Good day, and thank you for standing by. Welcome to the Capgemini Q3 2026 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. We will kindly ask you to restrict yourself to one single question. You may then rejoin the queue for a follow-up if need be. 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 2026 revenue call. I am joined today by our CFO, Nive Bhagat. Let me start with the headline. Q3 was another solid quarter, slightly better than we expected, the growth of 11.7% at constant currency and underlying growth close to Q2, despite a tougher comparison basis. In a demand environment that remains stable, we continue to outperform the industry, and it allowed us to raise our revenue growth outlook for the year while confirming our margin and cash objectives. I will cover four points. First, the strengths and the breadth of our Q3 performance. Second, our progress in Intelligent Business Operations, whose performance again confirmed the strategic relevance of the WNS acquisition. Third, the consistent execution of our AI strategy as demand ramps up, leveraging Capgemini assets and platforms.
Fourth, our positioning in sovereignty and defense, where we are building a leader in Europe. Q3 was a solid quarter. Revenues reached EUR 6 billion 73 million, up 11.7% year-on-year at constant currency. The scope contributed around seven points, essentially WNS and Cloud4C, that is about half a point more than in Q2. This means underlying growth is close to Q2, and it was achieved on a tougher comparison basis. Sequentially, the demand environment is broadly unchanged, and our momentum is fully intact. The bookings totaled EUR 5 billion 401 million, up 3.4% year-on-year at constant currency. Q3, as you know, is seasonally our smallest quarter for booking, and like every year, the book-to-bill is below one. The demand momentum continues.
The pipeline is up 7% year-on-year, with strategic deals funnel up 9%, lining up for a seasonally strong fourth quarter. Our Q3 performance shows broad-based growth across geographies, businesses, and sectors, accelerated by the continuous expansion of AI demand. Let me start with AI, because it really shows in the numbers. The clients no longer ask us, as you know, to deploy a tool or validate a proof of concept. They ask us how AI changes their business and how to scale it across the enterprise while keeping control of important elements like governance, cost, and security. That is first, the strategy and transformation conversation, and that business grows close to 19%, accelerating for the fourth consecutive quarter. It is also the modernization conversation.
Scaling AI requires modern technology and data foundations, and that is what supports demand in application and technology, up 3.5% on a high comparison basis. It is the agentic operation conversation, Intelligent Business Operations, where we transform and operate agentic enterprise processes, posted another quarter of double-digit like-for-like growth, and I will come back to it. Geographically, it is visible first in North America and the U.K., which both show solid underlying growth and clear outperformance. North America underlying growth is in the high single digit, and the U.K. and Ireland is in double digit. By sector, momentum is still very healthy in financial services, consumer goods and retail, and the public sector. Let me come on France and manufacturing, and the two topics we discussed at the beginning of the year. A year ago, France was declining by almost 5%. This quarter, it grew by almost 5%.
The second quarter of growth in a row and a clear acceleration from under 2% in Q2. Manufacturing is the same story. It returned to growth at the end of last year, and it keeps improving, above 7% this quarter after 5% in Q2 and 3.5% in Q1. Defense is doing very well, aerospace is accelerating, and automotive is back to growth. The rest of Europe grew 3.4% in line with Q2. Compared with the end of last year, the improvement across continental Europe and in two sectors, manufacturing and consumer goods and retail, diversified the growth drivers. Growth is no longer carried primarily by North America and financial services. Within this growth, Intelligent Business Operations stands out, with like-for-like growth of double digit in Q3 and over nine months across both the scope of WNS and Capgemini.
This confirmed the conviction behind the acquisition, two complementary businesses. WNS bringing deep industry and process expertise, Capgemini bringing global scale as well as leadership in AI and business transformation. The integration remains on track with a unified organization in place and revenue and cost synergies progressing as planned. Let me illustrate with three engagements. First, for a distribution company, we are delivering an integrated scope across the customer life cycle and the product life cycles, spanning customer service, commercial operations, procurement, supply chain, logistics, and finance. It is a front-to-back operating model and a new service line that we can replicate across similar industries. We accelerated the design of the target operating model thanks to an automated platform, supporting data-driven decisions on process standardization, automation, and organization.
