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Good morning, ladies and gentlemen. Welcome to CGI's third quarter Fiscal 2026 conference call. I would now like to turn the meeting over to Mr. Kevin Linder, SVP of Investor Relations. Please go ahead, Mr. Linder.

Thank you, Joelle. Good morning. With me to discuss CGI's third quarter fiscal 2026 results are Tim Hurlebaus, our President and CEO, and Steve Perron, Executive Vice President and CFO. This call is being broadcast on cgi.com and recorded live at 9:00 A.M. Eastern Time on Wednesday, July 29th, 2026. Supplemental slides, as well as a press release we issued early this morning, are available for download along with our MD&A financial statements and accompanying notes, all of which have been filed with both SEDAR+ and EDGAR. Please note that some statements made on the call may be forward-looking. Actual events or results may differ materially from those expressed or implied, CGI disclaims any intent or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

The complete Safe Harbor statement is available in both our MD&A and press release, as well as on cgi.com. We recommend our investors read it in its entirety. We are reporting our financial results in accordance with International Financial Reporting Standards, or IFRS. As always, we will also discuss non-GAAP performance measures, which should be viewed as supplemental. The MD&A contains definitions of each one used in our reporting. All of the dollar figures expressed on this call are Canadian, unless otherwise noted. I'll turn the call over to Steve to review our Q3 financials, then Tim will comment on our business and market outlook. Steve.

Thank you, Kevin. Good day everyone. In our third quarter of Fiscal 2026, we are pleased with our revenue growth, delivery of strong EPS accretion, and cash generation. In the quarter, we delivered CAD 4.2 billion of revenue, up 2.5% year-over-year, or up 1.3% when excluding the impact of foreign exchange. Growth was primarily driven by our recent business acquisitions, representing approximately 2.5%. Our clients, particularly those in financial services within North America, continue to utilize our global delivery centers, contributing to organic growth in our APAC segment of 9.7% in the quarter. In our Western and Southern Europe segment, with our acquisition of Apside, growth was 8.6%. As expected, our U.S. Federal segment improved sequentially, reporting year-over-year organic growth of 2.5% in Q3. Bookings in the quarter were CAD 4.2 billion for a book-to-bill ratio of 100%, with U.S.

Federal at 115%, followed by Germany at 114%. On a trailing 12-month basis, bookings totaled CAD 17.8 billion for a book-to-bill ratio of 108%. Managed services had a book-to-bill ratio of 115%, and the SI&C book-to-bill ratio was 100%. Our contracted backlog stands at CAD 31.8 billion, or 1.9x revenue. Of the CAD 31.8 billion, we have just over CAD 12 billion in already contracted revenue to be realized over the next 12 months. This is a 5% increase compared to Q2. Turning to profitability. Adjusted EBIT in the quarter was CAD 682 million, up 2.3% year-over-year, for a margin of 16.3%, consistent with the prior year. Earnings before income taxes were CAD 634 million for a margin of 15.1%. Our effective tax rate in the quarter was 26.5%, an increase from the 26% in the prior year when excluding the tax impacts from acquisition and related integration costs.

The increase is mainly explained by the new corporate tax surcharge in France, representing CAD 3 million. Based on enacted rates at the end of the quarter and our current profitability mix, we expect our tax rate for future quarters to be in the range of 26%-27%. On a GAAP basis, net earnings were CAD 465 million, up CAD 57 million for a margin of 11.1%. Diluted EPS was CAD 2.23, an accretion of 22.5% when compared to Q3 last year. Adjusted net earnings were CAD 478 million, up CAD 8 million for a margin of 11.4%. On the same basis, diluted EPS was CAD 2.29, an accretion of 9% when compared to Q3 last year. Turning to cash. In Q3, we generated CAD 605 million, representing 14.4% of total revenue. Our cash on a trailing 12-month basis was CAD 2.6 billion, representing a very strong 15.8% of revenue.

DSO was 43 days, unchanged when compared to the prior year. In Q3, we continued to deploy our capital and invested CAD 105 million back into our business, which includes strategic investments in advanced AI CAD 50 million for business acquisitions, CAD 413 million to buy back our stock, and in addition, we returned CAD 36 million to our shareholders under our dividend program. Yesterday, our Board of Directors approved a quarterly cash dividend of CAD 0.17 per share. This dividend is payable on September 18th, 2026 to shareholder of records as of the close of business on August 14th, 2026. At quarter-end, CGI had CAD 3.2 billion in capital resources readily available and a net debt leverage ratio of just over one. Our capital allocation priorities have remained consistent and focused on our value creation stream for our shareholders.

Investing back in the business to drive revenue growth through managed services, SI&C, and IP, pursuing accretive acquisitions, share buybacks, where we continue to be active in our share repurchase program, and quarterly cash dividend distributions. I will turn the call over to Tim to further discuss insights on our performance and the outlook for our business. Tim?

Thank you, Steve, and good morning, everyone. CGI's results in the quarter continue to reflect our positioning to meet client demand as well as our operational excellence, both of which contributed to revenue growth, EPS accretion, strong cash generation, and a rising opportunity pipeline. These outcomes reinforce our confidence in CGI's strategy and team. Thank you to our consultants around the world for earning the trust of our clients every day. Your expertise, insights, and commitment made these results possible. I'd like to take a moment to give a special message to our colleagues and clients in Northwest Spain and Southwest France who have been dealing with the wildfires. We understand this morning that the government has given the okay to move back into the evacuated areas. Most importantly, as far as we're aware, there was no impact to human life, which is the thing that really matters.

Know that we are with you as you get back up and operational after this devastating event. Today, I will focus on performance highlights before turning to the business environment and growth outlook. For the first three quarters of Fiscal 2026, revenue was up 4.4%, or 2.1% on a constant currency basis, to CAD 12.4 billion. Adjusted EBIT was up 4% to CAD 2 billion. Adjusted EPS was up 8% to CAD 6.67. On a trailing 12-month basis, cash from operations was up 18%, totaling CAD 2.6 billion, strengthening our financial capacity to execute our profitable growth strategy. Clients are turning to CGI for enterprise-scale initiatives with advanced AI embedded. This client trust drove bookings of CAD 17.8 billion over the past year, up by CAD 1.2 billion compared to the previous year. On this same trailing 12-month basis, book-to-bill was 112%.

Backlog also remains strong, representing nearly two years of annual revenue, propelled by ongoing multi-year managed services and IP engagements. Client demand for managed services remains high. Given the nature of these larger and longer-term engagements, we assess the health of managed services bookings on a trailing 12-month period, given the typical step growth nature of this business. On this basis, managed services wins reached CAD 10.3 billion, up 5% over the previous period, for a book-to-bill of 115%. Notably, the demand for our managed services, which integrate AI and IP, is also evident in proposals already submitted. Compared to this time last year, the number of proposals pending client decision has more than doubled. The total contract value is more than 50% higher. Given the strength of our value proposition, our win rate on managed services engagements is high.

These are positive indicators we expect to contribute to bookings and revenue momentum in the quarters ahead. In Q3, the renewed strength in systems integration and consulting continued with strong client awards across financial services, government, and manufacturing, each with book-to-bill ratios of 103% or higher. At the core of this improvement is demand for CGI's industry understanding and technical expertise, both of which are required to help clients operationalize AI. Specific to consulting services, client awards in the quarter were up 11% year-over-year. This uptick contributed to a rise in the trailing 12-month book-to-bill, now at 108%. This increase was driven by offerings for change management, CIO advisory, security and risk advisory, as well as our proven consulting approach to help clients align their business strategy, operating model, and transformation roadmap.

In addition to driving shorter-term revenue, CGI's SI&C services often set the stage for future managed services engagements as clients shift from design and development into implementation. Representative Q3 bookings illustrate the breadth of CGI's full services portfolio. For example, the U.S. General Services Administration awarded CGI a $251 million modernization contract, which combines CGI's Momentum platform in a secure AWS environment with AI-powered automation to improve efficiency, reduce costs, and advance the secure operations of their financial management environment. SSAB, a global steel manufacturer, expanded its strategic partnership with CGI to modernize business-critical IT operations in Finland and Sweden, strengthening business continuity, supply chain reliability, and AI-enabled manufacturing transformation. The U.K. Ministry of Defence expanded its relationship with CGI to modernize and operate mission-critical electronic warfare and intelligence capabilities, reinforcing our role as a trusted partner for supporting national security and defense readiness.

Orange, a leading global telco, named CGI a strategic partner for the first wave of its IT transformation with focus on application modernization, cloud adoption, and enabling data and AI capabilities across critical business and network operations. The City of Munich selected CGI to advance digital government services, improve administrative efficiency, and strengthen technological sovereignty through services including digital transformation consulting, system development, and IT security. Posti, a leading Nordic transportation and logistics company, awarded CGI an expanded agreement spanning the full communications value chain, extending our role in delivering integrated omnichannel communications with greater reach, delivery reliability, and cost predictability. CGI is one of two companies selected by Poland's Social Insurance Institution to support the continued development of one of the country's largest public sector IT systems, using AI-enabled capabilities to improve software development efficiency and accelerate delivery of secure, citizen-focused digital services.

