Cloud services to boost the profitability of IT service providers

Cloud Services
Cloud services to boost profitability of IT service providers

Capgemini’s digital and cloud services grew around 15% in 2020 from 65% of its business in October-December period

Capgemini reported full-year results in line with consensus, boosted by growth in its digital and cloud services and said profitability would beat market expectations in 2021.

To adapt better to a new flexible or exclusively remote working model, the COVID-19 pandemic has given IT services providers like Capgemini, the silver lining of an increasing number of companies expediting a move to cloud services.

The firm’s digital and cloud services grew around 15% in 2020 from 65% of its business in October-December period, said Capgemini.

The operating margin of the French consulting and IT services provider is expected to be back at pre-COVID-19 levels in 2021, which is between 12.2 per cent and 12.4 per cent, slightly above the 12.1 per cent consensus view.

In a call with Aiman Ezzat Chief Executive said, “With all the positive signs we see in our activity, we expect a progressive improvement over the first half of the year, and we hope to come back to our mid-term growth objectives at the end of the year”.

The firm’s full-year 2020 operating margin dropped less-than-feared from 12.3 per cent the previous to 11.9 per cent.

Nicolas David ODDO BHF analyst said, “Regarding the result it’s slightly above expectations in terms of profitability”.

Capgemini still aimed for double-digit growth of digital and cloud services in 2021, Ezzat said in a call with analysts.

Boosting digital and cloud services, the US rival Accenture, in December, raised its guidance thanks to an extended work-from-home period.

In the analyst call, Carole Ferrand, CFO said, Capgemini also provided guidance that 2021 revenue would increase 7 per cent to 9 per cent in constant currency terms from the 2020 figure of 15.85 billion euros, ($19.07 billion) which was up 12.2 per cent. This increase was helped by the consolidation of Altran, a smaller rival Capgemini bought last year, offsetting the pandemic’s impact on growth.

Also read: Transformation of BFSI industry with cloud and AI combo

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