Good day. Thank you for standing by. Welcome to the Capgemini first half 2026 results webcast and conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be the question and answer session. To ask a question during the session, you need to press star one one on your telephone keypad. You will hear an automatic 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 our speaker today, Aiman Ezzat, CEO. Please go ahead.
Thank you. Good morning. Thank you for joining us for our first half results call. I'm joined today by our CFO, Nive Bhagat. Our performance in the first half confirms that our strategy is translating into tangible results. We set out to make AI real for our clients, helping them move beyond experimentation and turn AI ambition into measurable business outcomes. That ambition is now materializing in the market, in demand, in growth, and in market share gains. I want to focus today on three areas first. One is the strength of our H1 performance and what it says about our AI relevance. The second thing is the new AI value pools that are expanding our addressable market that we presented to you at the Capital Market Day. The role of WNS and Cloud4C accelerating our growth and strengthening our future positioning.
Coming to H1 revenue, they reached EUR 12, 0 million, up 11.3% year-on-year at constant currency, enabling us to outperform the market once again. Booking total, EUR 12 billion 602 million, representing a book-to-bill ratio of 1.04 and reflecting solid commercial momentum. This performance demonstrates the strength of our positioning and our growing relevance as organizations increasingly move from AI ambition to AI execution at scale. AI has become the leading driver of new demand. To capture this opportunity, we are building AI enterprise hubs around each of our core partners, bringing together our capabilities, assets, and expertise to deliver enterprise scale, outcome-driven AI transformation. We continue to enrich our portfolio of AI offerings to help our clients accelerate adoption and realize business value faster. We are also benefiting from the acquisition of Cloud4C and WNS, which I will come back to shortly.
This momentum is translating into market share gains, both in emerging AI-driven demand and with new clients. It's visible in the strong performance of North America and the U.K., both growing around 20%, and in strategy and transformation at 9.2% year-on-year. These results confirm that as AI reshapes the enterprise, Capgemini is increasingly the partner clients choose to turn ambition into measurable business outcomes at scale. Turning to how the market is evolving, clients continue to invest, but they are becoming increasingly disciplined in how they allocate capital. Across sectors, spending is being directed towards initiatives that deliver clear business value, measurable outcomes, and tangible results. This is particularly evident in AI. Clients are moving beyond isolated use cases and pilots, focusing instead on end-to-end business processes and enterprise-wide transformation program that can generate impact at scale.
Their ambitions remain intact. But the approach is increasingly outcome-driven. Against this backdrop, the underlying demand drivers remain broadly consistent with previous quarters, and our momentum is the strongest precisely in these areas of strategic investment. A good example is Intelligent Business Operations, our new global business line built around WNS, which delivered double-digit underlying growth in the first half. This validates our conviction that combining AI, industry, and domain knowledge, as well as data operation expertise, is becoming a critical lever for enterprise transformation. We also continue to benefit from several structural trends that support our medium and long-term growth. Defense and security, which now represents 7% of group revenue and more than 11% of our business in Europe, maintain strong momentum with double-digit growth in H1, reflecting sustained investment in resilience, modernization, and strategic autonomy.
On sovereignty, which is becoming an increasingly important consideration for clients worldwide. What initially emerged in Europe and later expanded across the Middle East and Asia Pacific is now becoming a far more systematic requirement. Organizations are increasingly assessing sovereignty as part of major technology decisions, seeking the right balance between resilience, risk management, strategic objective, and cost efficiency. Geographically, we continue to see encouraging signs across continental Europe, which accelerated further in Q2 to reach 2.8% constant currency, demonstrating improving momentum across the region. Together, these growth areas provide support. Clients continue to invest in transformation and AI, but with greater focus on business outcomes, operational impact, and value realization. This evolution plays directly to Capgemini's strengths, given our ability to combine strategy, technology, operations, and industry expertise to deliver transformation at scale. Turning now to profitability and cash generation.
We remain firmly on track to deliver our full-year targets. Our operating margin performance in the first half is fully aligned with the trajectory we set at the beginning of the year. The anticipated margin contraction in France is compensated by North America and the U.K. France is a key focus area for the Fit for Growth program, which is progressing well. We expect to see the first benefit materialize in the second half of the year. Providing a foundation for further margin improvements through 2027. Turning to organic free cash flow at EUR 37 million, performance is fully consistent with seasonality of our business and leaves us on track to deliver our full-year objective. Finally, normalized earning per share came at EUR 5.29 compared to EUR 6 in the first half of last year, reflecting higher financing and tax expenses.