Second, we have entered into partnership with an insurance company covering new business, policy servicing, and claims, creating a platform across its retirement, group protection, and wealth businesses. The expected benefits are improved customer outcomes, greater operational resilience, and scalable growth. Third, for a consumer goods company, we are designing and deploying agentic enterprise processes across Southeast Asia, South Africa, and Latin America. This outcome-driven operating model built around digital agents brings our client a better customer experience, greater operational efficiency, stronger resilience, and sharper decision-making in a model designed to scale. What these engagements have in common is our ambition, not simply to run processes more efficiently on behalf of clients, but to deliver measurable business outcomes. This is also our answer to the question we are often asked about agentic AI in operations.
When we target outcomes rather than just cost, AI expands the scope we address for clients. It does not shrink it. We are executing the AI strategy laid out at our Capital Markets Day, and demand ramp-up validates those orientations. Three examples show it in action across three of our value pools. So, enterprise technology modernization. For an asset management firm, we built an AI-enabled unified desktop, replacing 180 fragmented applications for customer-facing staff. Built on enterprise knowledge and client intelligence, it provides real-time guidance during client calls and automates call notes. The results speak for themselves. Employee satisfaction up 43%, UX delivery 30% - 50% faster, and EUR 3 million savings in the software development life cycle, thanks to the agentic SDLC acceleration. In the area of control plane for a life sciences company, we are deploying an agentic total cost of ownership capability.
It is an enterprise-wide AI economics model that ties consumption to cost and to business ownership. AI spend is traced back to initiatives, platforms, and users, with full transparency on usage and value. It is exactly what client needs to scale AI responsibly and to invest on the basis of data. Finally, in agentic products and services for a bank, we are unlocking new revenue opportunities by accelerating the delivery of AI-powered data products. This is reducing data friction and enabling the bank to monetize high-value data assets across multiple lines of business. What these programs have in common is a clear ambition to go beyond one-off solution. We are accelerating IP and platforms. Four layers allow us to turn a point solution into a defensible, reusable asset. Proprietary agents and models, reusable accelerators and frameworks, curated domain data, and patterns and institutional know-how.
A good illustration of that is an agentic system of operation that we run for global shipping and logistics player. It handles more than 27 million transactions every year, so this is no pilot. It is a platform operating on an industrial scale. It delivers 40% - 50% productivity improvement, and the impact goes beyond efficiency. For each client, collection times are shortened by five to eight days, which means cash is released faster. That is the benefit of building Capgemini assets. What we build once strengthens the platform and expands our capability so that we deploy it from one client to the next faster and more efficiently through industrialization. It is how we unlock value faster for clients and how we protect our economics as AI reshapes delivery. Behind this project I just mentioned, there is a common enabler, our partner ecosystems.
We work with 18 co- partners, from hyperscalers and major software providers to AI-native leaders. In the first half of the year, those 18 partners were associated with approximately 65% of the group booking. This shows how central they have already become. Together with these ecosystems of partners, we are well-positioned to make AI real for our clients. We expect this to accelerate our growth across the agentic value pools, which together will represent $350 billion - $490 billion by 2030. This comes on top of the secular growth we continue to see across our traditional value pools. For our clients, the breadth of these ecosystems of partnership means greater flexibility to combine the models and platforms that best meet their business needs, and increasingly to do so in a way that is consistent with their sovereignty requirement, which brings me to my last point.
In sovereignty and defense, we are building on strong European demand. As I said in July, sovereignty is now systematically addressed by our clients, and we see it firsthand in what we deliver. Let me give you three examples. In public safety communications, we are working with a national agency to modernize the country's emergency communication network by 2030. We bring our expertise in planning, architecture, and program management, as well as in integration, testing, and operational readiness, with, of course, strong deep knowledge of telecoms operations. The goal: communication that can be relied upon when it matters most. Another example, we are helping a leading insurer assess its exposure and define a resilience strategy so that critical business functions keep running even if cloud or data services from non-European providers are disrupted. The aim is to strengthen the sovereignty and resilience of the client core systems.