As these new awards demonstrate, and as I've heard consistently from client executives over the past few months, AI is not changing what organizations want to accomplish. Clients want to grow their businesses, serve customers and citizens, improve productivity, and manage risk. What has changed is how quickly they expect technology to help them achieve those objectives. As was the case in previous technology cycles, AI is moving from experimentation into everyday operations, just at a faster pace and with a higher expectation for return on investment. Client conversations are increasingly centered on how to deploy AI securely, operate it responsibly and cost-effectively, and embed flexibility to evolve as technology advances. With this shift in mind, we see several demand trends reshaping how clients procure, partner, and deliver IT services. Clients are increasingly seeking fewer strategic partners to help them navigate technology change over the long-term.

Their capacity to evolve becomes as important as the technology itself. This is where CGI has always had an advantage. We are not defined by a single platform, product, or service. Our teams help clients make the right decisions for their organization, implement those decisions successfully, and continue adapting in line with technology innovation. We believe that independence is becoming increasingly important as innovation accelerates. We are seeing this advantage for CGI reflected in procurement initiatives. During the quarter, we were selected as a strategic partner through multiple vendor consolidation initiatives in the U.S. with clients in financial services, airline operations, and retail. As advanced AI matures, clients are starting to move beyond the technology itself to focus more on how to scale successfully. Modern data, cybersecurity, engineering, organizational readiness, and cost management have become central to this discussion.

Increasingly, clients want a partner to help govern and manage AI effectively and economically in order to drive sustainable value. These demand patterns are also driving some client organizations to more deeply embed external technology expertise. While this may now be described as being forward-deployed, it is well-aligned with CGI's model. Our professionals work alongside clients as an extension of their teams, combining technical expertise with a deep understanding of how their organizations and industries operate. As AI becomes embedded in daily work, that proximity becomes even more valuable because successful adoption depends on continuous collaboration, not a one-time implementation. To deepen our client capabilities close to clients, we are expanding CGI's sovereign AI capabilities through new high-security platforms and sovereign cloud partnerships. These investments help clients adopt AI while maintaining control over sensitive data and addressing both regulatory compliance and national security requirements.

Taken together, these trends reinforce a key observation. Enterprise AI success will increasingly be measured by what organizations can operationalize and sustain over time. That is how long-term business and mission value will be created. This evolution aligns well with CGI's strategy and with the IT services investment patterns we see across industries. Clients are investing in four categories, typically starting with improving their current operations. Then they modernize the technology foundation needed to scale advanced AI and other innovations. From there, they build new AI-first products, services, and business capabilities that create competitive advantage or better serve their constituents. Across each of these categories, they also need strategic guidance to adapt their operating models as technology evolves. These four categories reflect where we continue to invest and where we see the greatest opportunities to drive future growth.

This is demonstrated in the rising pipeline of opportunities that are expected to close over the next year. Specifically, our managed services opportunity pipeline is up by 20% compared to this time last year, and SI&C opportunities are up by more than 30%. The total pipeline of IP opportunities, which are embedded across these major lines of business, is up more than 30%. Across all four categories, demand is rising for CGI talent. Hiring is up more than 10% on a sequential quarter basis and 50% compared to Q3 last year. This is led by our U.S. segments, where strong year-to-date bookings are being staffed as projects ramp up. In addition, we see an increase in year-over-year hiring in open billable positions in Asia Pacific based on our value proposition, which combines industry domain and technology expertise, as well as proven global capability center models.

As advanced AI continues to be increasingly embedded as part of our deals and offerings, CGI's overall pipeline of opportunities over the next 12 months is up by more than 10% year-over-year, as is the proportion of opportunities where AI is embedded in our services. Specifically, the segment of the total pipeline with AI-based services is now nearly CAD 10 billion, double in size since last year. One of CGI's enduring strengths is our capacity to invest through every business cycle. Our financial strength provides flexibility to continue investing in our business, pursuing strategic acquisitions, and returning capital to shareholders while maintaining the discipline that has consistently differentiated CGI. Our buy strategy remains critical to how we build and grow for the future. Our focus remains on deepening our industry expertise, strengthening our capabilities, and expanding our metro market presence and client relationships.

CGI's M&A pipeline remains active across both metro market and larger strategic opportunities. As always, we will remain disciplined in our approach. Every opportunity must strengthen CGI strategically, complement our culture, and create accretive value for all of our stakeholders. In closing, as AI and other emerging technologies continue to become part of how enterprises operate, client needs are naturally expanding. Through more than 50 years of technology innovation, we have learned that lasting value rarely comes from solely adopting new technology. It comes from evolving the organization as those technologies offer new ways to create business value. This is increasingly the role clients need their partners to play, and it is why CGI continues to be best positioned as a partner of choice. Thank you for your continued interest and support. Let's go to the questions now, Kevin.

Thanks, Tim. Joelle, we can now poll for questions.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press star followed by one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by two. If you are using a speakerphone, please lift the handset before pressing any keys. Our first question comes from Jérome Dubreuil with Desjardins. Your line is now open.

Hey, good morning, everyone. Thanks for taking my question. First of all, Tim, congrats on the new role. I want to ask about any strategic tweaks that we should be expecting going forward. In recent tasks, CGI has been perceived externally as being a relatively prudent organization. Any strategic tweaks we should be expecting going forward?

Yeah. Thanks for your question, Jérome, and thanks for the welcome. Much appreciated. Prudent is an interesting adjective. It's mostly positive, but it has an element of conservatism in it, I suppose. When I think of how we operate and how that adjective is a fair, perhaps, description of the way we've approached the market, I think it means that when I think of ready, aim, fire, we try to be thoughtful in the way we engage with clients. I'll give you maybe a really successful example of how we've engaged with a large telecom client, international telecom client, in the last two and a half years as they've entered the world of, and again, I call it advanced AI, meaning generative and agentic AI, because AI's been around for decades. I know the term of art is just AI. There's my translation for you.

As they've engaged in these generative and agentic tools, they've set up a master services agreement that we're a part of, where we run a number of use cases with their chief data officer, apply these tools to the use cases, and before we start, we define specific measures of return on investment. Then we run these exercises. Sometimes they're a couple of months, sometimes they're four months, but they're of a specified duration with a specified expectation of return on investment. The expectation is that some won't return on investment and some will. The ones that don't are stopped after three months, four months, and then the effort is redirected to those that are returning the return on investment. That's been a great model for channeling the use of these tools versus just handing out thousands of licenses and letting everybody see what happens.

If prudent means that we take a measured approach with our clients focused on business value, then that description fits. In terms of strategic priorities, I think our fundamental strategy remains the same. In terms of what we do next, what's the next most important thing? That's where we adapt, whether it's working with in partnership with some of these frontier tools to deliver capabilities to our clients sooner, or whether it's working with the hyperscalers to help somebody transform their environment. Those priorities obviously will continue to adapt as our client demands.

Great. Thanks for this. A follow-up question from me is, you've been putting a lot of emphasis on the pipeline in your prepared remarks. Kind of contrast somewhat with the bookings we're seeing in the quarter. Are you seeing some sort of inflection in the conversations you're having with the clients?

Not particularly. I think we did have 100% bookings in the quarter, so they were there. We tend to look at bookings, especially on the managed services side, from a trailing 12 months perspective. By the nature, I think we called it in the remarks, the step growth nature of those products where there's a transition period where everything's on the balance sheet, and then there's a ramp-up after that. Oftentimes, when you get those bookings, it takes a while for them to show up in revenue growth. We think trailing 12 months is a better barometer, and you heard us tout those numbers, which are pretty healthy. The emphasis on the pipeline really just means there's more to come. You know, pipeline is pipeline, and booking is a booking, and revenue is revenue, and that's the order they go in.

I'm not telling you that everything in the pipeline will become a booking, but it certainly is promising to have a bigger pipeline than we've ever had before. Given our traditional observed win rates, we think that's a very positive sign for future revenue growth.

Thank you. Appreciate it.

Sure. Thank you.

Your next question comes from Stephanie Price with CIBC. Your line is now open.

Good morning, Tim. I'll echo my congratulations on the role. As you kind of step into the seat here, wondering how you think about the opportunities you see for future growth at CGI and what gets you the most excited? Maybe conversely, what are some of the risks that you're watching that maybe are a bit underappreciated by the market here?

Yeah, good question, Stephanie. Thanks again. Thanks also for the welcome. I think what you heard a bit of in our remarks and what I'm most excited about because it's what I have experienced over several decades here as part of CGI, is that it's becoming clear that the real power of these new technical tools, specifically generative and agentic AI, the power is real, but it relies on understanding details about a specific industry and even a specific domain within that industry. That's where we've lived forever, is being close to our clients with our proximity model and then having industry expertise that is relevant to what they do, whether that's energy and utilities or government satellite or financial payments.

Having that expertise allows us to understand what they're really trying to do, what their constraints are, whether they're regulatory or procedural or what they might be, and how we can best apply these tools to actually accelerate them in the right direction. Acceleration by itself just means you go faster. If you go faster in the wrong direction, you just end up lost faster, to be colloquial about it. I think helping people accelerate in the right direction and helping them do more faster is what I'm most excited about. I'm seeing that acceleration happen. Our revenue trend is moving in the right direction because of that acceleration. To your question, I'm very optimistic about that looking forward. In terms of risks, it's an ongoing life risk. We just need to stay close to our clients. That sometimes takes effort.

If you think about having an old friend, the old friends stay old friends because you make the effort to keep in contact. Same with our clients. We need to make a constant effort to be with them, to be listening to them, to understand where they're trying to go, and to bring them what we're learning from across the globe and across the industry, lessons learned that are relevant to them, and provide insight that maybe our competitors aren't, and that's how we keep our competitive advantage. It's really just incumbent upon all 94,000 of us to take that on every morning when we wake up and have that energy around and client focus.