Let me now turn to how we see the market expanding around AI. As we outlined at our Capital Markets Day, we have identified five major AI value pools that are reshaping technology and business transformation opportunities. Enterprise tech modernization around helping clients address years of accumulated technology debt and prepare the environments for AI scale. The reset of the tech stack as application data platforms and infrastructure are redesigned for AI native world. The agentic control plane, which provides the governance, orchestration, security, and observability required to deploy agentic AI safely at scale. Agentic products and services enabling notably new customer experience and offerings and revenue streams. The agentification of enterprise processes where AI agents augment and increasingly orchestrate end-to-end business operations. Together, these five value pools significantly expand our addressable market and reinforce the relevance of Capgemini end-to-end capabilities across strategy, technology, and operation.
Today, I'd like to focus on two of them where we already see strong client demand. Let me start with enterprise technology modernization. Every organization today wants to become agentic, but before they can become agentic, they must become AI ready, and most are not. Decades of accumulated technical debt have left many enterprises with fragmented data, legacy systems, and complex integration layers, limiting the ability to deploy AI at scale and realize its full value. What is changing is that agentic AI is transforming the economics of modernization itself. Modernization program, once seen too costly or too complex, are becoming economically viable and deliver faster. Initiatives that were often viewed as optional have become strategic imperatives. As a result, we believe the industry is entering into a multi-year modernization super cycle, driven by the need to establish a technology foundation required for AI native enterprises.
We are already seeing this reflected in a growing funnel of opportunities. For a major European automotive manufacturer, we are leading the modernization of a large-scale mainframe estate, rehosting and transforming legacy COBOL application onto AWS Cloud. For HMRC in the U.K., we are migrating a critical tax platform to SAP S/4HANA on a sovereign cloud, creating a secure, resilient foundation ready to support future AI capabilities. For AXA, we are delivering an AI-enabled cloud infrastructure modernization program designed to strengthen resilience, increase scalability, and support the group's long-term transformation agenda. Taken together, this program illustrates a broader shift. AI is not only creating demand for new business capability, it's also accelerating the modernization of the technology foundation on which those capabilities depend. Let me now turn to agentic enterprise processes, including intelligent operations.
This value pool is not about deploying AI for the sake of deploying AI, nor is it about embedding a few agents into processes that were originally designed for purely human workforce. This is about something much more profound, redesigning how enterprises operate. We work with clients to reimagine end-to-end processes, create step change in business outcomes, and build operating models where humans and AI agents work together seamlessly. These agentic systems can understand context, make decisions, orchestrate workflows, and increasingly execute actions autonomously. Put simply, organizations are moving from companies run by people supported by software to processes orchestrated by human AI workforce. This is where the real value lies, optimizing the total cost base that bundles operation and technology while improving speed, quality, resilience, and customer experience. Let me illustrate this with two examples.
For a leading North American insurer carrier, we are delivering a multi-year transformation of underwriting and claims operation. By moving from manual document-intensive workflows to real-time AI-driven decision-making, we expect to reduce underwriting cycle time by 30%-50% and claim cycle time by 20%-40%, while improving consistency and service quality. For a major North American automotive manufacturer, we are redesigning, integrating, and operating enterprise shared services through an AI-enabled global business services model spanning finance, HR, procurement, supply chains, and IT. By moving from a fragmented operating environment to unified agent-enabled platform, we expect to deliver 50%-54% productivity improvement over seven years and generate up to EUR 1 billion in cost savings, with additional value creation opportunities in working capital, logistics, warranty management, and compliance.
This example demonstrates why we believe agentic enterprise processes represents one of the largest value pools created by AI. The opportunity is not simply to automate existing activities, it is to redesign how work gets done across the enterprise and unlock a new level of business performance. This brings me naturally to our value realizing acquisition, in particular to WNS and the launch of Intelligent Business Operation, our new global business. Intelligent Business Operation combines two highly complementary strengths. On the one hand, WNS brings deep industry and process expertise built over decades of designing and operating critical business processes, leveraging an asset-led service model for leading global enterprises. On the other, Capgemini contributes its global scale leadership in AI technology, modernization, and business transformation. Together, we have created a unique platform to help clients redesign, transform, and operate their most critical processes in the age of AI.
This business is organized around industry sectors, allowing us to speak our clients' language and address the specific value chain, regulatory environments, and operational challenges that matter most to them. These capabilities are reinforced by horizontal functional expertise across areas such as finance, procurement, supply chain, and HR, supported by proprietary assets, industry-specific platforms, and AI accelerator that can be deployed repeatedly and at scale. This combination positions us as a partner of choice for intelligent operations. Our ambition is not simply to run processes more efficiently on behalf of clients, it is to deliver measurable business outcomes with clear accountability for performance, productivity, and value creation. What we have seen since the acquisition closed is strong early validation of this. Our combined opportunity pipeline has expanded to EUR 13.3 billion, reflecting growing client demand for this integrated proposition.
