Capgemini Earnings: Results Broadly In Line but Market Reacts Negatively to AI Investment

Narrow-moat Capgemini reported first-half results that were within our expectations and on-track with company guidance. However, the stock was down nearly 7% intraday. European technology stocks are in the red today, but 7% is an outsize move. We think the market is reacting negatively to the company's announcement to invest EUR 2 billion over the next three years in artificial intelligence, which may be seen as evidence that artificial intelligence is a threat to the industry. We don't expect to make a material change to our forecast of EUR 210 fair value estimate. At current levels, the shares look undervalued.