Thanks for the color. Maybe a follow-up from me just on the demand environment. You mentioned strong hiring in the U.S., but I think last quarter, there was a bit of caution around delayed decision-making in Europe. Just curious how we should think about the overall demand environment here and any changes from last quarter.

Yeah. Good question. In the U.S., really, like I mentioned in the script, we've had some strong bookings, so we're really hiring to fill the needs generated from those bookings, both in the federal market and in the private sector and state and local market. There's a few places in our private sector clients in the U.S. where we've been juniorizing our staff. They've been kind of remaking the services we're providing. That's created some kind of puffed-up hiring needs this quarter in particular that drove those stats a little bit. In Europe, there is demand in certain industries. It just depends on where. We did have a little bit of a delay in decision-making and on a couple deals up in the Nordics this quarter, but we're optimistic that those will come in the current quarter.

There's nothing in particular about that that worries me at the moment, other than just the normal course of business. Thanks for the question, Stephanie.

Thank you.

Your next question comes from Doug Taylor with National Bank. Your line is now open.

Yeah, thank you. Good morning. I'll start with a question about the overall organic growth. A better comp this quarter than what we've seen in the last couple of quarters, better U.S. federal as expected. You had also identified a couple of other specific customer situations that had been putting pressure on your growth over the last couple of quarters heading into this one. Any update generally on the status of some of these customer engagements as we think about further growth, organic growth I should say, in re-acceleration into the second half of calendar 2026, particularly with you lapping some easier comparisons and with the improving pipeline that you've spoken to?

Yeah. Thanks for pointing all that out, Doug. Everything you said is right on. There were a few, I think what we were referring to in previous quarters, we did reference some of our larger clients who were a little bit slow, going a little bit more deliberately. Shouldn't call them slow. Deliberately and carefully in some of the transformation they were doing. I mentioned, I think in the script, there are three clients in the U.S. where we've been on the right side of vendor consolidation. We're just at the beginning of ramping that up. Maybe those are some that maybe were a little bit slower to evolve than we thought, but provide us with some opportunities, as you say, to provide some good year-over-year growth in the next few quarters. That's certainly a tailwind.

I think that's probably what we were referring to, and it still remains a good news. It would've been nice for it to happen faster, for sure. The fact that it's still there, and we're still selling into it and recruiting into it is a very positive sign for us.

One follow-up for me. You referenced the trend in data sovereignty combined with your local presence orientation in theory being an ongoing good leverage point for CGI, particularly in places like Europe. Can you speak a little bit about your infrastructure set up there and the level of investment in that? I know infrastructure's not been something you've emphasized as much in recent years, but remains part of the business and how that's factoring into your customer conversations and the competitive landscape.

Yeah, that's a great question, Doug. Thanks for that. Sovereignty, we think, is a real unique opportunity where we have some unique differentiation, as you say, because of our proximity in all of those countries. We do have some infrastructure capability in the EU and in the U.K. in particular, and we've got some advanced AI tools already in place. We've got something called CGI AIOps Nova in the U.K. that's helping us be efficient in the infrastructure services we provide for our clients there. We've got DigiOps, which is something that we're providing more broadly to many of our infrastructure and application managed services clients. Quite a few capabilities. In terms of sovereignty, sorry, to your specific question. We are making the investments that are required to provide that capability, and we'll continue to do that.

If I may add it includes having more physical capability within the EU, we have the financial wherewithal to do that. We will absolutely make investments as are necessary to deliver into that need. One more thought about our unique situation relative to sovereignty. Sovereignty is really about specific sets of data and processes that need to be handled by people in country with certain levels of clearance. It's not everything, but it is some things. Having good governance is really important to being able to deliver a sovereign solution, and we have always prided ourselves on diligent governance, and that's really the first part. The fact that we have people, people who are citizens of these countries and clearance holders in the case of government in these countries ready to do it is an advantage. We're very well-represented across the countries we work in.

We're not 95% residents of one country and importing everybody from there. We're well-positioned. For the processes and data that is flexible, and in almost every sovereign operation, there are some things that can be supported in other places. We provide that flexibility as well. We're well equipped to, I think, answer the bell on the demand for sovereign operations.

Thank you.

Your next question comes from David Kwan with TD Cowen. Your line is now open.

Good morning. Some of your peers had talked about being impacted by shifting IT priorities and a pullback in discretionary spending, particularly late in the quarter. Curious to see what you had seen as it relates to any changes in customer demand and activity throughout the quarter and maybe into this month.

Thanks, David, for the question. Just by happenstance in our portfolio, we did not see that this quarter, and I think it's reflected by our SI&C book-to-bill. We seem to have some pretty good velocity on that front. I'm familiar with that phenomenon as we had seen it in prior quarters. I think maybe what others might be referring to is with respect to advanced AI. As clients started understanding what the bills would be for token usage over the last three or four months, they've had to revisit their ROI calculations and in terms of the investments they're making and the ROI it's providing, and then they invested in licenses for these new tools but didn't necessarily factor in or fully understand the cost of the compute as represented in tokens.

It's actually provided opportunity for us, we've executed several engagements already with clients where we've helped them design their processes with the token usage in mind, optimizing the language models that they're executing. We have helped them create things that we call domain-specific language models, DSLMs, as opposed to just the general large language model, which focuses in on the specific function they're doing. Uses the dataset or datasets that are necessary to support that function versus the whole broad dataset, and thereby being measured and thoughtful about token usage. It's a new thing in this new world, but it's not a new phenomenon in technology. We've always had new innovations in technology and then gone through the process of tuning the use of those tools to be efficient.

By the way, not only does using a domain-specific language model help you reduce the cost of tokens, reducing the compute you're using, and therefore the number of tokens, is also good for the environment. It uses less energy. It addresses a number of goals that our client organizations and we jointly have. That is probably maybe what you're hearing from some others, and it is a legitimate phenomenon now as people try to get their hands around this newer development. It's, in this quarter, provided opportunity for us on a consulting basis and an architecture basis to help our clients rethink the way they're implementing these tools.

No, that makes sense. It's similar to what we've been hearing. Just on the SI&C side, it was down slightly this quarter. Don't know if that was related to maybe some more discretionary work getting pushed out. Can you kind of comment on that? As it relates to bookings, though, which were pretty solid, what's driving that performance? Is that primarily AI-driven, helping customers with their AI deployments and helping generate better returns, or was it something else?

Well, it's a combination of many things. The SI&C bookings tend to turn into revenue more quickly. I think we highlighted that in the script. We see that quicker, even in quarter. If you sign a contract at the end of April, you get two months of revenue on that booking, as opposed to, I described earlier, managed services, which can take sometimes months or even over a year to show up on the P&L as revenue. In the quarter, we had SI&C bookings of 105%, that was positive for us, and I think gave us some of that growth in the quarter, but also portends for a positive growth going forward.

That's great. Thank you.

Yep. Thanks, David.

The next question comes from Paul Treiber with RBC Capital Markets. Your line is now open.

Well, thanks, and good morning. Good to be speaking to you, Tim. You mentioned a number of times, hiring is a key priority. There's a general view out there that IT services at some point would decouple from employee growth due to AI. In your perspective, is that comment a misconception of the role of employees in IT services?

Yeah. Thanks, Paul. That's a great question, maybe to put a finer point on it, there's a perception that the IT services industry in its most simplified form was people times rate times hours, drives revenue. In that simplified form, the notion that having an advanced AI tool that could reduce the amount of effort necessary to accomplish a certain task would reduce the number of people you need to generate revenue. In other words, decoupling people from revenue. Now, maybe you're charging for the agents you create to maintain your revenue. That's, I think, what that theory is based on. What we're seeing is a couple things. First of all, historically, we've had areas of our business where revenue was not directly coupled to headcount.

Our managed services program as an example, which is 56% of our revenue-ish, 55%, 56%, is about outcomes and delivering to service level. As you build it up based on needing a certain headcount to do all the functions necessary to deliver that service, over time, as we become more efficient in delivering that service, as we implement tools to help us implement that service, to include advanced AI tools among others, then it can reduce the headcount necessary. Historically, over decades, our model is to share those savings with our client and then hopefully use those savings to fund advanced scope. That's one example. Another example is intellectual property, where we've built these solutions over time, and we leverage them across clients and even industries. The revenue we derive from producing value with those solutions is not directly tied to headcount.

That's been a phenomenon that's been true for a while. The other thing I'll say, even back to the more simple model, is people are needing help with these AI tools. The reason that I personally think that this technical evolution over the last two and a half, three years has been more profound is that it's been accessible to the average person, right? We can all turn on a phone or a machine and enter a prompt and interact with these tools. Previous generations of AI were more in the domain of systems programmers or at least business process people who were doing robotic process automation or whatever. The average person wasn't using them, and now we all are. It's, I think, more profound and has made the idea of what could happen more real to everybody.

As people are using this, especially in the enterprise business environment, it is occurring to everybody that, okay, we still have to be thoughtful about how we accelerate. I think I said earlier, if you accelerate in the wrong direction, you just end up lost faster. I think we do need these people that we are hiring that can understand industry, that can understand the nuances of the technology, even though perhaps anybody can enter the prompt. You are right, the barrier to entry to using these tools is certainly lower than it was. Still, knowing how to use the right prompts, how to focus your energy so that you are using the compute efficiently, how to anticipate complex industry requirements that maybe are not obvious to somebody who has not done it before. Like for example, in payroll. Think about payroll.