The business is delivering double-digit like-for-like growth, demonstrating the strength of the underlying market opportunity, both revenue and cost synergies remain firmly on track, reinforcing our confidence in the value creation potential of this transaction. More fundamentally, Intelligent Business Operation embodies what we believe is one of the most significant shifts taking place in our industry, the convergence of operational technology and AI. As clients move towards agentic and outcome-driven operating model, they increasingly need a partner capable of transforming and operating these processes end to end. This is exactly the position we have built with Intelligent Business Operations. Let me now turn to our outlook. Given the strong momentum we delivered in the first half, we are raising our revenue growth target for the year.
We now expect constant currency revenue growth of 8.5%-9% compared to our previous guidance of 6.5%-8.5%. This includes an inorganic contribution narrowed to around five points. For the second half, this implies growth of 5.5%-7% at constant exchange rate, despite a significantly higher comparison base in the second half of 2025. Turning to profitability, our Fit for Growth Program is progressing as planned, we expect to see the first benefit contribute to margins in the second half. This supports our confidence in delivering our operating margin of 13.6%-13.8%, representing an improvement of 30 to 50 basis points year-on-year. Finally, we are confirming our organic free cash flow target of approximately EUR 1.8 billion-EUR 1.9 billion for the full year. Overall, our first half performance reinforces the confidence we expressed at the beginning of the year.
We are benefiting from strong momentum in AI-driven transformation. Our recent acquisitions are performing well, and our operation initiatives are progressing according to plan. As a result, we enter the second half with confidence in our strategy, confidence in our execution, and confidence in our ability to deliver on our commitments. With that, I will hand over to Nive.
Thank you, Aiman, good morning, everyone. Before going into the detail, the key message from H1 is clear. We are progressing in line with the trajectory that we set out earlier this year. Growth momentum is solid, margin is resilient before the Fit-for-Growth benefit, and we continue to make progress in the value pools that underpin our medium-term ambition. Starting with the H1 headline numbers, revenues reached EUR 12,082 million, up 8.8% on a reported basis and 11.3% at constant currency. On profitability, operating margin reached 12.5%, up 10 bps year-on-year. This is consistent with what we outlined for the year, a broadly stable margin in H1 with the benefits from our Fit-for-Growth initiative starting to come through progressively in H2 and building further in 2027. As expected, the Fit-for-Growth initiative also translated into higher restructuring costs.
This is the main driver of the EUR 227 million increase in other operating income and expenses, which I will come back to shortly. As a result, group net profit came in at EUR 498 million, with basic EPS at EUR 2.96. Normalized EPS, which excludes other operating income and expense items, was EUR 5.29, down 11.9% year-on-year. Finally, organic free cash flow was EUR 37 million, in line with our usual seasonal pattern. Let's now look at the quarterly growth trends. After a good start to the year, Q2 was also slightly ahead of our expectations, both at constant currency and at constant scope. Constant currency growth reached 11.6% in Q2 and 11.3% for H1. This includes a scope contribution of around six and a half points in each quarter.
Before moving into the detailed H1 analysis, let me briefly touch on two factors that will affect reported revenue growth over the next couple of quarters. First, on FX, we continue to turn positive in H2 2026, bringing the full-year FX headwind to slightly below one point. Second, on scope, the impact will mechanically reduce in Q4 as we annualize the consolidation of WNS and Cloud4C. For the full year, we now expect scope to contribute around five points. Turning to bookings, we reached EUR 12.6 billion in H1 2026, including EUR 6.5 billion in Q2. At constant currency, bookings were up 9.2% in Q2 and 7.8% for H1, which is consistent with the good revenue momentum we are seeing. The book-to-bill was 1.07 in Q2 in line with our historical standards, bringing the H1 ratio to 1.04 overall.
This sales momentum is already visible in some of the value pools that will support our medium-term growth ambition. As Aiman mentioned earlier, we notably see good traction in enterprise technology modernization and in agentic enterprise processes. Overall, bookings growth in generative and agentic AI are double-digit. From a sector perspective, Q2 showed a clear improvement on a like-for-like basis. Financial services, our fastest growing sector in H1, remained strong. At the same time, sectors that were softer than Q1, notably consumer goods and retail and manufacturing, improved visibly. This performance was also supported by the contribution from the acquisitions of WNS and Cloud4C, which was most visible in services, financial services, energy and utilities, and consumer goods and retail sectors. For H1 overall, at constant currency, financial services and services remained the most dynamic sectors, growing 20.5% and 19.1% respectively.