Finally, for a defense client, we are building secure shared engineering environments that allow defense players from several countries to develop new systems and products quickly and securely, of course, in a collaborative environment. By combining digital engineering, cybersecurity, and sovereign cloud capabilities, we create digital continuity across complex European defense programs while safeguarding sensitive data and national sovereignty. What this example shows is our ability to cover all layers: infrastructure, core systems, AI, and models, of course, and client posture, which is about helping clients understand where the dependencies actually sit. This end-to-end coverage, combined with our European footprint and our partnerships with sovereign cloud providers, is why we are so well-positioned on these markets. Let me turn now to our outlook. Our Q3 performance gives us confidence to raise our revenue growth target for the year, in a demand environment that should remain broadly unchanged.
We expect to maintain our momentum from Q3 to Q4, yet there are two effects to keep in mind. First, scope. WNS and Cloud4C were consolidated in Q4 last year, so the inorganic contribution drops from around seven points in Q3 to around one point in Q4. Second, comparison basis. Q4 2025 was a strong quarter with a material acceleration underlying growth. This translates mechanically into a target of 3% - 4% constant currency growth in Q4, including about one point of scope. This leads us to raise our full-year growth target to 9% - 9.5% at constant currency from 8.5% to 9% previously. The contribution from acquisition is unchanged for the full year at around five points, so the upgrade reflects our underlying performance. On profitability, we confirm our operating margin target of 13.6% - 13.8%.
Fit-for-Growth is on track, and its benefits start to come through in the second half. We confirm as well our organic free cash flow target of around EUR 1.8 billion -EUR 1.9 billion, which already absorbs around EUR 200 million of additional restructuring cash-out linked to Fit-for-Growth. So, 2026 is shaping up well as the first year of our CMD ambitions. Faster underlying growth, a broader base of growth drivers, and AI converting into revenue. We are making AI real for our clients, and it is converting into growth. With that, I hand over to Nive.
Thank you, Aiman, and good morning, everyone. Q3 was another solid quarter, and we continue to make good progress in the new AI value pools that underpin our medium-term ambition. Let's now look at the quarterly growth trends. Revenues reached EUR 6,073 million in Q3, up 11.7% year-on-year at constant currency. Scope contributed around seven points, about half a point more than in Q2. In underlying terms, our growth was close to Q2, and that is against a comparison basis which was tougher. Looking ahead into Q4, there are two aspects to keep in mind. First, the scope contribution falls by six points from around seven points to around one point. This reflects the completion of the WNS and Cloud4C acquisitions in Q4 last year. It also takes into account the disposal of CGS at the beginning of this quarter.
Second, the comparison basis steps up again from Q3 to Q4 last year, so our underlying growth accelerated by about two points. For Q4, we expect the momentum to remain the same, with the growth of 3% - 4% at constant currency. The two items I just mentioned represent a combined impact of around eight points against the 11.7% growth at constant currency we posted in Q3. Turning to currencies. As expected, currency turned positive in Q3, adding 0.9 points, mostly from the US dollar against the euro. Over nine months, the currency effect is now limited to minus 1.4 points. We expect currency to add one to two points in Q4. That would bring the full-year effect to between minus 0.5 and minus one point. Let me now turn to sectors. Our growth continues to be broad-based.
Five of our seven sectors grew 10% or more at constant currency. In underlying terms, public sector and consumer goods and retail, our two fastest-growing sectors in Q2, remained strong with close to double-digit growth. Manufacturing and energy and utilities improved further after a gradual recovery in Q1 and Q2. TMT and services remained muted in Q3. At constant currency, as in previous quarters, WNS and Cloud4C added to this underlying performance, most visibly in financial services, consumer goods and retail, energy and utilities, and services. Manufacturing grew 7.3%, up from 5% in Q2. Let's now look at geographies. In underlying terms, North America maintained a high single-digit growth rate. The U.K. and Ireland accelerated further from an already strong H1. In France, we are particularly pleased with the improvement, and the rest of Europe also improved at a more moderate pace.
