Capgemini, the narrow-moat company, announced its first-half results, which were in line with our expectations and company guidance. However, the stock experienced a decline of close to 7% during the day. While European technology stocks are currently in the red, a 7% drop is a significant move. We believe that the market's negative reaction is due to the company's announcement of a €2 billion investment over the next three years in artificial intelligence, which may be seen as a potential threat to the industry. However, we do not anticipate a substantial change to our fair value estimate of €210. Considering the current levels, the shares appear undervalued. The company reaffirmed its guidance for 2023, which includes revenue growth of 4%-7% in constant currency, an operating margin of 13. 0%-13. 2%, and organic free cash flow of approximately €1. 8 billion. The second-quarter revenue growth slowed to 5. 2% at constant exchange rates, or 7. 9% for the first half, as expected due to more challenging macroeconomic conditions. Nevertheless, the operating margin for the first half expanded by 20 basis points to 12. 4% as Capgemini's revenue mix continued to shift towards higher-margin services in intelligent industry and digital transformation activities, such as cloud, data, and artificial intelligence. Bookings increased by 4%, and the book/bill ratio remained healthy at 1. 05. The majority of the revenue slowdown seems to be occurring in North America, as second-quarter revenue growth was flat in that region. North America is often considered an indicator for IT services, so the market may be concerned about global growth declining more than expected in the second half. Capgemini has revealed its plan to invest €2 billion in artificial intelligence over the next three years to develop industry-specific offerings. Additionally, the company intends to double its data and artificial intelligence employee base to 60, 000 people during this period. At Morningstar Investor, we aim to turn stock insights into action.

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