All other sectors posted mid to high single-digit revenue growth. Geographically, the underlying growth trends remained robust in Q2. Most notably, France returned to growth and rest of Europe continued to improve. North America and the U.K. and Ireland also maintained strong momentum, although slightly below their Q1 levels. The contribution from WNS and Cloud4C remains most visible in North America, the U.K. and Ireland, and Asia-Pacific. In Q2, this lifted their growth rates close to or above 20% at constant currency. For H1 overall at constant currency, North America was up 19.8% year-on-year, with strong underlying performance, mainly supported by financial services and manufacturing. The U.K. and Ireland posted growth of 21.1%. Underlying performance was robust, driven by strong traction in public sector and consumer goods and retail sectors alongside a dynamic financial services sector. France was slightly positive at 0.4%.
Momentum in financial services and renewed growth in manufacturing more than offset weaker activity in the public sector. Rest of Europe grew by 2.6%. Public sector performed well alongside services and consumer goods and retail. Manufacturing remains soft, but the trend is improving. Finally, Asia-Pacific and Latin America delivered the strongest growth at 26%, mainly supported by financial services, consumer goods and retail, and energy and utility sectors. On profitability, North America expanded its operating margin by 20 basis points to 16.5%, while the U.K. and Ireland remained very strong at 18.1%. As previously outlined, France and rest of Europe did not yet benefit from the Fit for Growth initiatives in H1. Both regions therefore continued to be impacted by pockets of underutilization, with operating margin down 230 basis points and 80 basis points respectively to 7.7% and 9.6%.
Finally, Asia-Pacific and Latin America delivered a strong improvement with operating margin up 410 basis points to 14.2%. We also maintained good momentum in Q2 across all business lines, both at constant currency and on a like-for-like basis. Strategy and transformation accelerated to 12.2% from 6.2% in Q1. This is another encouraging sign that clients are looking at AI beyond a technical lens and to a broader business transformation needed to capture its value. This is exactly where Capgemini's industry expertise and consulting capabilities are particularly relevant. For H1 overall, at constant currency, strategy and transformation was 9.2% in H1 2026 with growth across the group's main regions. Applications and technology grew by 5%, benefiting from the acceleration in technology modernization spending and clients' early investments to build new agentic tech stacks.
Finally, operations and engineering posted a growth of 24.7% with double-digit like-for-like growth in Intelligent Business Operations, which combines Capgemini and WNS's digital business process services. Headcount closed at 417,600, up 20% year-on-year, mainly reflecting the integration of WNS since Q4 last year. Offshore leverage stood at 66% at the end of June. Since January 1st, headcount is down 5,800, including 2,400 onshore. Let me now update you on Fit for Growth. The initiatives are progressing according to plan. Important milestones have been passed in key countries, the benefits will start to come through from H2 and continue to build through 2027. As we reshape our capabilities, training and upskilling remain at the core of our approach. This is complemented by the normal rotation of skills through attrition, which now stands at 18.6% over the last 12 months.
It is also worth mentioning that we are using subcontracting selectively in fast growth areas where we don't need these capabilities necessarily in the medium term. Let me now walk you through the operating margin bridge. Gross margin was 26.1% in H1, down 30 basis points year-on-year. As discussed earlier, this mainly reflects pockets of underutilization weighing on profitability in France and rest of Europe. The benefits from Fit for Growth are not yet visible at this stage, with important milestones now behind us, they will start to come through from H2 onwards. At the same time, we are seeing the benefit of initiatives launched in 2025 to improve the efficiency of our own operations, notably by simplifying some operating processes.
This is visible in selling expenses, which are down 70 basis points, while G&A reflects some technology investments and higher WNS G&A mix with temporary increase of 30 basis points. Operating margin therefore increased by 10 basis points to 12.5%, which is consistent with the trajectory we outlined earlier this year for 2026. This puts us on track for margin expansion. We see traction in our AI and innovation portfolio, which is accretive to margins. Fit for Growth is progressing according to plan, WNS synergies are on track to deliver their targeted run rate by the end of 2027. Together, these levers give us increasing flexibility to reinvest part of the benefits and accelerate our growth profile in the future. As we create more value for our clients, we aim to get our fair share and expand our margins. Moving on to financial results and tax.
