Montreal-based multinational IT consulting firm CGI plans to invest $1 billion over the next three years to boost the growth of its artificial intelligence (AI) business.
The broad investment plan CGI outlined on Monday — two days ahead of its upcoming quarterly results — includes “expanding AI consulting services with the hiring and training of employees globally.”
CGI says it has a workforce of “91,000 consultants and other professionals around the world,” including several hundred at its headquarters in downtown Montreal.
Also, CGI is committed to accentuating this development of AI by advocating its “responsible and ethical use” while taking into account the “optimization of intellectual property” related to AI applications.
“For more than two decades, CGI has offered intelligent automation and AI technologies in its services and solutions, enabling us to test and train new models quickly and securely, then apply that knowledge to our service line,” said George D. Schindler, president and CEO of CGI, in a statement.
“Now our advisors can take advantage of proven use cases and out-of-the-box AI solutions. They’re also backed by trusted expert datasets to help CGI clients navigate the current craze and make the most profitable investments. »
According to CGI’s president, this $1 billion commitment to AI development marks “the beginning of a new wave of innovation that combines human expertise and the ethical use of technology to achieve business value from AI.”
How will these AI ambitions impact CGI’s business prospects? Two days before the announcement of the quarterly results, expected Wednesday morning, the senior management of the multinational remains stingy with more detailed information.
But analysts say CGI stock investors may have to be patient before they can put a price tag on those AI ambitions.
“An important part of this $1 billion commitment to AI consists mainly of additional investments to those made previously, as well as a redefinition of priorities on initiatives already underway,” said Jérôme Dubreuil, analyst at Desjardins Capital Markets, in a note to investors.
Therefore, he says, “I expect AI’s contribution to CGI’s revenue to be gradual and relatively insignificant for several quarters.” I also believe that the impact of this additional investment in AI on CGI’s future profit margins should be modest.”
That said, adds the Desjardins analyst, even if “CGI is not known to be the company that adopts new technologies the fastest in its sector (business computing consulting services), I support its plan to allocate resources to an area of important interest – AI applications – among its customers”.
CGI shares traded on the Toronto Stock Exchange closed Monday’s session at $135.19, up just 0.3% from last Friday’s closing price.
On the New York Stock Exchange, shares of CGI ended Monday’s session up 0.6%, at US$102.60.
As for CGI’s results to be announced Wednesday morning, for its third quarter 2023 ended June 30, analysts’ and investors’ expectations remain relatively strong despite signs of a slowing economy and business investment.
On average, analysts expect CGI’s quarterly revenue to be around C$3.6 billion, which would represent an increase of around 10% compared to the corresponding quarter in 2022.
Quarterly net profit is expected around C$425 million, and net earnings per share around C$1.79, which would represent a gain of around 16% compared to comparable figures a year ago.
