CGI Leverages Client Proximity for Competitive Advantages

CGI Inc.’s 92% contract renewal rate and 4.7-year average contract duration demonstrate exceptional client retention and revenue visibility as revenue and earnings grow.

CGI operates in the expanding global IT services market, with particular strength in high-growth areas like AI services and government IT modernization initiatives.

This firm’s diversified revenue base across 21 industries and 10 countries provides resilience against cyclical downturns, while its 92% contract renewal rate and 4.7-year average contract duration indicate just how strong and stable its business continues to be.

CGI’s “Build and Buy” strategy positions it perfectly for market consolidation. And a unique client proximity model (embedding local teams near clients while leveraging global delivery centers) creates sustainable competitive advantages through deep client relationships and operational efficiency.

Meanwhile, the stock trades at just 14.7 times the company’s forward earnings forecast, a reasonable valuation for a high-quality IT services company with a strong growth profile and competitive positioning.

CGI INC. (Toronto symbol GIB.A) lets investors tap Canada’s largest provider of computer outsourcing services. It helps its clients automate certain routine functions like accounting and buying supplies. That makes companies more efficient and lets them focus on their main businesses.

CGI fuels its growth with a “Build and Buy” strategy.

The “Build” part refers to the expansion of its current client relationships and the development of new ones. The “Buy” part involves making acquisitions.
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Under the Build part of that strategy, U.K.-based banking firm Barclays has awarded the company a new contract to integrate its CGI Trade360 software into its online trading platform.
CGI Trade360 is a suite of programs that help banks and lenders manage their credit obligations and international transactions.

The new system will reduce the entry of manual data and speed up transactions. It will also give Barclays greater oversight of transactions and cut its operating costs.

The company has not yet said how much it will receive. However, the deal strengthens its reputation and should help it attract more clients.

Under the Buy part of that strategy, in the nine months ended June 30, 2025, CGI acquired several smaller businesses for a total of $1.66 billion.

Thanks to those new operations and new contract wins, CGI’s revenue in its fiscal 2025 third quarter, ended June 30, 2025, rose 11.4%, to $4.09 billion from $3.67 billion a year earlier. That beat the consensus forecast of $4.01 billion. If you factor out the benefit from currency rates, revenue rose 7.0% in the quarter.

CGI’s AI leadership should help it retain U.S. government contracts

The stock is down 22% since the start of 2025, mainly due to concerns that the U.S. federal government will cancel consulting contracts as part of its plan to improve efficiency. That client accounts for roughly 14% of CGI’s total revenue. However, the company’s new AI-powered software and cloud computing platforms will help government agencies and businesses detect and prevent fraud. Products like this should give the company an advantage over rival consulting firms.

For the latest fiscal year, ending September 30, 2025, GCI’s earnings probably rose 9% to $8.33 a share. The stock trades at a reasonable 14.7 times that estimate. The $0.60 dividend yields 0.5%.

Recommendation in The Successful Investor: CGI Inc. is a buy.

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Jim Bates

Jim is an associate editor at TSI Network. He is the lead reporter and analyst for The Successful Investor and Wall Street Stock Forecaster and a member of the Investment Planning Committee. Jim has held the Chartered Financial Analyst designation since 1992 and spent more than a decade at the Financial Post DataGroup before joining TSI Network. He has a Bachelor of Commerce degree from the University of Toronto.

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