We moved from a net financial income of EUR 60 million in H1 last year to a net expense of EUR 65 million in H1 2026. This was mainly driven by the increase in our financial debt over the period, including the EUR 4 billion bond issuance in September last year. On income tax, the effective tax rate increased year-on-year to 37.5%. This includes some items which mean that H1 effective tax rate is not necessarily representative of the full year rate. Moving from operating margin to the bottom line. As anticipated, other operating income and expenses increased year-on-year by EUR 227 million to EUR 628 million. This increase is mainly driven by restructuring costs, which rose by EUR 210 million in connection with the Fit for Growth initiative.
These initiatives are expected to bring the total restructuring costs to EUR 700 million over 2026 and 2027, we remain on track for the majority of these costs to be incurred in 2026. This takes operating profits to EUR 878 million or 7.3% of revenues, compared with 8.8% in H1 last year. After the financial and tax impacts we have just discussed, group net profit stands at EUR 498 million, compared with EUR 724 million in H1 2025. Basic EPS was EUR 2.96, while normalized EPS was EUR 5.29, down 11.9% year-on-year. Turning finally to cash generation and capital allocation. We generated EUR 37 million of organic free cash flow in H1 2026, compared with EUR 60 million in H1 last year. This is in line with our normal seasonal pattern. As usual, cash generation will be heavily weighted towards H2.
In terms of capital allocation in H1, the group paid EUR 517 million in dividends and used EUR 315 million for share buybacks under its multi-year program. On the balance sheet, we redeemed in full at maturity an EUR 800 million bond in April, which was successfully refinanced in May for a similar amount. We closed H1 with EUR 6.5 billion of net debt, compared with EUR 5.3 billion at the end of 2025. On that note, Aiman, I hand back to you.
Thank you, Nive. Let's now open the Q&A. Again, to allow maximum number of people in the queue to ask question, I kindly ask you to restrict yourself to one question and a single follow-up. Operator, could you please share the Q&A instructions?
Thank you so much. Dear participants, if you would like to ask a question, please press star one one on your telephone keypad and wait for your name to be announced. To withdraw a question, please press star one and one again. Please stand by while we compile the Q&A roster. This will take a few moments. Now we're going to take our first question, and it comes the line of Sven Merkt from Barclays. Your line is open. Please ask your question.
Great. Good morning, Nive.
Morning.
Thanks for taking my questions, congrats on another good quarter. Maybe you can help us a little bit on the phasing the second half. The comps are very different between Q3 and Q4. Then secondly, you were very clear that the gross margin was impacted by pockets of underutilization. Can you help us here a bit understand how this should develop in the second half? Does the Fit for Growth initiative resolve this completely, or do you require also some increase in demand in some of these areas where you have this underutilization? Thank you.
Yes. Thank you. Listen, it's clear that we're keeping some level of cautiousness around the fourth quarter, okay? Because of still the global macro evolution, inflation, what's happening in the Middle East, et cetera. We're going to remain cautious around Q4. I think we're definitely going to have the impact of the base effect. Just to give you an idea, we were organic at -04% in Q2 last year, we ended up there at 4%. Of course it's going to play. Overall, we have good confidence on Q3 and Q4. Yes, comps will play and again, caution around basically what happened on the macro side.
Sven, on the gross margin, yes, you're absolutely right. The gross margin is of course impacted because of the under-absorption in Continental Europe, as I just mentioned. Yes, as we start to see the Fit for Growth benefits start to kick in, we'd expect gross margin to improve progressively. I'd also say that will also be further supported by an improved utilization as well as a continued shift to higher value activities.
Yes, you should see improvement in the second half coming for the full year compared to H1.
Perfect. Thank you very much.
Thank you.
Thank you.
Now we're going to take our next question. The question comes line of Frederic Boulan from Bank of America. Your line is open, please ask your question.
Hey, good morning, Aiman and Nive. Thanks for taking the question. If I can follow up on the demand side and whether you've seen any macro competitive dynamics you want to point out, any comments around how pricing is evolving considering two factors, one, AI deflation, but also new demand around agent capability. If you can share the level of margins you see on current contract, current RFPs versus where you've been historically, that'd be great. Thank you.
Yeah. Listen, macro dynamics haven't seen much of evolution. Of course, there's always noise in the system with the inflation situation, with the Middle East. Again, I remain cautious, but so far we haven't seen significant changes in decision-making. Okay? I'm not saying certain things have not been delayed right now. There's always some of that. Always have some right shift, but there's nothing that's substantial for the moment in the market. On the pricing, there's no change. There is anticipation with AI, yes, clients are anticipating some of the benefits. We price them, then we have to deliver them. The maturity we get in bit by bit in terms of how to make that happen is increasing. I think from my perspective, it's stable. We're seeing stabilization compared to expectations from that perspective.
