product engineering, GenAI will not come at the expense of these. So it is incremental in terms of spend because it's bringing incremental value to clients.
Perfect. Thank you.
Next question.
Thank you. We will now take the next question from the line of Michael Briest from UBS. Please go ahead.
Good morning. Thanks.
Morning.
Aiman, just in terms of the 14% margin target, I appreciate you said it's not deliverable next year, but is it still an ambition for the group? I think, for me at least, it feels as though there's a pivot and sort of emphasis towards growth and getting back to the 7%-9% trajectory. Does that have an impact on margins? Maybe you can sort of talk about the balance of the two over time. And then just a follow-up on the actions you mentioned in terms of trying to sort of help with that acceleration. Can you quantify the sort of cost? Is this a restructuring program? Are there going to be people leaving the organization? Does this impact the sort of typical 1% of sales budget for restructuring this year or next year? Thanks.
For me, it's not a shift. First, the 14%, yes, it's still achievable, of course. I mean, the premise of what's driving the 14% and the margin improvement are still there. It doesn't change. But as I said, next year, it was really linked to a good operating leverage coming from the growth acceleration based on the exit rate. I cannot say that we're starting the year with a boom in terms of growth. So the premise of what made the 14% achievable next year are not there. So by definition, it's not achievable anymore. Now, is the 14% still there in our plan in terms of what can be achieved over the next two, three years? Of course, it is still there because I think the margin progression and the underlying reason why we can improve the margin have not changed. It's only linked to the current environment.
The balance, there's always a balance between growth and margin that you have to manage. But I think, for me, you have to do both. You cannot just do growth at the expense of margin because structurally, you're killing your business bit by bit. And at the same time, margin, you cannot just push for margin and stop investing just to grow. So you need to keep that balance. But coming back to your next question, this is not about a big restructuring program. This is really about speeding up the way we react and speeding up the decision and empowerment and streamlining a bit some of the processes behind some of the decisions that we make in the organization to enable faster enablement on the front end. And it's not about driving a big restructuring program.
Okay. Thank you. All the best for the future, Olivier.
Thank you. Appreciate it.
Thank you. We will now take the next question from the line of Nicolas David from ODDO BHF. Please go ahead.
Yes. Good morning, Aiman, Nive, and Olivier. Thank you for taking my question. I have one and a follow-up. The first one is regarding the. It's good to see that you are back to positive. Let's start hiring in Q3, but I would like to have a feeling on where those recruitments carried out fully on purpose and well-managed throughout the quarter and where you were actually surprised by the deterioration of the demand during the quarter, which means that those hirings were a bit higher than what you should have done, and this is amplifying, actually, the action you need to take to adjust your operation.
My follow-up is about to get more sense about the buffer you have taken in your Q4 guidance regarding notably U.S. and the potential impact of the wait-and-see attitude from clients on the presidential election and also the client behavior regarding their end-of-the-year budget. Do you expect now a furlough as severe as last year, or you are still expecting that clients may behave a bit better than last year? Thank you.
Thank you. So headcount growth, no, no, it is not, "Oh, we did headcount growth, big mistake. Now that things are deteriorating, we're going to have to cut." No, no. The headcount growth, as I said, will resume at one moment. And at this stage, headcount growth has resumed, I said, in India, and I said it continues to grow in India, and we continue to see positive traction and growth driven by India. So I think there's no revert back in terms of the plan based on what we have done. It's not a surprise that we have to address. And I think I know you all love headcount growth as a leading indicator. So yes, headcounts are growing again. On Q4, of course, we built some caution on Q4. I think things like furlough, etc., is a discussion we have had with clients.
We are at the end of October, and we don't expect surprises. But even that, we have built some buffer for potential surprises. But remember, the difference is that there's a few weeks left in the year, so we can have very dark scenarios. But I do think that we have built enough buffers for the remaining eight weeks of the year. Remember, we did not have a big surprise around Q3. The big shift had happened in Q4, not in Q3, really. Q3 was very close to where we expected it, so it's more the Q4 swing that drove us to adjust the guidance for the top line. So I think we feel pretty comfortable about where Q4 is. And this was the last question. Thank you all. Looking forward to interact with you over the coming weeks. Have a great day.
This concludes today's conference call. Thank you for participating. You may now disconnect.