Morning, ladies and gentlemen, and welcome to this conference call on Sopra Steria's Q3 2026 earnings. Throughout the first part of the presentation, participants will be on listening only mode, and during the Q&A session, participants can ask a question by dialing the hash key and then five on their telephone keypad. I will now hand the floor to Rajesh Krishnamurthy, CEO. Over to you.
Good morning, ladies and gentlemen, and welcome to this conference call on Sopra Steria's Q3 2026 earnings. I am here with Etienne du Vignaux , Group CFO, with whom I will be leading this session. I will start with a few general comments on the performance over the quarter, then we will detail the figures for our four major reporting units. We will finish with a Q&A session. Q3 2026 revenue came to EUR 1,420.1 million, representing growth of 7.9% when compared with Q3 in the previous year.
At constant scope and exchange rates, growth in revenue was 4.3%, compared with 3% in the first half of 2026. It should be noted that this quarter had an additional working day when compared with Q3 2025. As planned, the conclusion of the SFT program had a non-recurring negative impact of 2.1 points on the growth over the quarter. Excluding this impact, underlying organic growth in the group's activities stood at 6.4%, compared with 4.9% in the first half. Q3 2026 thus confirms ongoing solid growth momentum in our activities in all our reporting units. Vertical markets like defense, security, and space, which grew 13%, Aeronautics, which also grew 13%, and also cybersecurity, which was up 18%, and consulting, which was up 7%, broadly drove the growth over the quarter.
This growth highlights the relevance of our positioning and confirms the importance of our customers' digital transformation needs in the areas of agentic AI, digital sovereignty, cybersecurity, and operational efficiency. Given the growth posted in the third quarter and our outlook for the fourth quarter, we are raising our full year organic revenue growth target. We are now targeting organic growth in revenue between 2.5% and 3%, compared with 2% and +2.5% previously. Targets for operating margin on business activity and free cash flow are confirmed. I would like to suggest that we now move on to the detailed analysis of our performance by reporting unit, and I will hand the floor to Etienne du Vignaux .
Good morning, ladies and gentlemen. Let us start with France. Revenue stood at EUR 638.4 million. Organic growth was sustained at +6.1%. With the exception of energy and telcos, all the reporting units, vertical markets posted growth.
The most buoyant markets were the public sector, defense, security and space, transport, financial services, and Aeronautics. I would stress that the public sector, which represents 15% of the France reporting unit, experienced strong growth. It has got a strong exposure to state sectors, and it is also driven by strong transformation needs. U.K. now, revenue stood at EUR 232.3 million. Organic growth was 8.2%. All the activities in the reporting unit, NHS, Aeronautics, defense, security, NextGen BPS, new technologies, they all grew. There was a favorable basis for comparison. The growth in Q3 2025 was negative, strongly negative, at 9.5%. So this comparison basis will be reversed during the last quarter of the year, and we are expecting the last quarter to be down. But the second half of the year should be relatively stable when compared with the second half of 2025. Now, Europe. Excluding SFT, revenue stood at EUR 455.4 million.
The reporting unit posted organic growth of +5.7%. Scandinavia, Italy, Switzerland, Spain remained buoyant. Belgium contracted slightly, the Netherlands stabilized, and Germany returned to growth. As forecasted, SFT posted revenue of EUR 6.6 million, and as a reminder, it was EUR 32.7 million in the third quarter of 2025. In total, including SFT, Europe generated stable revenues of EUR 462.1 million. Now for solutions. The reporting unit posted revenues of EUR 87.3 million, representing organic growth of 7.5%. The human resources solutions business, which represents 65% of the reporting unit's activity, was up 6.6%, and the real estate business continued to post sustained growth. Our economic and geopolitical environment remains challenging, and it is marked by a great deal of uncertainty. Nonetheless, we have solid assets. A commercial strategy based on 100 strategic customers. Strong credibility when it comes to digital sovereignty challenges.
Significant exposure to strategic and critical markets like defense, space, Aeronautics, public sector, and financial services. An entrepreneurial model which fosters agility, and a primarily outcome-based commitment model. Q3 2026 was buoyant, and our growth was solid. While the growth benefited from a positive calendar effect on a favorable basis for comparison, growth was above all driven by our positioning and our mix in terms of verticals. We are confident for the full year, and we are raising our organic revenue target to between 2.5% and 3%. At the same time, we are confirming our margin target, so above 9.5%, and our free cash flow target for around 5% of revenue. I would like to suggest that we open the Q&A session now. Thank you.
If you would like to ask a question, please dial the hash key five on your telephone keypad. Please limit yourselves to two or three questions max. The next question comes from Thomas Poutrieux from BNP Paribas. Over to you.
