Feb 5 (Reuters) - Compass Group, the world's largest caterer, reported a bigger rise in first-quarter organic revenue than expected on Thursday, helped by robust growth in its sports & leisure and
Compass Group Shares Decline Amid AI Concerns Despite Revenue Growth
Impact of AI Concerns on Compass Group
By Raechel Thankam Job and Yadarisa Shabong
Quarterly Revenue Performance
Feb 5 (Reuters) - Compass Group reported stronger-than-expected quarterly revenue growth on Thursday and stuck to its annual forecast, but its shares hit their lowest in over three years with analysts citing anxiety over the potential impact of AI on its office-based clients.
Market Reactions and Stock Performance
About 20% of Compass' revenue comes from technology, professional and financial services clients, exposing it to investor concerns about artificial intelligence's potential disruption to office-based work, even as it benefits from catering demand at data centre construction sites.
Future Guidance and Currency Changes
Shares in the world's largest catering group fell as much as 8% and looked headed for a fourth week of losses with analysts saying investors were also worried that weight-loss drugs could hurt its business model.
The stock has fallen over 10% so far this year, underperforming smaller rivals Sodexo and Aramark.
"Whilst a sound in-line print like today’s should otherwise be sufficient to reassure (especially at this level), it is unlikely to be sufficient to improve sentiment on the name for now," JPMorgan analysts said in a note. They said the stock was trading at relatively depressed multiples due to concerns around AI affecting office jobs.
Fears that advances in AI technology could upend business models triggered a broad selloff in software stocks in recent days.
Compass, which employs 590,000 people in over 25 countries, posted 7.3% organic revenue growth in its first quarter, beating market expectations of 7.1%, as contract wins and expansions in the technology sector drove double-digit growth in its Business & Industry segment in North America.
The London-listed company reaffirmed its 2026 guidance, continuing to expect around 10% underlying operating profit growth in constant currency supported by about 7% organic revenue growth.
Compass also said it will change the trading currency of its shares on the London Stock Exchange from sterling to U.S. dollars from April to reduce foreign exchange volatility given most of its revenue is dollar-denominated.
(Reporting by Raechel Thankam Job and Yadarisa Shabong in Bengaluru; Editing by Subhranshu Sahu and Emelia Sithole-Matarise)