As in previous quarters, the contribution from WNS and Cloud4C remained most visible in North America, the U.K. and Ireland, and Asia Pacific. At constant currency, the U.K. and Ireland and North America led the performance in Q3, growing 25.2% and 18.3% respectively. Both benefited from strong consumer goods and retail momentum. Public sector was strong in the U.K. and Ireland, while financial services and manufacturing performed well in North America. Asia Pacific and Latin America grew 11.9%, supported by WNS and Cloud4C, and had good momentum in financial services and consumer goods and retail. Continental Europe continued to improve. In France, this was second consecutive quarter of growth at 4.9% after 1.8% in Q2, led by manufacturing and financial services. The rest of Europe increased 3.4%, driven by public sector, energy and utilities, and services, and manufacturing, which turned slightly positive. Moving on to business lines.
We maintained good momentum in Q3 across all three, both at constant currency and in underlying terms. Most notably, strategy and transformation accelerated further. Total revenue growth reached 18.6% year-on-year at constant currency, up from 12.2% in Q2. This strong performance reflects the clients are increasingly focused on AI-driven value creation and enterprise-wide transformation. It also demonstrates the relevance of Capgemini's deep industry expertise and our understanding of clients' business challenges. Applications and technology grew 3.5% against a comparative basis of 5.7% last year, which was 3.2% in Q2 this year. It continues to benefit from demand for the modernization of legacy technologies. This is important because modernization is a critical prerequisite for building the new agentic technology stack, something we discussed at the Capital Markets Day. Finally, operations and engineering grew 26.9%. In underlying terms, the performance was solid, driven mainly by Intelligent Business Operations.
This delivered double-digit like-for-like growth with strong traction across both Capgemini and WNS activities. Turning now to bookings. They amounted to EUR 5,401 million in Q3, up 3.4% year-on-year at constant currency. The book-to-bill was 0.89 in Q3, which is seasonally our smallest quarter for bookings. Over the last 12 months, the book-to-bill was slightly above 1.04, and importantly, generative and agentic AI bookings continued to grow at a solid double-digit rate this quarter. As Aiman mentioned earlier, we are seeing tangible business traction in new AI-related value pools, such as enterprise technology debt modernization and agentic enterprise operations. We also see growing business opportunities around sovereignty, reflecting increased client focus on control and strategic resilience, and we continue to see further opportunities emerging in the defense sector. Let me now come to headcount.
We closed the quarter at 417,500, up 18% year-on-year, mainly reflecting the integration of WNS since Q4 last year. Headcount was broadly stable versus June as we onboarded our graduates. Since the beginning of the year, headcount is 5,900 lower, including 2,300 onshore. At the same time, we continued to hire where the demand is. The offshore leverage stood at 66% at the end of September. Lastly, a few words on our Fit-for-Growth initiatives. We continue to progress according to plan, and we are starting to see this in the numbers with the bench in Continental Europe gradually coming down. We are confident that the benefits come through from H2 and continue to build through into 2027. This gives us room to keep innovating in AI and other capabilities, and we need to capture the new growth opportunities.
The last 12-month attrition stands at 18.4%, 0.9 points lower year-on-year, and broadly stable since the end of June. Before I hand back to Aiman, there is one more point I would like to make. In the appendix of today's presentation, you will find a slide that summarizes two changes to our financial reporting from 2027. First, as discussed at the CMD, from our 2027 outlook, our headline profitability metric becomes Adjusted Operating Profit. This is more comprehensive. It is an all-in metric that notably includes share-based compensation and restructuring costs. The second is the implementation of the new IFRS 18 standard. On that note, Aiman, I hand back to you.
Thank you, Nive. Now let's open for the Q&A, and to allow maximum number of people in the queue to ask questions, I actually kindly ask you to restrict yourself to one question, and actually a single follow-up. Britta, could you please share the Q&A instructions?
Thank you. To ask a question, you will need to press star, one, and one on your telephone and wait for your name to be announced. To withdraw your question, please press star, one, and one again. Please stand by while we compile the Q&A roster. Our first question for today, just one moment, comes from the line of Sven Merkt from Barclays. Please go ahead.
Great. Good morning, Aiman and Nive. Congrats on the—
Morning.
