When CEO Daniel Julien took the stage in New York for a pivotal investors’ relations day in June, he knew the stakes were high. Julien’s company, the French outsourcing giant Teleperformance , had lost more than 75% of its value from its 2022 high. He was tasked with convincing his audience — investors and Wall Street analysts — that they had misunderstood the business. He, and other Teleperformance executives, spent the next three and a half hours explaining that AI was integral to the future of Teleperformance, citing “AI” more than 75 times. Teleperformance operates call centers and other business process outsourcing services. It is one of the largest employers in the world with nearly 500,000 workers worldwide. Julien’s plan was detailed, and the targets were ambitious, yet the market’s verdict was swift and brutal. Shares in the outsourcing firm tumbled 14% following the June 18 Capital Markets Day, when the company laid out its new AI-centric strategy. In the days that followed, the slide continued, wiping out nearly a fifth of the company’s value. TEP-FR 1Y mountain The sell-off highlighted the market’s doubts over the firm’s future in an automated world, despite Julien’s best efforts, even as a big acquisition in the sector suggested a premium for the very skills Teleperformance offers. Investment banks say that generative AI could pose both a major threat and opportunity for Teleperformance — a company built on the labor of hundreds of thousands of call-center agents. Executives at the CAC 40 company detailed plans to grow its core business with AI, setting long-term financial targets. The company is targeting 4% to 6% annual revenue growth by 2028, an adjusted profit margin of approximately 15.5%, and a cumulative net free cash flow (FCF) of approximately 3 billion euros ($3.5 billion) between 2026 and 2028. The company also earmarked roughly 1.5 billion euros for dividends and buybacks, another 600 million euros for AI-related investments, and the rest for paying down debt. The bear case For Wall Street’s bears, the plan did little to reassure them about a business model under siege. Investors are worried about the deflationary pressure of AI. As automated systems handle more customer interactions, the value of traditional human-led services, particularly those in lower-cost offshore locations, comes under pressure. This is already starting to show. In 2024, the company’s “Core Services” division saw its adjusted profit margin fall by 10% year-over-year, excluding one-time gains and expenses, on just 1.4% growth. “Into 2025 and beyond we are sceptical the company can meet consensus expectations as deflation from offshoring will likely persist, with automation-related deflation only set to accelerate,” said JPMorgan analyst Sylvia Barker in a note to clients on July 7. Barker sees the stock rising just 3% to 91 euros by the end of next year. The ‘Buy’ side Bullish analysts, however, say that the sell-off is a significant overreaction, creating a compelling investment opportunity. For them, the market has priced in a worst-case scenario that ignores the company’s ability to pivot and its financial strength. The 47-year-old company, founded by Julien, doubled its sales to more than 10 billion euros in 2024. It’s also sitting on more than a billion euros of cash in its bank account, according to FactSet data, that it can deploy at will. Analysts at Berenberg, who have a Buy rating on Teleperformance, say it is “materially undervalued at 4x EBITDA,” an adjusted profit metric. Bank of America, also with a Buy rating, called its valuation “attractive” and pointed to a shareholder-friendly capital return policy. Even some of the more cautious analysts acknowledge the low valuation. Nearly everyone, however, pointed to the lack of near-term guidance amid the start of heavy investments in AI as the reason behind the share tumble. “In our view, this is due to the company emphasising its heavy opex and capex investment in AI in the short term, alongside its hockey-stick trajectory growth to FY 2028,” said Berenberg analyst Carl Raynsford in a note to clients on June 20. Raynsford — one of the most bullish analysts who expects the stock to more than double to 190 euros over the next 12 months — said the company’s target of 3 billion euros of free cash flow by 2028 looks “overly cautious.” These analysts believe the market is misinterpreting the company’s AI investments. “We like the strategy,” said Simona Sarli, analyst at Bank of America. “The company aims to expand into higher-growth back-office solutions and reposition its Customer Experience offering to high-value-added tasks via targeted AI investments.” Peer review Adding to the complexity is a puzzling inconsistency in how the market is treating Teleperformance compared to its peers. Analysts at RBC Capital Markets highlighted that investors are “rewarding” Concentrix , a Nasdaq-listed peer, for its AI strategy, while writing off Teleperformance’s equivalent as an “exercise in value destruction.” RBC noted that Concentrix is up nearly 40% year-to-date, while Teleperformance is up just 8%, in line with France’s CAC 40 index. TEP-FR CNXC YTD line They also point to a survey commissioned by Concentrix that showed that 85% of large companies expect to increase their outsourcing budgets over the next two to three years, with the “majority of that increase expected to be net new investments in supporting their AI agenda.” Scotiabank echoed the sentiment on the sector. “Based on our ongoing discussions with global [customer experience (CX)] companies, we believe that, contrary to investor concerns, the revenue landscape for CX companies is not shrinking,” said Scotiabank’s Divya Goyal in a note to clients. “Instead, it is transitioning, with outsourcing on the rise. This propensity for outsourcing grows as new technologies are introduced into the market, ultimately benefiting established CX players.” Capgemini’s WNS acquisition Just as investors were weighing Teleperformance’s AI strategy, the corporate M & A market delivered a powerful data point. On July 7, French IT consulting giant Capgemini announced it was acquiring WNS , a major player in the business process outsourcing (BPO) space, for $3.3 billion in cash. Capgemini has agreed to pay a 17% premium to the prior day’s close at a valuation of 15 times forward earnings —a multiple nearly three times that of Teleperformance, analysts at TD Cowen pointed out. Crucially, the rationale for the premium price was WNS’s perceived value in an AI-driven world, according to the analysts. “The deal counters certain market participants’ bear thesis on BPM,” said Bryan Bergin, TD Cowen’s analyst. “Perception of BPO has been materially hampered amid the rise of GenAI/Agentic tech due to fears of cannibalization, though this has not yet happened broadly in practice yet.” A ‘show-me’ story Caught between conflicting signals, many on Wall Street have adopted a wait-and-see approach, as captured by one analyst who said Teleperformance had become a “show-me story.” “[Teleperformance’s (TP)] new growth strategy needs to prove that AI can drive enough growth and sustainable new revenue streams to offset headwinds from the outright automation of some services, and accelerated deflation on others,” said UBS analyst Nicole Manion in a note to clients. “While we note that TP has proven exactly this through previous tech shifts, the current rate of change means that it appears a much less certain outcome this time around,” Manion added. Similarly, Bank of America’s Sarli says the company has failed to buckle up investors who could be in for a rollercoaster ride over the next few years. “We don’t doubt the merits and potential of the new strategy,” Sarli said in a note to clients on June 24. “But we think management failed to reassure investors on whether progress to its 2028 financial targets will be linear or … follow a year of transition in 2026, with the risk of potentially softer growth and margins than in 2025.” Teleperformance did not respond to a request for comment from CNBC.
