CGI, the global IT consulting giant, held its Q2 2024 earnings call, and while analysts dissected margins, bookings, and the cautious spending environment, one crucial detail seemingly flew under the radar: a hidden goldmine of opportunity in the rapidly evolving world of AI.

Yes, everyone's talking about AI, and CGI, like its peers, is diligently incorporating AI into its existing offerings. But CGI possesses a unique, almost overlooked advantage: its vast library of 150+ intellectual property (IP) solutions. These aren't just dusty legacy systems; 60% are now delivered as SaaS, and they form the backbone of operational efficiencies for clients across a diverse range of industries.

Here's the bombshell Wall Street seems to be missing: **CGI is aggressively infusing its IP solutions with AI, and clients are ecstatic.**

While much of the AI conversation revolves around new business opportunities, CGI's approach focuses on reinvigorating and future-proofing its existing IP portfolio. Governments, especially in North America and Europe, are particularly enthusiastic. Remember, government constitutes CGI's largest vertical market at 36% of Q1 revenue, and that figure is steadily climbing.

This means CGI isn't just chasing the flashy allure of brand-new AI projects. They're strategically embedding AI into the very fabric of their recurring revenue stream. Imagine a city's parking violation system, powered by CGI's Advantage Collections IP, suddenly augmented with AI to predict violation hotspots or optimize enforcement routes. That's tangible, recurring value, and it's precisely what CGI is delivering.

Now, let's talk numbers. In Q1, CGI booked over $200 million in engagements incorporating AI. Roughly 60% of this was embedded within existing projects, demonstrating how the company leverages AI to deepen client relationships and enhance their existing solutions.

But don't dismiss the 40% attributed to entirely new AI-driven projects. That's a significant number, especially considering the current cautious spending climate. More importantly, it speaks to a growing appetite for CGI's unique end-to-end approach to AI, which seamlessly integrates strategy, data preparedness, and pilot implementations.

What makes this even more compelling is that AI is still in its early stages of enterprise adoption. As CGI rightly points out, most clients are currently focused on pilots and smaller projects to prove out business cases and establish responsible use frameworks. This means the $200 million in AI bookings is just the tip of a colossal iceberg.

AI Integration in CGI Bookings

The following chart displays a hypothetical breakdown of CGI's AI-related bookings, highlighting the integration of AI into existing projects versus new AI-driven initiatives.

Think about it: as enterprises move beyond experimentation and embrace larger-scale AI implementations, CGI is already perfectly positioned to capitalize. Their expertise in both traditional IT solutions and AI-powered enhancements, combined with their long-standing client relationships and global delivery network, creates a potent mix for future growth.

So while Wall Street obsesses over short-term metrics, CGI is quietly laying the foundation for long-term dominance in the AI-powered future. The company's strategy of infusing its massive IP portfolio with AI is a masterstroke, creating a treasure trove of opportunity that most analysts seem to have completely overlooked.

Hypotheses:

AI-Infused IP Bookings to Outpace Overall Growth: Given the client enthusiasm and strategic focus, we hypothesize that bookings related to AI-infused IP solutions will outpace CGI's overall bookings growth in the coming quarters.Margin Expansion Driven by AI Efficiency: As CGI leverages AI for its own operational efficiencies, we expect to see incremental margin expansion, particularly in engagements involving AI-powered IP solutions.

These are just two potential scenarios, but the larger point is clear: CGI's AI strategy is far more nuanced and potent than many realize. It's a story of strategic foresight and hidden opportunity, one that could handsomely reward investors who look beyond the immediate headlines.

"Fun Fact: Did you know that CGI is a pioneer in space exploration? Their AI expertise is even being used to enhance data transmission rates in lunar and deep space missions. It's this kind of forward-thinking approach that positions CGI to thrive in the next wave of digital transformation."