The simple model for payroll is, I have a salary and every two weeks, you compute my hours or my 1/24 of my salary and you cut a paycheck. Then, okay, but you got to take taxes and other deductions out. What about retroactive? When you do a retroactive pay, are you taking into account the regulations that were in effect, during that retroactive period that maybe have changed since then? It gets very complex very quickly. The novice user maybe could do the first part, but as you get into those more complex environments. An audit trail, just think about the requirements of audit trails on banking payment systems or any of these things, and how to make sure you accurately maintain an audit trail. These are complex things.

This is why the IT system integrator market exists, because over decades, we have helped clients understand how to best use technology to meet their needs. That is, again, still the case. Maybe it is faster now, maybe we can do more with a certain level of effort than we could before. I think that is certainly true. This is all good for all of us, but certainly, we are going to need IT services professionals to continue to help be successful in this endeavor, for sure.

Thanks for that explanation. The second question, three years ago, CGI announced a plan to invest CAD 1 billion in AI over three years, we are at the end of that. What has been the results of that investment, do you have plans to continue or expand that investment going forward?

Yeah. Great question. The answer is yes, we always continue to invest in our capabilities. The first and biggest part of that investment is in our people and giving them access to the tools and giving them training on how to use those tools with clients, so that's an important part. I mentioned just a few of the capabilities and tools we've created. I mentioned the AIOps Nova in the U.K., the DigiOps, for managed services there. We've integrated advanced AI into all of our IP platforms, to help us create agents to assist the users of our IP in all the industries in which we operate. Massive investments in solutions and in people will absolutely continue, and that's why we highlight our financial strength. We have the ability. The first priority of use of our cash is investing back into our business.

That's back into developing solutions to propose into the market to our clients, that's back into training our people. That's back into making sure we're investing in our alliances with our global alliances, with tech partners, the hyperscalers, the frontier AI tool providers. Those all have been and will continue to be priorities for us. Great question.

Okay. Thanks for taking the questions.

Thanks, Paul.

Your next question comes from Surinder Thind with Jefferies. Your line is now open.

Thank you. Tim, just taking a step back and maybe following up on the very first question that was asked. Can you maybe discuss what you plan on doing differently from your predecessor and maybe elaborate on why?

Yeah. Thanks, Surinder, for the question. I get that question a lot. What's Ridley going to do differently? What I've figured out, Surinder, over the last two and a half months in this role, I like to tell people I'm the new guy, but they kind of smile at me and say, Well, haven't you been here for 38 years? As the quote unquote new guy, at least new in chair guy, what I'm learning is that the fundamentals are strong, that the way we approach the market, the way we think about providing solutions to our clients is fine, it's really how we prioritize what we do within that structure. I've been talking, Surinder, a lot about putting our energy into the fewest, most important things.

Making sure that we have the right capability to bid into requirements. If somebody has chosen the platform on a certain hyperscaler, do we have the right people with the right certifications to deliver into that demand? If we're seeing that demand across countries in a particular industry, or otherwise, are we making sure that we're coordinating and making that the priority for how we're having people spend their time? That's from a technology standpoint, from an industry standpoint, making sure that we, as ever, are current on regulations. Again, it's more of the same strategy. It's really just about priority within that strategy, what we do within the construct that we have. There's a huge amount of opportunity if you just think about your own day and what you choose to do next.

There's a huge opportunity if you pick the right things, just as importantly, stop doing the wrong things. If you have 10 priorities today, I would suggest to you that's too many. I suggest to people one is the perfect, but maybe you've got three, and maybe that's doable. I mean priorities. If you've got more than a few, then you probably need to rethink and understand, what's my role in helping CGI grow in this market? What's my role in helping this client that I'm serving succeed? Surinder, it's really more of a focus of priorities, which are definitely changing. If I think back over the last couple of years, we have prioritized our global alliance program more.

They're a big part of what our clients are doing, making sure that we're coordinating globally and helping each other across regions and industries with our global alliance partners, that's been something that's been a different prioritization for CGI over the last couple of years. There are more things that are like that. I hope that answers.

That's helpful. I guess as a related follow-up, what is your view of maybe how the competitive environment, I guess, is evolving? Maybe how you intend to position yourself? What I mean by that is, it seems like there's two different mindsets of how the business is going to evolve. One is that you need to build a lot more IP, we're seeing a lot of investment in building platforms, platform solutions that you can go and take to the client. Think of it almost as a Palantir type of strategy. The other strategy is more about continuing down the current path, maybe doing a bit more custom work, maybe having a little bit more technology, but not materially different. How do you envision those two different views of the world, and how you think which one CGI fits in?

Yeah, that's an interesting question, Surinder. I'm not sure they're total opposites. To the first part of creating platforms, or I think many people call them accelerators, right? That's something we're doing. For example, I think I mentioned the term Pulse earlier. Across, as you're aware, we've got IP in government and financial services and utilities. We've created a platform called Pulse that is not competing with the frontier products out there, but is sitting on top of them and providing a consistent way to integrate with all of our IP, we've rolled that out to all of our clients. For sure, that's what you would call a platform or an accelerator that we Just one example. DigiOps is another example of a platform or accelerator.

if I was answering your question just straight up, I'd say we're certainly behaving more in the first way. I want to qualify that by saying, you know, that's the technology answer. The business and client relationship answer is a little bit in the second, which is, we still have to stay close to our clients and understand what really creates value for a bank in the payments process. What are the key places where they can create a competitive advantage, if any? What are the key places where they need to be compliant, where they get in big trouble? Understanding those things. as we introduce new platforms, new technology, making sure that we focus on those things, that we don't break the stuff that has to work, and that we accelerate the stuff that is truly a competitive advantage.

I think that mindset is less about the first category you described and more about the second. A little bit of both, if that makes sense.

I think that's relatively fair. I guess what ends up happening, just at the high level is, I would see a much more bigger disconnect of revenues from headcount in what I would call the tech forward strategy or the platform strategy, versus kind of going down a bit more the path in the accelerator strategy, which is a little closer to, I would argue, the status quo. At least that's how I see them. I'm not sure how you would view the differences between the two.

Yeah, maybe. Like I said, our revenue mix is about 56% managed services, 44% SI&C. Managed services already tends to be less connected to headcount in terms of revenue. SI&C would be typically more connected, but as you know, Surinder, we've got a lot of SI&C where we're doing IP implementation. A lot of our SI&C is firm fixed price, which is more outcome-based than effort-based. I think for some in the industry who have a larger proportion of T&M staff augish type contracts, I would think that that would be a bigger phenomenon and a bigger shift For others like us who have always had a little bit of a separation between head count and revenue, it might become less noticeable. I don't know.

Got it. Thank you for the response and welcome aboard.

Thanks, Surinder.

Thanks, Surinder.

Your next question comes from Thanos Moschopoulos with BMO Capital Markets. Your line is now open.

Hey, Tim. Can you give us an update on M&A, just given all the disruption with AI valuations in the market and so forth? Any changes seen in recent months in terms of opportunity sets, valuations, willingness to transact? Does your own stock's valuation maybe put a higher hurdle rate for you on M&A, just given the attractiveness of potentially buying back your stock as an alternative? Thanks.

Yeah. Thanks for the question, Thanos. We've had a nice run of M&A over the last two and a half, three years, given the valuations of some of our traditional targets, that we've been able to pick up some really nice complementary companies to merge in that have really helped us a great deal in a number of industries and a number of regions. It's been good to us. We continue to be very active. We have as big of an M&A pipeline as we ever have. As always, it's a combination of large companies that span multiple regions and industries and smaller niche companies. We announced, for example, Stratfield recently in Atlanta, which helped us bump up the Atlanta metro and particularly helped us in the retail sector. That's been a terrific merger so far. It's early days, but terrific so far.

We've also got some much bigger ones, multi-billion dollar targets. As ever, those come when they come. I can tell you we're working on some now. In terms of cash, we are very well-positioned, maybe I'll give it to Steve for a quick explanation on that. We're very well positioned to be able to do the size of acquisition that comes along. Steve, maybe you could say a couple words about that.

Yeah. As you know, our leverage ratio is quite low, our balance sheet is really ready for any large M&A. Over the last couple of quarters, any excess cash, we were obviously repurchasing share, we did not use our balance sheet to repurchase share, it's planned like this. We want to keep our balance sheet fully open for the growth coming from M&A and for the opportunities that we see in our pipeline. Obviously, we continue to be disciplined. We need to do the right M&A at the right price. As Tim mentioned, we have the capacity to execute on the M&A that we're having in the pipeline currently.

Great. I'll pass the line. Thank you.

Thanks, Thanos.

Thank you.

Ladies and gentlemen, as a reminder, should you have a question, please press star one. Your next question comes from Suthan Sukumar with Stifel. Your line is now open.

Good morning, gents. Thank you for taking my questions. Tim, congrats on taking the helm here. For my first question, I want to touch on IP. You guys talked about the pipeline being up here, but you also talked about higher managed services proposals with higher contract values. Just wondering, how much has the attach rate of IP increased in these managed services engagements, I guess, on a year-over-year basis?