Whatever expectation came into the market, they have already been absorbed, and right now, I don't see an evolution quarter-on-quarter from that perspective. I'd say competitive, but stable.
Thank you.
Thank you. Now we're going to take our next question. The question comes line of Laurent Daure from Kepler Cheuvreux. Your line is open. Please ask your question.
Yes, thank you. Good morning, Aiman and Nive. Congrats to [Mayur] as well.
Good morning.
Two questions. The first is, you said the Fit for Growth plan was on track. Could you be a bit more specific by the end of the year, how much you think will be completed, and if it's fair to say that still the majority of the savings should come mostly in 2027, given that it's back-end loaded? The second question is on the bookings that you have delivered in the first half. When you look at them and try to estimate the profitability they will bring in the coming quarters, do you see some changes? I know you already comment on the pricing side, but overall, do you believe what you book today has at least the same profitability as what you've been delivering in past quarters? Thank you.
The first question for Nive. She's driving the programs.
In terms of the Fit for Growth initiative, you're right, Laurent. We will see, of course, some benefits start to come through in H2. As you can understand, because of the nature of some of the continental European countries, some of the full benefits you'll start to see more in 2027 than you will see in 2026. The plan is progressing according to plan. We believe that we will be able to get those benefits in H2, but more in 2027.
On the profit of new booking, of course, it's important. We do an estimate always in terms of what we think the profitability of what we sell is. We had seen pressure in previous years, year-on-year because of the expectations of clients and our estimation of our ability to be able to deliver them. Right now, I think we see stability. That means today we are pretty much aligned year-on-year in terms of what we see in terms of profits of some of these new bookings. Of course, I think we can deliver better over time because, again, it's an estimation at the time where you sign the deal. We had some erosion previously, and now it really starts to stabilize.
One, because more confident in our ability to deliver some of them, and the second thing is our portfolio is also improving in terms of what we deliver. I think we have bucked the trend, and now we are getting more into stabilizing and potentially more positive territory as we move forward, Laurent.
Okay, great. Thank you.
Thank you so much. Now we're going to take our next question. The question comes line of Balajee Tirupati from Citi. Your line is open, please ask your question.
Thank you. Congratulations on another good quarter from my side as well as Aiman and Nive. One question and one follow-up from my side as well, if I may. Firstly, on AI, we have started to see a shift in enterprise approach to AI adoption to focus more on efficient way of using the technology. Could you share how that is defining your engagement with customers and implications for IT services industry in general? Second, on the restructuring program, with almost half of the planned restructuring provision made in first half of 2026, could you share if the progress is as expected as you see, or you see possibility to do more than you had initially expected?
Okay. On AI adoption, I think what's changing, there are differences. First, I think everybody's realizing it's a lot more complex than what people initially thought and quick savings, some agents, some small platform, and suddenly the world is going to change. People start to realize, as we developed at the Capital Markets Day, there are a lot of elements. First it was, "Oh, we need to get the data ready. Oh, it's not just the data ready. Now we need to create the context and semantic. Oh, there's a control plane. Oh, there is a cyber part. Oh, there is which model we should use. Oh, there's a sovereignty aspect." People realize the complexity of that. I think this is where our value also increases, as people realize the complexity of the transformation, the need to see how to optimize multiple variables.
There's a lot of arbitrage around different decisions to be made. That's more and more, our value becomes more pertinent to client, and they realize that this is not as simple as some people portrayed at the beginning. What is changing is there is a lot of subject being discussed with clients because a lot of variables to be taken into account now as you make some of the decision around AI, is which platform, which LLM, which solution, you go for SLMs, you go for LLMs, what you put, how do you manage the control plane? Do you go for a big control plane? Do you do for control plane initially by sub-process? There's flurry of decision-making that helps not only ensure that the program is successful, but also ensure that you have something that makes sense financially and from a risk perspective.
We are dealing with these complexities now as we reengage with clients. That's why you cannot make small signals saying, "I'm going to just introduce an agent on a process." Why? Because the amount of risk and complexity you're doing by just trying to do that is so high that it's much better to start looking at real end-to-end transformation because the amount of variable you have to deal with, whether you introduce an agent or do an end-to-end transformation, start to become similar. That's really where people start realizing. The second aspect, which I think is important, because that's also we're experiencing internally as client zero is, it's good to have all of this, but where is the money? Okay? We realize that you need to redesign work, you need to have a very disciplined approach about how you're going to extract value.
