Image Source: https://www.reuters.com/world/uk/uks-capita-flags-up-140-mln-pound-cash-outflow-2024-2024-12-17/

LONDON — Shares of Capita plunged 15% on Monday after the British outsourcer warned margins will fall in 2026, as a collapse in its call center business underscores a broader shift across the industry: traditional outsourcing is losing ground to AI.

The company said its contact centre division, once a core revenue driver, saw adjusted revenue drop 17.5% in 2025 and is expected to turn loss-making this year. At the same time, Capita flagged rising startup costs tied to new contracts, including its Synergy deal with the UK government.

The selloff marked Capita’s worst trading day since March 2024 and highlights growing investor concern over how quickly legacy outsourcing models are weakening.

But the margin warning tells only part of the story.

Capita CEO Adolfo Hernandez said the call center market is “in transition,” with artificial intelligence playing an increasing role, a shift already reshaping demand across the sector.

While voice operations decline, Capita says two-thirds of its revenue is now “AI-enabled,” including tools for fraud detection and automated customer support. The company said deployment timelines have been cut from six weeks to 10 days.

Analysts at RBC Capital Markets said Capita could benefit from rising demand for AI in the public sector, positioning the company as a conduit for digital transformation across UK government services.

Capita’s contract pipeline nearly doubled to £19.8 billion, driven largely by demand for AI-led solutions.

Still, near-term pressures remain. The company expects low single-digit revenue growth in 2026 after a decline last year, with margins weighed down by weaker call center performance and upfront investment costs.

Tags: Capita, AI, UK