CGI’s exceptional revenue visibility and its unique “buy-and-build” capital allocation strategy make it extremely appealing. It boasts a record $31.50 billion backlog that effectively guarantees nearly two full years of revenue. This high level of certainty protects the firm from short-term spending lulls. Unlike peers who dilute shareholders or take on aggressive leverage, this one generates high-velocity free cash flow that it immediately uses to shrink its equity base.
Furthermore, the company is poised to benefit from the execution phase of the AI boom. As global enterprises shift away from empty AI hype and look to integrate machine learning models securely into core legacy systems, they require deeply embedded IT consultants. The firm’s “AI-first” strategy bridges this gap by directly advising clients on mission-critical clouds and complex data architecture, positioning it as a highly efficient engine for scalable corporate AI spend.
CGI INC. (Toronto symbol GIB.A; www.cgi.com) is 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.
The stock is down about 34% in the past year, due to fears that new artificial intelligence (AI) software tools will hurt CGI’s business.
While CGI sells some software (as an ongoing subscription service), it helps businesses upgrade their computer systems. That involves sending in consultants and helping train employees. That’s a strong advantage for the company.
What’s more, CGI is helping its clients integrate AI into their systems to make them more efficient and protect sensitive data.
As part of that plan, the company recently expanded its partnership with OpenAI, the developer of the popular ChatGPT chatbot. OpenAI’s expertise will help the company embed new artificial intelligence (AI) tools in its software products. Those tools should help its clients speed up administrative functions and cut costs.
Meanwhile, the company’s strong reputation continues to help it win new contracts.
For example, Caisse Alliance, which provides financial services through 26 branches in 24 Northern Ontario communities, has awarded CGI a new 10-year deal to modernize its digital banking platform.
The company’s new artificial intelligence tools will also improve security and help Caisse Alliance launch new products and services.
CGI has not yet said how much it will receive under this deal. However, it should help it win even more contracts from this client, as well as other small financial services firms.
The company has also won a new contract from NATO’s Communications and Information Agency to help build and operate a new wireless communication system. That will let command and control personnel securely share classified information with field commanders in mobile vehicles.
CGI has not yet said how much it will receive. However, deals like this enhance the company’s reputation and should help it win even more contracts from NATO and other military agencies.
CGI typically uses acquisitions to enhance its expertise and expand its presence in certain countries.
Under that strategy, it recently paid an undisclosed sum for Comarch Polska SA, which provides software and consulting services to government clients in Poland.
The deal added 460 IT (information technology) and business consulting professionals to its operations in Poland and the Baltic States. That division now has 1,500 professionals.
The new operations also nicely complement its existing operations in Europe, which supply about 40% of its revenue.
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CGI’s backlog provides a shield against enterprise spending drops
The company reported lower-than-expected quarterly revenue in the 2026 first quarter. That was largely due to the shutdowns of the U.S. federal government, which slowed the signing of new contracts (this client accounts for about 12% of CGI’s total revenue).
In its fiscal 2026 second quarter, ended March 31, 2026, CGI’s revenue rose 3.3%, to $4.16 billion from $4.02 billion a year earlier. That missed the $4.24 billion consensus forecast. If you factor out the benefit from currency rates, revenue rose 1.6% in the quarter.
If you exclude costs to integrate recent acquisitions and other unusual items, overall earnings in the quarter rose 0.6%, to $483.4 million from $480.7 million. Due to fewer shares outstanding, earnings per share improved 7.1%, to $2.27 from $2.12. That matched the consensus estimate.
CGI signed $4.31 billion in new contracts during the quarter. Its book-to-bill ratio in the past 12 months is also a solid 108.4% (a figure below 100% implies demand for its services is falling).
As well, the company’s contract backlog at the end of the quarter was $31.50 billion, or 1.93 times its revenue in the 12 months ended March 31, 2026. That cuts your risk.
For all of fiscal 2026, CGI will probably earn $8.96 a share and the stock trades at 10.8 times that forecast. That’s an attractive multiple, particularly as the company is helping businesses use artificial intelligence (AI) to improve the efficiency of their computer systems. CGI’s high client renewal rate of 95% also cuts your risk. The $0.68 dividend yields 0.7%.
Recommendation in The Successful Investor: CGI Inc. is a buy.
