CGI Q2 Beats: Revenue Up 3.3%, EPS Jumps 10.6%

What happened

CGI reported Q2 fiscal 2026 revenue of $4.16 billion, up 3.3% year-over-year, with diluted EPS rising 10.6% to $2.09, driven by steady execution and ongoing share buybacks. Adjusted EBIT margin held at 16.6%, while bookings of $4.31 billion exceeded revenue (book-to-bill of 103.8%), supporting a healthy backlog of $31.5 billion. The results align with the DeepValue thesis of durable free cash flow and compounding, as TTM operating cash flow reached 15.1% of revenue and net debt/EBITDA remains low at 0.64x. Despite headwinds from EU AI Act compliance and competitive UK/EU frameworks, CGI's scale and sticky public-sector relationships continue to deliver per-share growth. The quarter reaffirms the company's ability to capture secular AI modernization demand without margin erosion.

Implication

The Q2 beat confirms CGI's operational stability and capital discipline, supporting the current BUY rating with a target of $118 based on EV/EBITDA. Investors should focus on continued FCF generation and buyback momentum, as EPS growth outpaced revenue due to share count reduction. The healthy backlog and book-to-bill above 100% suggest near-term revenue visibility, while AI modernization tailwinds remain intact. However, monitor EU AI Act developments and framework win rates, as these could affect margins and competitive positioning. The thesis holds with no delta; the risk-reward remains favorable given the margin of safety from DCF.

Thesis delta

No delta: Q2 results align with the existing thesis of durable compounding through sticky government relationships and disciplined capital allocation. The EPS acceleration (10.6% vs revenue 3.3%) highlights the power of buybacks, while backlog strength supports forward revenue. Execution remains consistent, and no new risks emerged.