Yeah. Thanks, Suthan, and thanks for the warm welcome. I think, yes, we did talk about the fact that our IP pipeline is up and our managed services pipeline is up, and that we have a high win rate off our IP as part of our managed services solutions. I mentioned, for example, DigiOps as something that's involved in many of our managed services proposals that are out now. I guess the answer to your, I think what your question was, is it's probably up. We probably have more IP in our managed services bids than we did a year or two ago. As Surinder asked earlier, it's probably more in the form of accelerators and platforms, which is what I would call DigiOps versus maybe an industry solution, although our industry solution IP has a healthy pipeline as well.

In relation to managed services, it probably tends to be more of the platform accelerator type IP in those bids. If that helps.

Great. Thanks for the color. For my second question, I just wanted to touch on pricing. You guys talk about rising contract values. Is that more a function of pricing power or growing scope? Conversely, given rising AI utilization here, how has that been a factor on pricing overall?

There's a couple questions in there. The first thing I would say about total contract value, it's more a function of scope and duration. An old colleague of mine used to say the difference between a CAD 100 million contract and a CAD 200 million contract is five or 10 years. It's really more scope and duration more than anything. In terms of AI and pricing pressure, it's a function just like any other. We always have to be compelling in our offers that we're offering a fair and efficient price, or else the client won't buy our solution. That's nothing new under the sun.

We are transparent in how we're using these AI tools in our solution and the benefit it's providing to our clients. We try to show why we'll be able to deliver something faster and more efficiently, perhaps for a better price, by integrating these tools in. Absolutely, it affects the price in that way.

Okay. Great. Thanks for taking my questions. I'll pass the line.

Thank you.

There are no further questions at this time. I will now turn the call over to Kevin Linder for closing remarks.

Thanks, Joelle, and thanks everyone for participating. As a reminder, a replay of this call will be available either via our website or by dialing 1-888-660-6264 and using the pass code 69190. As well a podcast of this call will be available for download within a few hours. Follow-up questions can be directed to me at 1-905-973-8363. Thanks again, everyone, and look forward to speaking soon.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and I ask that you please disconnect your lines. We're back in the pre-conference. Have a good day.

Ladies and gentlemen, welcome to CGI's second quarter fiscal 2026 conference call. I would now like to turn the meeting over to Mr. Kevin Linder, SVP of Investor Relations. Please go ahead, Mr. Linder.

Thank you, Sylvie. Good morning. With me to discuss CGI's second quarter fiscal 2026 results are François Boulanger, our President and CEO, and Steve Perron, Executive Vice President and CFO. This call is being broadcast on cgi.com and recorded live at 9:00 A.M. Eastern Time on Wednesday, April 29th, 2026. Supplemental slides, as well as a press release we issued earlier this morning are available for download along with our MD&A financial statements and accompanying notes, all of which have been filed with both SEDAR+ and EDGAR. Please note that some statements made on the call may be forward-looking, actual events or results may differ materially from those expressed or implied. CGI disclaims any intent or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

The complete Safe Harbor Statement is available in both our MD&A and press release, as well as on cgi.com. We recommend our investors read it in its entirety. We're reporting our financial results in accordance with International Financial Reporting Standards, or IFRS. As always, we will also discuss non-GAAP performance measures, which should be viewed as supplemental. The MD&A contains definitions of each one used in our reporting. All of the dollar figures expressed on this call are Canadian unless otherwise noted. I'll turn the call over to Steve to review our Q2 financials. François will comment on business and market outlook. Steve.

Thank you, Kevin, and good day, everyone. In our second quarter of fiscal 2026, we continued to create value for our shareholders while executing on our AI strategy. In the quarter, we delivered CAD 4.2 billion of revenue, up 3.3% year-over-year, or up 1.6% when excluding the impact of foreign exchange. Growth was driven by our recent business acquisitions and continued demand for our APAC delivery center, especially from our North American clients. APAC reported growth of 7.2%, supported by DigiOps, our award-winning AI-powered offering for the delivery of managed services. In our U.K. and Australia segment, with our acquisition of BJSS, growth was 16.5%. In our Western and Southern Europe segment, growth was 8.3%, led by our acquisition of Apside, which added scale for our software engineering services.

Our U.S. Federal unit took a bit longer to recover from delays in decision-making and the ramp-up of new contracted work following the fall U.S. government shutdown. This segment improved sequentially, and based on what we see in the pipeline and our booking strength in Q2, we expect that CGI Federal will return to positive organic growth in Q3. We also were impacted by delays in decision-making across Europe, mainly with the Nordic countries. Bookings in the quarter were CAD 4.3 billion, or a book-to-bill ratio of 104%, led by a strong return in our U.S. Federal segment at 122%. Other notable segments were concentrated in Europe, with Germany at 114% and Scandinavia, Northwest and Central East Europe, and WSE both at 111%.

Managed Services and SI&C each had a book-to-bill ratio of 104% in the quarter. For SI&C, this represented a continued sequential improvement over the last 3 quarters. SI&C projects are shorter in duration relative to managed services, but realize revenue much sooner after their booking. On a trailing 12-month basis, bookings reached a record high of CAD 18 billion, up 6% or nearly CAD 1 billion. Book-to-bill ratio was 108%, with North America at 117%, and Europe at 102%. On the same basis, Managed Services had a book-to-bill ratio of 118%, and the SI&C book-to-bill ratio was 98%. Our contracted backlog stands at CAD 31.5 billion or 1.9x revenue.

Of the CAD 31.5 billion, we have almost CAD 12 billion in already contracted revenue to be realized over the next 12 months. Turning to profitability, adjusted EBIT in the quarter was CAD 692 million, up 3.9% year-over-year for a very strong margin of 16.6%, up 10 basis points. Including acquisition and related integration costs of CAD 41 million, earnings before income taxes were CAD 618 million for a margin of 14.9%. Our effective tax rate in the quarter was 26.6%, an increase from the 25.9% in the prior year when excluding the tax impacts from acquisition and related integration costs.

The increase is mainly explained by the new corporate tax surcharge in France. Based on enacted rates at the end of the quarter and our current profitability mix, we expect our tax rate for future quarters to be in the range of 26%–27%. Adjusted net earnings were CAD 483 million for a margin of 11.6%. On the same basis, diluted EPS was CAD 2.27, an accretion of 7.1% when compared to Q2 last year. Net earnings were CAD 445 million for a margin of 10.7%. Diluted EPS was CAD 2.09, an accretion of 10.6% when compared to Q2 last year. Turning to cash.

On the back of strong cash generation in our first quarter with CAD 180 million of prepayments from clients, in Q2, we generated CAD 451 million, representing 11% of total revenue. Our cash on a trailing 12-month basis was CAD 2.5 billion, representing 15% of revenue. DSO was 40 days, unchanged when compared to the prior year. In Q2, we continued to deploy our capital and invested CAD 105 million back into our business, which includes strategic investment in advanced AI, CAD 397 million to buy back our stock, and in addition, we returned CAD 36 million to our shareholders under our dividend program. Yesterday, our board of directors approved a quarterly cash dividend of CAD 0.17 per share.

This dividend is payable on June 19th, 2026 to shareholders of records as of the close of business on May 15th, 2026. At quarter end, CGI had over CAD 2.2 billion in capital resources readily available and a net debt leverage ratio of just over 1. Yesterday, we increased our credit facility by CAD 1 billion, now totaling CAD 2.5 billion, providing additional financial capacity for our build and buy growth plans. Our capital allocation priorities have always remained consistent to deliver shareholder value. Investing back in the business, pursuing accretive acquisitions, and share buybacks. Now, I will turn the call over to François to further discuss insights on the quarter, the progress on our AI strategy, and the outlook for our business and markets. François?

Thank you, Steve. Good morning, everyone. Today, I will focus on our first half performance, the demand outlook for the second half, and our enterprise AI growth strategy. Year-over-year, for the first half of 2026, revenue was up 5.5% or 2.5% in constant currency to more than CAD 8.2 billion. Adjusted EBIT was up 5.4% to CAD 1.35 billion. Adjusted EPS was up 7.4% to CAD 4.38. Cash from operations total over CAD 1.3 billion, up by more than CAD 238 million, representing 16.1% of revenues. Each of these results represent a record high for half year performance, demonstrating CGI's proven discipline and agility to deliver shareholder value.

Importantly, these results also underscore our financial strength and our ongoing capacity to invest in profitable growth to position CGI for the future. CGI's financial health remains a differentiator in the current market for shareholders and for clients. Thank you to our experts, engineers, and consultants around the world for earning the trust of our clients every day. Your expertise, insights, and commitment made these results possible. During Q2, many clients again faced an unpredictable business environment. To help them navigate these conditions, many turn to CGI as a trusted, steadfast partner to help them consider new strategies and delivery approaches, notably to address the opportunity to integrate advanced AI at the enterprise level.

Our positioning contributed to strong first half bookings of nearly CAD 8.8 billion, up CAD 141 million year-over-year, even with temporary decision delays impacting some larger agreements, mainly in Finland. Specific to government sector bookings, we saw a return to strong awards in the quarter with a book-to-bill of 111%. This was led by our U.S. Federal segment at 122% as our team closed a combination of large managed services wins, as well as IP and AI-led monetization engagements. The strong quarter raised the U.S. Federal's trailing 12-month book-to-bill to 111%, the first time this metric has been above 110% since Q4 of fiscal 2024. With these new projects in U.S. Federal, we expect this segment to grow organically in Q3, as Steve indicated.