If you don't do that, you will not see any value coming out. The realization of what it requires to drive this AI skill in terms of transformation and how, what you need to put in place to be able to capture the value is complex. I think we're going up the learning curve, and that's what we're bringing to our clients.
Balajee, coming back to your question on the restructuring. Clearly we had announced EUR 700 million envelope over 2026 and 2027. We had also said that the sooner we execute it, the sooner the benefits would start to contribute, if you like, to the margin trajectory. In that context, clearly whatever we can do this year, we would do. The program, of course, is absolutely progressing to plan. As I just sort of remind everybody that clearly when we book it in the P&L does not necessarily mean, of course, the benefits necessarily accrue at the same pace. It comes later. We see some benefits in H2, and of course, we will see more benefits as we go into 2027.
Very clear. Thank you, Nive. Thank you, Aiman.
Thank you.
Thank you. Now we'll go and take our next question. The question comes line of Nooshin Nejati from Deutsche Bank. The line is open, please ask your question.
Hi. Good morning. Thanks for taking my question. On the Intelligent Business Operations pipeline that now stands at EUR 13.3 billion, how should we think about the conversion of that pipeline into revenue over the next 12 to 24 months relative to the traditional Caps bookings? Also on France that has returned to growth, while manufacturing also improved. Would you characterize that as the beginning of a broader recovery or are those still isolated pocket of strengths? Thank you.
The first thing on conversion, of course, it's a pipeline, first it has to move from qualified opportunity to actually client making decisions. We have to win, we have to start the transition, we have to ramp up. Some of this, you're talking 12, 18, 24 months, in terms of basically cycles. It doesn't convert overnight, but definitely it's positive. This is a pipeline to positive to see also what we signed and what we expect to sign in the coming few quarters. It gives more broad sense. It's the growth, right? The growth of that pipeline is more than 30% since the beginning of the year, and we have new opportunities coming in on an ongoing basis. The value proposition is strong, and should really sustain a pretty stronger growth for that Intelligent operation business over the coming years.
We are quite confident on that. On the France side, listen, there are pockets where I consider we're still underperforming the market in France. I think overall we have managed to address some of the challenges we had, notably on the manufacturing. I think we still have work to do on the public sector. It's still a headwind, but underlying overall, I see really an improvement in France, which I think is good. We should keep progressing over the coming quarters. I think with that, we also have to work, and the Fit for Growth program will be on the recovery of the margin, which weighs quite a bit at the group level right now. That's kind of the two axes, is the growth, but also the profitability axis that we should keep in mind.
Thank you. Very helpful.
Thank you. Now we're going to take our next question. The question comes line of Toby Ogg from JP Morgan. Your line is open, please ask your question.
Morning.
Hi, good morning. Aiman and Nive, thanks for the question. Just on the growth and margin dynamics. Clearly, we're continuing to see organic growth outperform with Q2 and the growth guidance upgrade. How do we think about that in the context of the unchanged margin guidance? Are you having to invest a little bit more to generate that growth, and so the operating leverage isn't as high? Or what's preventing that growth upside from translating into margin upside? When do you think we'll sort of reach a point where the growth outperformance can drive margin outperformance in terms of your expectations? Thank you.
Thank you. Listen, it's a good question. First, the operating leverage is not as high as we expect always in that business. Of course, if I go from 3% to 10%, you have operating leverage, but an acceleration of one or one and a half point doesn't give you a lot of operating leverage in that business. Yes, you are right. We are investing because I think the AI transition, in some cases, is accelerating. We have a lot of open fronts, these enterprise hubs we're building with every technology partners, and we are investing in them because that's what basically setting up all the practices that we're now shaping up and basically all the future growth. There is an acceleration in some of this AI transition, and we have to back the trend, and that requires some investment.
Yes, we are really managing that arbitrage between profitability improvement and the need to continue to fuel the growth quarter after quarter. We will see that margin improvement. Already, as you know, we still talk about 30 to 50 basis points improvement for the full year. We did confirm that guidance and further in the coming years based on what we gave you at the Capital Markets Day. There is confidence in terms of bit by bit, really seeing that growth and that improvement of mix translating into improvement in the margin.
Thank you. Now we're going to take our next question, and the question comes line of Charles Brennan from Jefferies. Your line is open, please ask your question.