—good quarter. Can you talk a bit about customer budgets and the pipeline for 2027, and how that supports your midterm growth into next year, especially as comms are obviously getting tougher? It would be really helpful if you could give us a bit more color on the booking performance in the quarter. The book-to-bill ratio was a bit softer than in the same quarter last year. Anything to call out here?
Yeah, thank you. Both good questions. On customer budgets, listen, what we are looking at is the trend of investments of customers around AI. That is really what we are interested in. Are our clients committed to continue to invest? Do they believe that AI will drive value for them? This remains quite strong. That is really my main indication in terms of the health of our business, is the customer appetite for transformation driven by AI, and whether they consider that AI is a huge driver of their future, because that is really what unlocks the budget. I know people look at things like IT budget. IT budget is just an indication, and it covers only part of our business. What I am really focused on is the customer appetite around AI transformation. I spend a lot of time on the West Coast.
I am in a lot of CEO meetings and a lot of interaction. I can promise you that appetite is higher than ever. Everybody expects to see the P&L impact, and that is where we play a big role in terms of offering intelligent operation, because here, where we deliver the outcome that basically justifies some of these AI investments. So, quite comfortable about the fact that there is still plenty of money to spend on AI, and that we are well-positioned to take advantage of it. Regarding the Q3, the Q3 is always softer. It is our softer quarter. Yes, the book-to-bill is a bit lower than what we have historically. On the other side, our pipeline is extremely strong. It is up 7%. On the strategic deal, it is up 9%, and we are setting up for a very solid Q4.
That is really what I am looking at, because that is what will provide us the momentum going into next year.
Perfect. Thank you.
Thank you. We are now going to take our next question. This one comes from Nooshin Nejati from Deutsche Bank. Please go ahead.
Hi, good morning. Thanks for taking my question. Aiman, on AI monetization, some of our industry checks suggest that even though contracts are increasingly structured as fixed-price or outcome-based, the underlying pricing methodology often remains linked to traditional time and material assumptions. I'm interested in whether you're seeing that starting to change as AI drives significant productivity improvements. How is the pricing conversation with clients evolving, and how much opportunity do you see for Cap to retain a greater share of those efficiency gains? Thank you.
Yeah. It's a good question. I think we shouldn't mix the fact that more and more we are driving outcomes with how the pricing is evolving, and I think you tend to mix the two. We are driving outcomes for clients. Doesn't mean that there's a fundamental change in the pricing model. What we see is clients want us to take more accountability for delivering the outcomes, and we see more fixed price. I always have the discussion with the client about being linked to outcomes, because I'm happy to be linked to outcomes, but I need to have enough leverage on what I'm delivering to be able to tie myself to the outcome. If the client's making all the decision, then how can I link myself to the outcome where the client is making all the decisions?
We have seen some cases where we link more to the outcomes, the pricing, but it's also because we have a lot more control on delivering the outcome, and they have to go hand-to-hand. If not, we'll take undue risk. We have started to have models where we have part of it linked to an outcome, 10%, 5% with upside and downsides. We start to have a bit of these mixed models, but it's still linked usually to less time and material, honestly, but a lot more fixed price.
Understood. Very helpful. Thank you.
Thank you. We are now going to take our next question. This one is from Laurent Daure from Kepler Cheuvreux. Please go ahead.
Yes, thank you. Good morning. Thanks for taking my questions. I have two as well. The first is on your intelligent operation, which continue to grow at a healthy pace. Last quarter, you shared with us a huge pipeline improvement. What can you say about the conversion of this pipeline and your win rate over the last couple of quarters, especially compared to Accenture? My second question is, if there is anything to flag on APAC and LATAM. You are still growing nicely, but compared to Q2, there was some softness. Anything specific? Thank you.
On intelligent operation, the pipeline remains strong. We have a pretty good conversion rate. I think we are winning our fair share of the deals, yes. We have some nice deals lined up with probably good conversion in Q4. I still remain quite confident about not only the pipeline, but also the positioning we have and our ability to be able to win these deals. On APAC and LATAM, yeah, APAC is a little bit softer. On the line, yes, your remark is right. APAC is a little bit softer, and we have some work to do there to be able to restrengthen the business in terms of going into Q4.
Okay, thank you.