From a services perspective, bookings were driven by robust demand for our AI and IP integrated managed services, which totaled CAD 10.5 billion on a trailing 12-month basis for a book-to-bill of 118%. Clients continue to expand core system modernization to drive operational efficiencies and generate savings to reinvest in new priorities, requiring more systems integration and consulting services such as AI advisory and change management. Continuing the trend we signaled last quarter, demand for SI&C rose in Q2 with a book-to-bill of 104%. This also represents a sequential quarter improvement of 5.5%. Strong SI&C wins in H1 contributed to a trailing 12-month increase of more than CAD 800 million compared to the previous period. Representative Q2 wins included: The U.S. Social Security Administration expanded its relationships with CGI through a $188.98 million contract to provide 24/7 support of mission-critical infrastructure, serving more than 75 million beneficiaries. This reinforces CGI's role in operating large-scale secure government systems. The U.S. Department of Veterans Affairs extended its partnership with CGI to advance financial management's transformation using CGI's Momentum Enterprise Suite. In Germany, Schneider Electric expanded its agreement with CGI to deliver end-to-end AI-enabled solutions for energy providers across three countries, combining consulting, integration, and managed services to help utilities optimize operations and navigate regulatory complexity. A subsidiary of the Saint-Gobain Group in France selected CGI's Retail Suite IP to modernize point-of-sale systems across 68 locations, improving checkout efficiency, transaction security, and real-time operational visibility.

CGI's global alliance relationships are also contributing to our bookings. Our pipeline of opportunities is up more than 180%. Recently, we expanded our joint go-to-market collaboration with AWS, OpenAI, and Google Cloud. We also continue to deepen our existing partnerships with firms like Microsoft, SAP, Databricks, and Salesforce through advanced certifications and recognitions. These developments reinforce CGI's position as a preferred global integrator. Throughout the first half, our financial strength enabled us to continue strategic investments in our business, including M&A. In the quarter, we announced the acquisition of Stratfield Consulting, further strengthening CGI's position in Atlanta, a key U.S. growth market. The consultants who joined CGI bring expertise in areas critical to embedding AI at enterprise scale, including digital engineering and technology strategy. I would like to warmly welcome the new consultants who joined CGI from Stratfield.

CGI's buy strategy remains a critical element of our growth plan, ensuring we are in proximity with existing and new clients to understand and adapt to their needs. We remain in dialogue with a number of firms, from metro market to transformational opportunities. All opportunities we consider are in line with the evolving skills needed for the future, as well as client relationships where we can bring CGI scales and global offerings. As always, we will be disciplined to ensure that mergers will be accretive to each of our stakeholders. I will now turn to the market dynamics, how these shape the outlook and our positioning to drive growth, notably through the continued progression of embedding AI across client enterprises. Throughout Q2, we met with more than 1,800 current and prospective clients, mainly C-level business and IT executives, as part of our annual strategic planning.

In discussion about their budgets for the next year, two-thirds of executives indicated they plan to sustain or increase their IT budgets. Our pipeline over the next year validates this as the value of new opportunities grew by over 40%. Executives we spoke with also noted that the alignment gap between business and IT within their organization is starting to expand again, making it more challenging to achieve the expected ROI. Over the years, we have measured this ROI metric, and this year the results show a plateau. To jumpstart their results for modernization, clients are increasingly turning to AI and managed services, particularly at the C-suite level. Enterprise AI adoption rose compared to last year, with one-third of organizations now at the implementation stage, notably for Generative AI, and a top emerging priority remains Agentic AI integrations.

These findings, a growing alignment gap, stalled ROI, and accelerating use of emerging technologies are a natural effect of earlier-stage AI adoption. All of these findings create new opportunities for CGI to deliver a wide range of end-to-end services. To understand these shifts and what they mean for CGI growth, it is important to recognize the complex systems underpinning our clients' operations. Introducing AI doesn't simplify this complexity overnight. It increases the need to manage and integrate it properly. As a result, standalone AI tools are not a substitute for enterprise IT. They accelerate tasks and processes but don't solve integration at scale. This complexity is driving new clients' behaviors. For example, organizations continue to move toward fewer trusted IT partners who can deliver end-to-end outcomes. These shifts play directly to CGI's strength.

We are positioned at the center of this change because of how we operate, our enduring client relationships, industry expertise, and end-to-end value proposition. This enables us to meaningfully embed AI directly into the systems and processes that run our clients' organizations. CGI's AI-first approach is based on two core tenets: we make AI real and outcome-focused. At the core of every enterprise, including our own, we transform how value is created, how work gets done, and how the future is built. We remain well-positioned to drive new growth leveraging this AI-first approach in four ways. We help clients operate more efficiently, we transform their legacy technology estate, we launch new services and solutions to capture net new areas of spend and growth, and across all of these areas, we deliver consulting services.

These four areas are closely integrated, and together, they offer significant opportunities for CGI to grow in this market environment. I will now go deeper in each of these elements. Clients continue to focus on driving efficiency as a top business priority. Through our managed services and IP solutions, we embed AI into IT operations, software delivery, and business workflows, reducing manual effort and improving performance. For example, CGI transformed customer service for a global financial institution by deploying an AI-driven operations platform integrated with core systems to handle and self-resolve over 500,000 interactions annually. For a healthcare organization, we implemented an enterprise AI platform to automate workflows and optimize claims, driving higher efficiency, increased savings, and establishing a scalable foundation for broader AI-driven transformation. Today, every new CGI managed services proposal embeds advanced AI as the rule, not the exception.

The majority of our contracts are outcome-based, where the margin gains translate into benefits for both clients and CGI shareholders. As Steve mentioned, our AI-powered managed services platform, DigiOps, was recently recognized with the top innovation honor for helping clients drive practical agentic AI adoption. DigiOps integrates CGI IP, accelerators, and alliance technologies, spans nearly 200 agents and 400 workflows to automate and improve enterprise operations. As clients realize operational efficiencies, those savings are not all removed from IT budgets. They are often reinvested. Clients have significant backlogs of modernization programs, AI is now enabling them to tackle those programs faster. This creates a continuous loop to drive growth where efficiency creates new demand for transformation of clients' legacy technology estates. AI cannot be scaled on fragmented data and outdated systems, we are focused on the foundation: preparing data, simplifying architectures, and modernizing applications.

This is core to what CGI delivers as it relies on high-end engineering that is designed and scaled for mission-critical complexity. For example, CGI embedded AI across a utility serving nine million customers, replacing rule-based audits, forecasting to improve grid reliability, faster technician onboarding, and enabling self-service analytics. A leading financial institution partnered with CGI to modernize legacy systems using CGI InstaCode, our production-grade Generative AI platform for code conversion. The project is accelerating the transition to a cloud-native architecture, reducing development and testing effort by at least 50% and improving system scalability. As clients modernize, they typically invest in new areas to drive their growth and improve stakeholder values. This requires new services and capabilities from CGI, which helps them address emerging priorities that cannot be resolved without new technologies like AI.

For example, CGI developed and deployed the AI FELIX platform for NATO to modernize large-scale document processing and task management across secure air-gapped environments. The system reduced processing time from an average of seven minutes to 27 seconds. CGI launched a Finnish national security compliant sovereign AI platform, enabling enterprise and public sector clients to develop and deploy scalable AI solutions with full data sovereignty, regulatory compliance, and secure integration within a locally hosted environment. These new services and solutions are not examples of isolated pilots. They are scale AI offerings built for complex enterprises to achieve measurable outcomes. Across these areas, consulting plays a critical role as clients seek guidance on where to apply AI, how to structure their operating models, and how to embed new ways of working. This is why we are seeing strong demand for consulting services.

In fact, Q2 booking for our consulting services were up 16% year-over-year. This performance and a double-digit pipeline increase is led by our signature consulting offerings, notably advisory services and AI, change management, and risk and cybersecurity. For example, a leading telecom operator partnered with CGI to scale Agentic AI in a secure, on-premise environment by defining and deploying a roadmap, framework, and use cases. CGI partnered with a large European bank to translate its AI strategy into operational governance aligned with regulatory requirements. This created structured processes, improved compliance, and enabled faster, more consistent adoption of AI across the organization. In closing, we continue to see indicators of gradual improvement for the rest of the year. Our positioning as the AI-to-ROI partner for our clients is deliberate. It reflects how we help clients move from potential to performance, and it enables our future growth.

Clients today are not looking for generic AI capabilities. They want solutions tailored to their industries and that operate within their constraints, all with a trusted partner who has the capabilities and longevity to be part of their transformation journey. We combine expertise and domains plus technology, including AI. We work inside complex mission-critical environments. We have the proximity and sovereign services and solutions. We deliver results that are measurable, repeatable, and tied to business outcomes. While the headlines may focus on how easy AI has become, the reality for large enterprises is very different. The real challenge is mastering complexity, and that is exactly where CGI is built to lead and to grow. Thank you for your continued interest and support. Let's go to the questions now, Kevin.

Thank you, François. Sylvie, we can now poll for questions. I would ask that each participant hold to one question in light of the time we have remaining.

Thank you, sir. Ladies and gentlemen, if you do have any questions at this time, please press star followed by one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by two. If you're using a speakerphone, you will need to lift the handset first before pressing any keys. Please go ahead and press star one now if you have any questions. Thank you. First, we will hear from Suthan Sukumar at Stifel. Please go ahead. Please unmute, Suthan.