Good morning. Thanks for taking my question. I have a few. Let' s start with Aero, where growth was aligned in Q3 with Q2, despite the basis for comparison, I think it was a bit tougher with Airbus. How do you explain this? Is the vertical growing quicker than what was planned, or are you winning new positions? Second question, could you just drill down on the U.K.? Where do you stand when it comes to winning new contracts versus your initial expectations, and what's your level of confidence when it comes to an acceleration in this business unit next year? And then the third question, could we talk about cash? Any changes in DSO this year? Have you seen an impact in the public sector? And then obviously an impact of French debt, potentially.
Thank you for your questions. So Aeroline is experiencing strong demand. So we are aligned with what we have experienced in previous quarters. Our customers are developing. We have won new projects. So we feel that there is good momentum linked to transformation projects with our customers. For the U.K., we continue. Obviously, you have understood that Q3 was very strong, but there is a favorable basis for comparison with regards to last year. We will see this reversed in Q4. But this business is stable despite the couple of contracts that we have lost. But we are winning other contracts. But for next year, we are not ready to talk about what we are expecting just yet. On cash, so at the end of September, obviously we measure the indicator DSO. We are talking about the same measure as last year.
Yes, the increase in interest rates does mean that certain customers are a bit more cautious when it comes to their balance sheet. But at the end of September, we are fully aligned with the trajectory that we set for ourselves, and we expect it to hit the 5% of free cash flow, 5% of revenues.
Thank you.
The next question comes from Laurent Daure at Kepler Cheuvreux. Over to you.
Good morning, everyone. I have got three questions. The first one, performance in Cyber. Could we just focus on your positioning? Think about the headcount that you have hit and then the outlook for the next 12 months. Second question on rest of Europe. We have seen that all the geographical regions are in operating order. Where do we stand with regards to Belgium? We have seen that it's going better, but these are the regions that have been struggling compared to others. For Q4, basically the feeling is that you have got a swing over 15 points in the U.K., and the other regions remain similar to Q3. That's how you are going to hit the guidance for the year. Is that your logic?
For Cyber, EUR 200 million. Obviously it has got an extremely good outlook, but perhaps Rajesh could talk about this.
Yes, we see that our customers, they need to reinforce their cyber activity, especially now for a couple of months. We have seen with agentic, we also need to strengthen ourselves, and we need to develop solutions for our customers, which will mean that we will have greater capacity to react and correct situations. So it's a very buoyant business, and we think that it will continue to develop itself well in the coming years. Now for Belgium.
For Belgium, what we can say is that over nine months, Belgium was basically flat, slightly contracting in Q3, but if we take a step back, we can see that we are flat over nine months. We are expecting a return to growth. Headcount has been stabilized, so we don't have the levels of attrition that we have experienced in previous quarters, and now we are ready to move forward. In the Netherlands, very slight growth, 0.0x%, but we should expect a change in Q4. Now for the guidance for Q4, your calculations are right. In the U.K., it's what you said. In terms of the swing, the basis for comparison has a significant impact in this region, so flat or slight growth in the U.K. So this means that when we restate the U.K. and SFT, we are expecting growth at about similar levels restated for the U.K. and for SFT.
As a reminder, if you would like to ask a question, please dial hash five on your telephone keypad. The next question comes from Derric Marcon at Bernstein. Over to you.
Good morning. I have got a few questions. The first is France. Could you come back to the revenue split, public sector 15%? Can we just look at the weighting of other sectors, defense, aerospace, and security? So can we have the breakdown by sector in France? That would be good. Second question on orders in the U.K. Obviously, I know that you don't want to talk about 2027 outlook, but can we just look at the momentum in terms of orders and the pipeline based on any discussions that you have underway, thinking about the pipeline? That would be quite important. And then the last question is on the guidance that you have raised. Does this mean Q3 was better than what you are expecting, or have you raised your expectations for Q4 with regards to what you are expecting at the end of the summer?
Thanks, Derric, for the questions. For France, in 2025, EUR 2.4 billion. Major sectors, Aeronautics, 20%, defense, security, and space, just under 20%, financial services, 16%, and public sector, I have already mentioned that. Energy, telcos, 14%, and then the rest of it is distributed across transport and the other sectors. Public sector, I said that one earlier, about 15%. For the U.K., we continue to have good momentum with regards to our pipeline. Obviously, you have to win these deals, but there are no issues in terms of pipeline. The pipeline is robust. We have got several interesting deals, some good wins this year, which will pay off next year. We are quite confident with regards to the trajectory for our activity in the U.K.
Just for the U.K., is this mid-size deals, big deals? What about the level of maturity, the conversations that you are having on these commercial opportunities? Are they progressing or you haven't progressed more than where you were six months ago? How do you qualify your chances of winning the deals?
