Alithya Group. Buy, Sell or Hold?

Alithya Group (Alithya Group Stock Quote, Chart, News, Analysts, Financials TSX:ALYA) delivered another stronger-than-expected quarter, prompting Ventum Capital Markets analyst Rob Goff to make “fine adjustments” to his estimates while maintaining his “Buy” rating and C$2.85 target in a Nov. 17 update.

Goff said Q2/F26 results underscored the company’s accelerating U.S. momentum, widening margins, and improving operating mix, which he believes are not yet reflected in the share price.

Alithya reported Q2/F26 revenue of $124.3-million, gross profit of $42.8-million and Adjusted EBITDA of $12.8-million, beating Goff’s forecasts of $122.2-million, $38.5-million and $11.0-million, respectively. Pre-quarter consensus had expected $124.2-million in revenue, $39.8-million in gross profit and $10.8-million in Adjusted EBITDA. As in Q1, the upside was driven by U.S. enterprise transformation work, stronger support activity, and continued margin expansion.

Goff made only modest revisions to his model, trimming Canadian revenue assumptions to reflect the deliberate wind-down of lower-margin domestic business and the absence of a major contract completed in Q3/F25. He raised U.S. revenue estimates after another outperformance in the region. His revised F2026 forecasts now sit at $508.9-million in revenue, $172.2-million in gross profit and $53.5-million in Adjusted EBITDA, essentially in line with consensus. He continues to model above-consensus margins and emphasized that the strength in U.S. operations “is underappreciated.”

In the quarter, he said, “We are optimistic that the ~17% organic growth in U.S. revenues will build awareness in conjunction with U.S. revenues moving to 50.8% of overall revenues on the quarter from 42.0% YoY.”

In Canada, revenue declined 7.4% year-over-year to $55.2-million, an improvement from the 8.5% decline in Q1/F26. Goff said the trend remains consistent with his view that the domestic business is stabilizing beneath the noise of completed contracts and the intentional reduction of low-margin government work. Financial services posted another quarter of year-over-year growth.

By contrast, U.S. revenue rose 17.3% year-over-year to $63.1-million, representing 50.8% of consolidated revenue, with U.S. operating margins of 21.9%. Goff highlighted management’s ongoing pricing discipline and its ability to leverage near-shore labour to meet demand for ERP and digital transformation work.

He said management’s comment that “AI adoption is a definite tailwind where companies look to adopt ERP platforms and strengthen cloud capabilities in order to have the data capabilities to effectively leverage AI.” He said that the shift in mix is central to the revaluation argument: “U.S. revenues/operating income have moved to 50.8%/62.9% of Q2/F26 results from 42.2%/45.0% on a YoY basis.”

Goff also pointed to Alithya’s client base, including 11 of the top 25 Fortune 100 companies, as evidence of its positioning in large-scale digital transformation markets. He said that near-shore labour now represents 13% of the workforce, up from roughly 6% 18 months ago, strengthening delivery capacity at lower cost.

Management reported that economic uncertainty continues to shift clients toward smaller, staged RFPs, which weighed on billings. Bookings fell to $90.9-million, a book-to-bill of 0.73, though Goff called the sequential decline seasonal, consistent with historical patterns.

Goff said M&A remains a realistic lever given more favourable valuations in the consulting and IT services sector. Two acquisitions in the past nine months have broadened Alithya’s portfolio across Microsoft, Oracle and Salesforce ecosystems.

“We are encouraged that management will build on the success of recent on-strategy, accretive acquisitions,” he said, adding that improved industry valuation conditions “are a positive light on the potential.”

He reiterated that the investment case is grounded in the structural shift of Alithya’s business toward higher-margin U.S. work, increased labour efficiency, and free cash flow strength.

“We believe the strength of U.S. organic growth at ~17% on the quarter and the increasing weight of U.S. revenues at 50.8% on the quarter (from 42.0% YoY) are both discounted in current valuations. We further note that U.S. operating income represented 62.9% of the quarter’s total from 45.0% YoY.”

He also highlighted the impact of smart-shoring and tighter cost controls.

“The F2025/26 FCF (pre-working capital) yield at 25.7%/27.4% limits downside risk while supporting flexibility for share repurchases and building resources to fund acquisitions where cash is the primary currency.”

Goff updated his valuation assumptions accordingly. His revised model now forecasts Adjusted EBITDA of C$53.5-million on revenue of C$508.9-million in fiscal 2026, compared with previous estimates of C$55.0-million and C$509.9-million. For fiscal 2027, he now expects Adjusted EBITDA of C$57.5-million on revenue of C$541.6-million, down from C$60.6-million and C$539.0-million previously.

He maintained his DCF-based C$2.85 one-year target and reiterated that Alithya offers an attractive value profile given the pace of U.S. growth, margin expansion and free cash flow yield.

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