Thank you. We are now going to take the next question. This one is from George Webb from Morgan Stanley. Please go ahead.
Hey, yeah, morning, Aiman and Nive. I've got a couple, please, as well. Just on the guidance, I think at Q2, you were kind of reserving some caution around Q4, in particular on the macro side of things. Did not hear the same degree of messaging today, I do not think, more about stability as you go into Q4. Is your confidence on how that macro environment and the tail risks in Q4 declined since Q2? Then just secondly, just on France, I guess on the flip side to the last question, quite a nice acceleration there. You called out some strengths in manufacturing and financial services, even as public sector was still weak. Is that growth rate in France sustainable, do you think, as you move forward? Or will there be different things in the mix that might drag it back a bit? Thank you.
Yeah, so listen, on the macro, again, I am always a little bit cautious around the macro. The environment is stable. I cannot say that we have seen a change in the environment. As you know, there continues to be some global volatility, so of course, we remain a bit cautious around basically what happen the next month. But so far, so good, I would say, from our perspective around the evolution of Q4. On the French question, listen, we have a good momentum. I think we have been able to recover in areas which were really challenging. Our consumer goods business is good, is back on track. We are finding some niches back in retail, which was really difficult for us. Manufacturing is back, even in auto. We are not shrinking in auto in France. Aerospace and defense is really giving good traction. So we are quite positive. So, I see growth.
I will not say how is going to be Q4 compared to Q3, but the growth momentum is there, and it's going to continue in France. I am quite positive about that. Happy about where we are. We still have some work to do in a number of areas, notably the public sector, but overall, we have regained growth momentum in France, and I think that's good. It's positive.
Great. Thank you. Good luck for the rest of the year.
Thank you. We are now going to take the next question. This one is from Toby Ogg from JP Morgan. Please go ahead.
Yeah. Hi, good morning, Aiman and Nive. Perhaps just firstly, just on the bookings again, just on the book-to-bill of 0.89, it does look a little bit lower than it typically would be in Q3 over the last five years. Anything specific there that's just driving that to be a little bit lower than it normally would be in Q3? Secondly, just on the guidance, so revenue growth guidance has been upgraded, but we are still not seeing that translate into any margin guidance or free cash flow guidance upside. Could you help us with the drivers of that dynamic, and at what point do you think we can start seeing that growth upside starting to translate into margin and free cash flow upside? Thank you.
So listen, on the book-to-bill, there is nothing special. I will tell you the obvious. There are some deals that basically are going to move from one quarter to another, et cetera, that will have some impact. I think the momentum is good. Our book-to-bill year-to-date is above one. Going into Q4, we see a stronger, solid quarter to line up for next year. I do not see anything concerning from my side regarding the book-to-bill of Q3. On the revenue growth guidance translating, we have upgraded a bit the revenue growth guidance, but the acceleration of AI is also pushing us to do a lot of investments. If we want to fuel the growth and we see growth acceleration, we have to continue to invest. This is not a free lunch. We are skilling capabilities. We are hiring in some areas.
We continue to invest because we want to fuel the growth. We are investing in assets, so there is expenses to fuel the growth. Yes, for me, right now, if there is good investment, we continue to fuel the growth, and yes, ultimately, it will translate in the increased operating margin and free cash flow that we all expect.
That is great. Thank you.
Thank you. We are now going to take the next question. This one is from Frederic Boulan from Bank of America. Please go ahead.
Hey, good morning, Aiman and Nive. Question on France, if you can discuss how you see elections potentially impacting the business next year, to a degree could derail the improving momentum in the region, or the growth drivers are more structural? Then a follow-up on the comments on Q4. I think I heard you say 3%-4% with one percentage point inorganic, so is it kind of 2%-3% organic? I think Nive also said there's eight points total inorganic impact when we account for CGS sale. Just if you could repeat those and clarify those comments. Thank you.
Okay, I'm going to let Nive answer because if not, I'm answering all the questions.