Two phenomena. The deals are becoming a little bit smaller when compared with what we have experienced previously, but the volume in the pipeline remains interesting and very robust, and as we advance through the year, obviously there was a slight slowdown given the political, economic situation in the country. But for us, we are progressing, and we are gaining in maturity. We are quite confident with regards to the future of this business. On your third question on guidance, we did slightly better in Q3 than what we anticipated, and we think we will do slightly better in Q4.
Thank you.
The next question comes from Michael Briest from UBS. Please go ahead.
Good morning. Thank you. Can you talk a little bit about pricing trends, given the strength in demand you are seeing? Is that converting into stronger pricing power? Similarly, on the margin, I guess, good revenues, does that imply that the upside to the baseline of 9.5%, is that little bit better than you thought at the start of the year? I appreciate you don't want to talk about next year much, but can you talk about how the political process in France has historically affected demand? Do you see any slowdown from the public sector in the run-up to a presidential election to corporates if there is a potential change of left-wing, right-wing government become more cautious in that timeframe? Is that something you are seeing yet or anticipate? Thank you.
With regards to changing in prices, prices remain broadly stable. We are seeing two phenomena. We are seeing with existing business where we have to renew, there are productivity efficiency gains that we can provide with operational efficiency, but also with AI tools. There is a productivity gain, and we are trying to share this with the customer. That' s for existing business, where there is a bit more competitivity with regards to prices. But elsewhere, we are seeing consulting, cyber, they are all progressing, and they are all at a good level of pricing. In terms of prices, quite stable. For the margin, we are remaining stable with regards to what we said, at least 9.5%. That' s what we are still aligned with this target. Obviously, we have to balance this out with the investments that we need to make to reinforce our offering.
Cybersecurity, for example, we have got the opportunity to push this activity, which is experiencing strong growth. So we have to balance out our investment choices with regards to the margin that we want to deliver. The last point, we continue to have the projects that we have won. Obviously, the economical, political context is uncertain, so it's difficult to say what we are expecting for 2027. What we could say historically is that the public sector is very resilient, whether there are elections or not. But there is a downside when we experience electoral periods, because obviously major decisions are pushed.
The next question comes from Wolfgang Specht from Berenberg. Please go ahead.
Yes. Hello. Good morning. Two additional ones from my end. The first one is on workforce hiring and utilization. It is visible that you had slightly higher build-up of workforce than growth. Do you plan to speed up hiring? Or could it be a situation where, let's say, AI tools enable you to, let's say, disproportionately low growth of workforce in relation to sales? On the regional market, Germany, is there any spillover of the SFT contract cancellation into 2027, or will this all be gone this year? Thanks a lot.
For the first question on growth in headcount with regards to revenue, obviously, slower than revenue. We have obviously got a subcontracting rate, which is quite high. We highlighted that in the first half. But this is a trend. It's an ongoing trend. In the short- term, it's not spectacular. Sopra Steria is recruiting in all of its geographies, though. Second question on SFT. So, important restructuring, which was obviously announced previously, and that's underway this year. It will be almost finished. There will just be a small amount next year for support functions, but that will be behind us in 2027.
Thanks a lot.
As a reminder, if you would like to ask a question, please dial the hash key and five on your telephone keypad. The next question comes from Thomas Poutrieux at BNP Paribas. Over to you.
Just an additional question on solutions, obviously performed well in Q3 with HR solutions, which are heading in the right direction. Was there a license sale that boosted the quarter, or was there a subscription?
It's both. We had license sales with a few customers who expanded their scope, but we have also had an increase in subscriptions, so we are progressing in both sides at 6.6% growth for HR. So there were some deals signed slightly earlier than planned, but progressing.
The next question comes from Derric Marcon at Bernstein. Over to you.
Yeah, sorry to come back to public sector. On the one hand, you have got positive momentum driven by the deals that you have already won, and then slight possibility of decisions slowing down in 2027. Can we have an idea of what's recurring, what's already integrated in the public sector?
I think the major transformation programs, systems integrations, they are planned over the long- term, so these are not going to be stopped. So is it just the discretionary part that is impacted by a slowdown in decisions, or have you got some other orders which are impacted, and what do you have to win to make sure that you have got continuity with regards to your trajectory?
So growth is very much linked to big contracts. We are thinking about large transformation programs here. That's where we support our customers. We support them through digital transformation. So there are some programs, obviously, they come to an end.
So mechanically, we have to renew contracts or we have to sign new. So this is very much linked to significant orders. We don't have figures on what's already there, but there are cycles. Projects get started. Sometimes they last 18 months, 24 months, and we have to keep winning other contracts as we go along. So at group level, we are talking about 40% of recurring revenue. Obviously, public sector in France, we are not expecting the same level of growth in 2027 when compared with 2026. Obviously, it's a bit early. We haven't fully prepared our budgets yet, so we can talk about that at the start of next year.
There are no more questions, so I will hand the floor back to Mr. Krishnamurthy for any closing remarks.
Thank you very much, and we will be seeing you soon. Goodbye.