Hello, Suthan.

Thank you, gents, and apologies, I was on mute. Yeah, got to my first question. Just wanted to talk about AI and, you know, you guys have announced some recent partnerships with folks like OpenAI and Google. What would you call out as being different about these partnerships, relative to, you know, what your, you know, some of the more traditional tech partnerships that you have today?

I don't necessarily see some differences. You know, it's, you know, for sure, you know, we are close to them. They want us to use their tools and to create platforms that are relevant by industries. That's really what we're working, especially with Google and OpenAI. It's really to help them. We had our CTO that went to the Google event last week in Vegas, and that's exactly what he was working with the team of Google, is to work on platforms and solutions that are relevant to industries.

Great. Thank you.

Next question will be from Jérome Dubreuil at Desjardins Capital Markets. Please go ahead, Jérome.

Hello, Jérome.

[Foreign language] Thanks for taking my question. On the SAP call last week, their management team said that the adoption of AI migration tools could possibly reduce system integration budget. Maybe it puts a bit of pressure on integrators to adapt quickly and be nimble. If this materializes, what would be the net impact of the introduction of AI migration tools in terms of absolute margin per project in the long term? Maybe does it change the total addressable market of tech adoption in general? Thanks.

Thanks, Jérome, for the question. For sure, and I did indicate it at the last call that, you know, on the life cycle of a project, we are seeing some saving by using AI. You know, we were talking about, you know, close to 50% of a project where we can use AI to reduce, and we see some saving between 20% easily to 40% and sometimes 50% on that, on these portions. For sure, it's reducing the number or the cost of doing these implementation. The good news on that, it's creating, you know, the funnel to do more.

You know, some of these clients then, you know, when I'm talking to some of these clients doing these SAP implementation are costly, and some people are postponing or trying to delay. This will just create new demand to go faster on these implementation. We're seeing that as potential new projects for the future.

Great. [Foreign language]

Next question will be from Kevin Krishnaratne at Scotiabank. Please go ahead, Kevin.

Hey, hey, good morning. François, you talked about, you know, your clients are expressing new behaviors, you know, with the, with the, this new technology, AI. They're talking to fewer IT providers. I'm wondering, could you talk about maybe your win rates when it comes to some of these AI projects? Where do you feel you may be better positioned than some of your competitors? It seems like everyone, is signing a partnership with, whether it's Anthropic or OpenAI. I'm just curious as to like what you what you bring relative to the others in the industry. Thanks.

Thanks for the question. First of all, it's our model, proximity model, right? We are close to our client. We know our clients. We understand their complexity, so we're the best-suited people for our existing clients to apply and help them with their AI implementation. We, you know, we're also built by industry, so we have the capability and the understanding of the industries. Again, bringing that expertise to new clients also is a way to showcase that, you know, you cannot just use a tool for the tool. You need people and expertise to implement that. Again, we are also very good in complex environment. We know we are working with big companies.

We're understand how to manage complexity. All that together, you know, I feel that it's giving us, you know, a advantage to win and grow in that, in that area.

Thank you.

Next question will be from Stephanie Price at CIBC. Please go ahead, Stephanie.

Hi, good morning. Maybe a broader question for you, just characterizing the macro backdrop here. You mentioned the contract signing delays in Europe, but it sounds like U.S. Federal is expected to return to growth next quarter. Just curious macro-wise what you're hearing from clients and how that varies by geography.

Yeah. Well, I would say, you know, first of all, in North America, demand is still good, very good. You know, very happy about the U.S. Federal turning back. We are seeing, you know, a lot more momentum on the procurement side, on the federal side. We saw it in the bookings, and we're seeing it in the pipeline, and that's why we're pretty comfortable to say that they'll come back to organic growth. That's still very relevant. Government, I would say across the world, is still a growth factor with all the investment that they want to do in the defense, for example, is potential growth for us in the future.

I would say the financial sector are still, you know, as we know, a lot of AI and investment, also very, you know, GCCs managed services is still a lot of discussion on that side. We're seeing a lot of momentum. I would say, you know, the one that is still in flux is the manufacturing, especially in France and in Germany. As we know, Germany, it's a tough economy for now. That's where we're seeing some softness on that side. Like I'm saying, government and financial sector, we're still seeing some good momentum on that side.

Thank you for the color.

Next question will be from Richard Tse at National Bank Capital Markets. Please go ahead, Richard.

Yes, thank you. In your comments you talked about continuing on sort of both the, the build and buy strategy. You know, with AI in the backdrop, how does that impact how you assess and then sort of value these prospects? You know, has anything sort of changed in terms of that process, you know, given sort of the potential disintermediation in the market? Just kinda wanna understand how you're thinking about that now.

Well, for sure, you know, like any other merger and acquisition that we looked at, you know, expertise is something that we're always looking at also. It needs to be, you know, yes, we're buying client relationships, where, yes, it's important, but we need also to be sure that we have the right expertise. For sure, when we're looking at these companies, AI and how much they are advanced in AI technology and AI expertise is a criteria when we're looking at them. That's for sure, one. As you know, evaluations are down, so it's a pretty very good market for now.

You know, we're there for long term, so we are always strong still believers that this industry will grow in the future, if you have naturally the right relationship and the right technology. That's what we're looking when we're doing, we're doing M&A.

Okay, great. Thank you.

Next question is from Paul Treiber at RBC Capital Markets. Please go ahead, Paul.

Hi, good morning. You mentioned earlier, you know, AI is driving productivity and cost savings for managed services. Can you speak to the pricing, how you're pricing those productivity gains in terms of, you know, either how much you're passing along to customers? Also, you know, is there an opportunity for you to capture some of those savings with higher margin as a result?

Oh, clearly. You know, I would say two-part. You know, we have our existing one that we signed, right? Where we promise, you know, a percentage of saving. Because again, like, I'm always saying, we're mostly all outcome-based pricing, especially in the managed services. We promise a saving percentage and, you know, having AI now, it's helping us in accelerating that production of savings. That's our way of giving it back to clients, but naturally producing our gross margin and our EBIT margin for us. For new ones, but naturally, you know, we will take that and put that also in the pricing.

With always the goal to produce our EBIT margin of 16% and up, that won't change. We are capable of doing both, and that's how we-- and that's why also it will create new demand, I'm convinced, new demand for managed services because people will see that, you know, they can achieve these savings. And it's not everybody who wants to do it by themselves. They'll need experts. And so that's why, yes, it will create new savings and cost reduction, but it will create brand new demand in managed services.

Thank you for taking the question.

Next question will be from Thanos Moschopoulos at BMO Capital Markets. Please go ahead, Thanos.

Hi. Can you update us with respect to AI in the context of your IP portfolio? To what extent is that helping accelerate development cycles, helping to bring maybe new offerings to markets, creating some upsell opportunities with your existing base, just with respect to your IP solutions? Thanks.

Yeah, for sure. Thanks for the question. You know, most of our development of IP is done in India. For sure, you know, we deployed all these tools in India to help them to go faster on these upgrade or new version of our tools. For sure, the cost of producing these new version of IP is going down big time. We are also naturally putting agents in our IPs for clients, so that's another big focus. You know, we were talking about, you know, agents, so we have more than 400 agents that is included in our IP, included in our service delivery, like I was saying, like DigiOps. So, we continue to implement these agents for clients and naturally using them for our own development.

Great. Thank you.

Ladies and gentlemen, a reminder to press star one should you have any questions. Thank you. Next is David Kwan at TD Cowen. Please go ahead, David.

Good morning. I was wondering, you talked about customers likely using some of the savings that you'd help generate from the AI as it relates to, on the managed services side. Do you see that as, I guess, as a net neutral or maybe even a net positive in terms of the managed services trajectory? Obviously, it's been, the growth has come down here, but I was wondering when you could see that potentially reverse and to what extent, you know, customers spending savings on new projects could be either neutral or net positive for you.

Yeah. I'm seeing it for the future as a net positive. You know, again, today, you know, when you're meeting with a CIO, most of the time he'll say that, or she'll say that they don't have enough budget. You know, maintenance is, what, 70%–80% of their budget. You know, it's giving them 20%–30% for new projects. It's never enough. When they are capable of reducing the maintenance or the running costs of their application, they'll use these savings to invest in new product and new services for their own clients. That's, you know, when I'm meeting CEOs and meeting business people, that's what they're expecting and want from their CIO department.

We see that as future growth. Like I was saying before, it will increase also the demand for managed services. Because I am saying it's not every company who will try to do it by themselves. It's complex, it's not easy tools to implement, and they'll need experts like us to help them to achieve their goals.

Just everyone, my apologies. It's Kevin here. I know it's 9:42, and I thought we'd run out of time, but it looks like we have more time. If folks on the line have other questions, please feel free to pick up in the queue.

Yeah.

Thank you. Next question will be from Robert Young at Canaccord Genuity. Please go ahead, Robert.

Hi, good morning. Revenue per employee looks like it's still going higher, and I guess AI will help that. Then you said you target 16% plus EBIT margins going forward. Looking back to a target you, I haven't heard you mention it in a while, but the double-digit earnings per share growth that was a target in the past, is that something that you can get to, or is that, you know, a function of the top line growth today? Are there other tools you have, operating margin expansion or, you know, buyback, et cetera, that could get you back to that double-digit earnings per share growth? Thanks.