Okay. On your first question on France, obviously, France, of course, we're very pleased with the performance in France, as Aiman said, from a Q3 perspective. Definitely, when you look at it from that progression from Q2, that's really positive. In terms of election, historically, elections have really not had any impact or little or no impact on the activity because of two reasons. One is, of course, remember that we're not just focused only on French clients alone. We've got a very global roster of clients in France, so we don't necessarily expect that that will come into play. Of course, our public sector in France is actually, we're underweight in some sense, so it represents less than 2% of group revenue. So, I don't necessarily expect that that will cause any kind of an impact at this stage.
But, of course, as always, we monitor the situation quite closely. I think that's as far as your French question is concerned. Now, as far as CGS is concerned, particularly, I think we did specifically mention it, I think when we set out our release, that it's less than 0.4% of our revenues. So, it hasn't really played so much into Q4 particularly.
Thank you.
Thank you. We are now going to take our next question, and this one is from Michael Briest from UBS. Please go ahead.
Good morning. Thank you. Just to clarify something on the adoption of IFRS 18, from a free cash flow definition perspective, can you confirm there are no changes? Because I see that interest and dividends are moving to the investing part of the P&L. You are not changing how you define free cash flow? That would be the first one. Then secondly, I guess related to the margin outlook, it is obviously a range. You are now close to the end of the year. Do you feel more probable at one or either end of that range? And subcontracting was quite high in the first half. Has there been any sort of movement on that in the third quarter or in the second half? Thank you.
Michael, on the first thing, we do not necessarily change the definition when it comes to the organic free cash flow when you look at the IFRS 18 piece, and we do not think anything material will come of it, of course, or in terms of any changes. But, of course, I can let Michael give you a full detail around the IFRS 18 when you have a separate chat with him on that. But no, do not see anything material, do not see any changes as far as the definition is concerned. Coming back to the point that you make as far as margin is concerned, we reiterate, of course, our guidance of being between 13.6% and 13.8%. And Michael, of course, there are a number of factors that play or drivers that play into that expansion. Of course, as you can imagine, one of them is the mix.
We did talk about the fact that as we continue to ramp up on AI, there will be that mix effect that comes in. Of course, there is the Fit-for-Growth, which then starts to come into H2 and then goes into 2027 as well progressively. And of course, there is further SG&A efficiency, which we continue to be focused on. So, it is all of that. Now, of course, Aiman did talk about the investments, and I think that is important to mention because whether it is H2 or whether you go into 2027, that is an important part, whether that is investment in our AI Labs or our new offers or our platforms, et cetera. That is going to be an important aspect of all of that. And that is something, if you recollect, I did mention in the CMD as well.
And subcontracting?
Well, subcontracting, Michael, we use as an element to be flexible. It brings us a level of agility in terms of what we need to do, because it is rightly so in an environment like this, when we think we have got to hire skills or different types of skills, et cetera, we want to see what kind of skills we want to, and so we will use subcontracting to try and manage that. And if you recollect, even just after COVID, when we had that uptick, we had used subcontracting quite extensively at that point as well. So, it is something that helps us with the agility.
Thank you. We are now going to take the next question. And this one is from Deepshikha Agarwal from Goldman Sachs. Please go ahead.
Yeah. Hi, Aiman, hi, Nive. Good morning. Thanks for taking my questions. Just two.
Morning.
First one, the growth was strong, so just wanted to understand, can you just highlight any specific areas of strength that you're seeing? Because it, to an extent, does indicate that the market share gains sort of continue. Then the second question is more on WNS. I know there was this integrated service that has been talked about. So, can you talk about what exactly is how are you seeing the synergies developing, and what kind of confidence does this integrated service give you? How does that add to that confidence that you talked about going into 2027?
Okay. So, listen, first on the that is specifically this quote. Listen, U.K. was very strong, as you have seen. U.S., I think we have a superb growth rate. Tim is doing a fantastic job. We end up winning some very nice deals. So, overall, we sustain the growth. And of course, you have the improvement in France. France is still 17% of our revenue, so when you go from under 2% to close to 5%, so all this adds up. On the other side, you saw we had a little bit of softness in APAC, but it's good that we see now a more broad-based growth across different variables. It's not only one or two. We basically have a pretty broad-based growth across a number of variables. When you look at the synergies, the synergies are there on WNS. We see the revenue synergies are there.