Great. Thanks very much. Just two for me, actually. Can I continue on the margin question? I'm struggling to understand the full dynamics of what's going on here. You're attributing a lot of the weakness, I guess, to underutilization in France, but France was relatively weak last year, and you managed to manage the margin. Why is it rolling over now? You pointed to relative stability in the U.S. and the U.K., but on an organic basis, I guess that we're looking at margin declines in the U.S. and U.K. as well. Can you talk about why we're seeing those underlying margin declines in the U.K. and U.S.? Thanks.
Charles, actually, if you really look back, while you thought that we had maintained the margin for France, I specifically did talk about the fact that the underlying operational performance in France had not improved, there were one-offs, et cetera, which had held the margin up. We were very clear that there were pockets of that underperformance for some time to come. Of course, there's been a revenue decline as well for some time to come. This is sort of catching up and caught up with us, therefore, because of the underutilization, we're not able to improve the growth margin in this particular case. As you can see, we had announced the Fit for Growth initiative knowing that this was indeed the case, therefore, the benefits from that will flow through in H2 and beyond into 2027.
As we see, of course, the growth start to come back and the utilization start to become better, et cetera, we expect the margin to improve. As Aiman said, the gross margin will improve and the overall margin will improve, and we're absolutely clear that we expect to keep our margin guidance.
Yeah. There's no underlying margin decline in U.S. and U.K. I don't know where you're getting that from, Charles. We are at a historical high in this region.
Yeah, it's 18.1, so it's not.
We are on a historical high in this region.
Yes.
I'm not sure why you're saying you see an underlying margin decline in U.S. and U.K. I mean, the challenge is really Europe. Primarily France. It weighs significantly on the Q1. We have anticipated that by launching the Fit for Growth program. This is where the biggest program we have is in France. It's being addressed. We anticipated it. I think we're on track to be able to recover the margin in France. We feel good about it.
I thought WNS was 30 basis points, roughly accretive to margins. Have I got my numbers wrong, though?
It's 20. It's 20 basis points accretion, that 20 basis points accretion does not come through in H1 because of what we just talked about, which is the France weighing quite heavily. Clearly, as we go into H2, we'll start to see the benefits come through.
You'll get it in the full year. I mean, we're not saying that the full accretion did not come in H1. Yes, there should have been the full accretion of WNS did not come in H1 because of the margin headwind in France. That's significant. That's it. Overall, we increased by 10 basis points. We still plan the 30 to 50 basis points, which will include the full accretion from WNS for the full year.
Okay. Thank you.
We take the last questions?
Yes, of course. Now we're going to take our last question. It comes line of Mohammed Moawalla from Goldman Sachs. Your line is open, please ask your question.
Great. Thank you very much. Hi, Aiman. Hi, Nive, and congrats on another good quarter. My question was really around sort of this outperformance you're delivering, relative to your peer set. You sort of talked about sort of market share gains already. Can you sort of pinpoint the specific areas of sort of strength that you're seeing? Then my second question is on WNS. Have you started to sort of recognize some of those synergies in Q3 already? Sorry, Q2. Is that something that sort of still comes either in the second half, or is that more next year? Thank you.
I would say on the revenue synergies, I think yes, because it played in some of the deals that we won. I think some of the deals we won, we would not have won them without WNS. I think that's played. On the core synergies, no, we just moved to the new integrated operation on the 1st of July. Really the synergies is in front of us. It was important to design the right organization to see how we're going to fit that together, how to make it work, how to fully benefit from the strengths of both organization. I think that's what we have done successfully with the launch of the integrated business line globally of Intelligent Business Operations.
Now we're going to start focusing a lot more around how to achieve some of the cost synergies now that we have put the operation together, and that's coming in the next 12 to 18 months. As we said, we expect to achieve the run rate on cost by the end of next year. We should come limited by the end of this year, but really getting into next year, we'll see a bit more impact.
Thank you.
Yeah, I mean, listen.
Thank you.
On some of the strength areas, we highlighted them. We're really on a good wave on the AI. The combination of capabilities we have, and as we said, the two big things that we saw initially that's really impacting the top line right now is on one side, the tech modernization, and we give you some examples of some of the deals we have with even some client names. The second one is really Intelligent Business Operations. That's really another fuel. This business is growing double-digit, definitely it supports its supposed strengths. Don't forget the defense and security play in Europe, which is really also helping us, and the sovereign cloud that we start picking up.
There are good growth drivers that we highlighted that we really expect to continue to strengthen in the coming quarters. Thank you all.
Great. Thank you.
Dear speakers, that was all for the questions for today. I would now like the conference over to the management team for any closing remarks.
No, thank you. I just hope to see you in the coming weeks. I think we had a good H1 and we are on track to deliver our upgraded guidance for the quarter.
This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.