Thanks for the questions, Robert. Yes, it's still our aspiration to do double-digit EPS growth, and that will always be the aspiration. You know, on that end, you touch all these levers. I think the first one naturally is growth. Like I was saying, we are seeing a gradual improvement on that growth side. Acquisition is also very active on that side. You know, evaluations are down, so that will help on the accretion, buyback. You know, we are producing excess cash. We are producing, you know, CAD 2.4 billion-CAD 2.5 billion with free cash flow is close to CAD 2 billion.

Before acquisition, when, you know, we can do both acquisitions and share buyback. For sure, you know, the EBIT margin will continue. We have some levers, at least on the long-term basis. It's not all the segments that are at 16%. We have segments of the business at 20%, 21% and 18%, but we have other ones that are still in the low teens. If we can improve these segments and bring them back to a 15%, 16%, you know, we would be able to come back to an accretion of 10%–15% in the future.

Okay. Thank you. Can I ask a second one? The seems to be a little more focused on cybersecurity. I mean, there's some, you know, worry around Mythos, et cetera. Can you just touch on, you know, where you're seeing opportunities related to that in your business, and then I'll pass the line.

That's a very good question for sure. A lot of the conversation on cybersecurity, you know, and when we were saying that consulting is picking up, a lot of it is on the cybersecurity side, like you said, with Mythos and all that. For sure, a lot of, even when I met the CEOs lately, that's top of the mind, on their mind. That's a source of future growth for us for sure, because of this.

Thank you.

Next question will be from Jérome Dubreuil at Desjardins. Please go ahead, Jérome.

Yeah, thanks, Kevin. You know I can ask questions all day. Two more for me. You touched on the buybacks on a previous answer, but you did a lot of it over the last year, but you did slow down in March. Still doing a lot, but still a material slowdown there, despite the share price being depressed. I'm wondering if there's a particular reason. Then the second follow-up I have, you for sure heard about the Forward Deployed Engineering, where it seems like software companies' model may be evolving a bit closer to an IT service model. How do you compete with those software companies, and have you seen this trend materialize so far? Thank you.

Yeah. I'll ask Steve to answer the first one, and I'll answer the second one. Steve?

Thank you, Jérome. On the first one, on the NCIB, look, what you're looking. Each quarter we're looking at the cash, the free cash flow that we're generating. It's really based on that, first of all, as you know, we want to grow with good M&A. We are making sure that we deploy our cash with M&A. In a quarter, if there is no cash outflow coming from the M&A, we'll look at our free cash flow and we'll purchase some shares. We did, yes, less than Q1, but the free cash flow was less, so it was done really by design. That's really it. We are really looking at our cash generation in a quarter, and based on that, we are adjusting our NCIB program.

Jérome, for your second question, I would say, you know, we are a company of forward deployed engineers. Again, you know, our model, you know, with the proximity, you know, what we will do better than all of these companies is that because of the proximity, we know our clients, we know their complexity, we know their industries. That's what we're bringing. You know, I think that's something that it's harder for these software companies to do. Again, it's not the first time. I'm a little bit older than you, Jérome.

You know, it's not the first time that these technology companies try to go into services, and it was always never happened because it's a tough, you know, they're good in their tools, and they're fantastic to know their tools, but it's not the expertise to manage complexity and manage understanding these industries.

Absolutely. Makes sense. [Foreign language]

Next question will be from Steven Lee at Raymond James. Please go ahead, Steven.

Hey, François and Steve. François, I heard you on the green shoots. Do you have enough visibility to see positive organic growth exiting the year? Thanks.

Again, as you know, I'm not giving guidance, Steve, but, you know, we are seeing improvement and a gradual improvement. I think the fact that, you know, example, you had federal government that was pretty tough two quarters ago at -12%, this quarter at -7%. The fact that, you know, no acquisition on their side, so it's all organic. The fact now that we, they were pretty convinced that they'll be able to come back to organic growth this quarter, for sure that's helping the overall results of the company. We are seeing these improvement, coming back and so that's why we're positive to say that, these improvement will continue in the next, several quarters.

Perfect. Thank you.

Next question is from Suthan Sukumar at Stifel. Please go ahead, Suthan.

Hi, guys. Just a follow-up from me. On the discretionary spending segment here, sorry, SI&C and more so discretionary spending, what changes in priorities have you guys been seeing from clients compared to recent quarters? The second part is, you know, some of your offshore peers have been talking about pricing compression. What are you seeing in the pricing environment and, you know, where are you seeing pressure specifically? Is that more of a function of kind of the softer discretionary spending backdrop, or is it more structural from AI or the shift to kind of outcome-based pricing?

You know, yeah, for sure, clients are asking more and more on outcome-based pricing. You know, already us, and I did state in the, in the past, you know, we're more than 60% of our business, close to 65% of our business, is outcome-based pricing. I would say to you that in India, we have, there also, the majority of our business is outcome-based pricing. That's, that's naturally, we're different than these very large Indian firms where they are input-based pricing. That's, that's helping on our side. You see still good growth in the, in the quarter, in India and Asia Pac.

A lot of demand still for Asia Pac, and I don't see that demand to reduce in the future. That's where we have also a lot of talents. That's why we are happy with where our position of our Indian region. We are seeing that as a growth lever for the future.

Thank you.

Next question is from Stephanie Price at CIBC. Please go ahead, Stephanie.

Hi. Follow-up for me just is on the Canadian region. Curious if you could talk a little bit about the environment there. Is Canada one of the regions where you're seeing a solid government pipeline, just given the push to buy Canadian? How should investors think about potential upside in Canada?

Thanks, Stephanie. For sure, Canada, we are seeing a very good pipeline for government. I think it's just, you know, they need to produce these RFP and going to the market. We have good discussion with clients on the government side and they want and they need to invest. You know, example on the defense side, we have very good defense capabilities across the world. As you know, in the U.S., but also in Europe with NATO. NATO is a good client of ours. In U.K., we have a lot of defense projects there. The fact that Canada wants to be closer to Europe, we see that as a great opportunity for us to help them to achieve their objectives.

Thank you.

Next question will be from Richard Tse at National Bank. Please go ahead, Richard.

Yes. Thank you. You know, you did have this nice rebound in terms of the U.S. Federal bookings. Have the type of services of those sort of new bookings changed at all in terms of like the profile or are they pretty much like a continuation of the stuff that was kind of held off, you know, given what's happened in the past year?

You're talking on the federal side or overall?

Yeah, yeah. On the federal side. Yeah.

Okay. On the federal side, I think, you know, as we know, last year, you know, a lot of slowdown in the procurement in general. A lot of agency put their projects on the side and waiting a bit how it would resolve with DOGE and everything else that was happening. You know, now it's a little bit back, I would not say to normal, but at least procurement is now going out with RFPs. You know, that's helping to improve the pipeline and naturally the bookings. Like I said, it's now close to two years that we didn't have the booking of that level in the federal government.

We are seeing, you know, RFPs going out, so continue to go out. That's why I'm saying, on the federal side, and some agencies are even hiring now. I think you'll see that continue in the future, and that's why we're positive on the federal side.

Okay. I just have one other question. Like recently you had a kind of a local sort of, call it AI data sort of sovereign win locally. Do you think CGI is in a position to kind of, you know, compete globally in that sort of sovereign AI data market, you know, looking ahead here as more and more countries and regions look to that?

For sure. Again, you know, when you're talking especially in Europe, everybody is talking about sovereignty. Again, it's not saying bring everything back, but naturally they're looking at their data. The most important data, that's where they're saying, "Perhaps I need to, you know, change a bit where we are with that and coming more with the sovereign solutions." The fact that we are in these in each of these regions, the fact that we know these clients, we are well-positioned to help them to achieve that. Again, the idea is not to compete anybody, it's to help them to put that in like the Finnish one that we announced yesterday.

It's really to help the Finnish Government to help them to bring back some of that data back on, in the country and having some of these solution running in their environment instead of having it in the public cloud.

Okay. Thank you.

Sylvie...

Next question.

we have time for one question, please.

Certainly, sir. Our last question is from David Kwan at TD Cowen. Please go ahead.

Hi. I'm just wondering if you've had conversations with clients and kind of what they're thinking about as it relates to the Iran conflict, and how that's impacting their business and their intentions on doing more business with you.

Well, you know, for sure, Iran, it's giving some pressure on the manufacturing side. It's putting pressure some in the airlines side. It's putting pressure also a bit even on the supply chain for hardware, for example. We are seeing some of that pressure and slow down because of the hardware. Naturally again, it's giving us the opportunity to see how we can help them on the cost reduction side, especially on the manufacturing side, and even on the airline side because, you know, it's putting pressure, and they need to increase costs and increase price. That's really, you know, the opportunity for us to go and see these clients and showing how we can help them in the cost reduction side.

Are you seeing any slowdown in sales cycles?

Not for now. I would not say that I'm seeing a slowdown on the sales cycle because of it, no.

Great. Thank you.

Yeah.

At this time...

Thanks, Sylvie.

we have no other questions.

Okay. Thank you, Sylvie, thanks everyone for participating. As a reminder, a replay of the call will be available either via our website or by dialing 1-888-660-6264 and using the pass code 74539. A podcast of this call will be available for download within a few hours. Follow-up questions can be directed to me at 1-905-973-8363. Thanks again everyone. I look forward to speaking soon.

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. At this time, we ask that you please disconnect your lines. Enjoy the rest of...