We're winning these deals. Intelligent Business Operations is really playing well. It was our strategy behind the acquisition. It's working well. The pipeline is strong. The outcome-based improvement is really playing very favorably in clients, because it's not just about cost. It's really about how to strengthen their business, how for them to basically grow faster, have better experience, better fulfillment rates. So overall, the value proposition of Intelligent Business Operations is extremely strong in the market, and we keep basically upgrading our skills to be able to deliver better. And as you saw some of the example, we are also developing assets. As we drive some of this improvement, we are developing reusable assets that we can take from client to client. So I'm quite confident about our ability to continue to drive basically good growth around Intelligent Business Operations, leveraging the combined capabilities of what we had in Capgemini and WNS.
But of course, the breadth of our capabilities, strategy and transformation, in technology, in engineering, in data and AI, that's really what drives this intelligent operation value proposition. So that just for me is really a lineup of capabilities that sets up well going into 2027 to continue to drive a good growth in that business. Okay, we'll go to the next question.
Thank you. We are taking the next question, and this one is from Ben Castillo-Bernaus from BNP Paribas. Please go ahead.
Yes, good morning. Question from me, please, on the auto sector. You mentioned it was back to growth. Could you just give us some color on discussions there? How much of this is simply bottoming out, they've essentially cut to the bone, or is this genuine budget increases on inflection point? And maybe just some thoughts into next year, specifically in this market. Do you expect that market to deliver positive growth next year? Thank you.
So listen, again, next year, I will not go market by market for next year. What I see, one, and there's still erosion in some places, so I'm not saying everything is growing in auto. But you saw some of the value proposition we have in auto are paying off. For example, we are winning deals in intelligent operations in auto. That's part of the growth drivers. We also see a lot of work around on the evolution of the engineering side. So we have won some nice deals and even, honestly, disrupted some RFPs by basically telling clients, "This is the way you have to think about the future."
You basically have to reinvent how you do your engineering. We have proactive approaches in auto that are starting to pay off, where clients say, "Yes, this is really what we need to do." So, some of the traditional business, you could say, is still under pressure in a certain way. But we are coming up with new value proposition that are opening new markets and giving us opportunities in auto to be able to drive back some of that growth. So, if we continue to be able to do that and continue to be able to show to clients that we have ways for them to be able to create more value, then I think we will continue to see a good growth going to next year into auto.
Thank you.
The next question will be the last one.
Taking the last question, and this one is from Balajee Tirupati from Citi. Please go ahead.
Thank you, and congratulations from my side on another good quarter. Aiman, could you share color on evolution of relationship with AI Labs? It seems like new opportunities to partner with Labs. At the same time, how should we see implication of AI Labs venturing into or supporting launch of new AI consultancy firms? In that context, given considerations around sovereignty in Europe, do you see demand for a closer partnership with European names like Mistral? Thank you.
Two good questions. First, listen, we spend a lot of time with the AI Labs, like we spend, of course, also with our partners, the hyperscalers, which are huge partners. We work very well hand-to-hand. The complementarity is really there. I really don't see any kind of competition, even if you still hear about some consultancy being set up by AI Lab. Listen, we work very well together. We had some of them, top team from one of the AI Labs in Europe with us, visiting clients, working with software partners. It's really, I think, between where we were at the beginning of the year, where we are now is day and night. We're winning some very nice deals with them, together. So I think this is really growing. They're also maturing, in terms of we're overwhelming them a little bit.
We still don't have enough people on their side to be able to follow us on some of the opportunities. So, we're quite confident in terms of how this is building up and the direction it's taking. On sovereignty, yes, of course. Of course, you have people like Mistral, are really have good traction, and there are some clients, for certain aspects, they really want to use Mistral. But clients use all the models. They use open model, they use closed models. So, many clients have used a lot of the different models. But yes, for certain workloads, for certain aspects, for certain things, they will have a preference for Mistral. Some clients have a preference for Mistral in Europe, and we have a good book of business and great relationship with Mistral as well. Okay?
Very helpful. Thank you.
Thank you all, and look forward to interacting with you over the coming days and weeks. Have a great day.
This concludes today's conference call. Thank you for participating. You may now disconnect.