I’ll say it plainly: Alithya Group (TSX:ALYA) is among the most underappreciated growth stocks on the TSX right now. It’s not flashy and doesn’t trade at 50 times earnings.
But over the next three years, it has the ingredients to quietly compound into something much larger, and most investors haven’t noticed yet.
Valued at a market cap of $138 million, this Montreal-based IT services company helps major organizations implement cloud systems, ERP software, AI tools, and digital transformations. Its clients span financial services, energy, healthcare, manufacturing, and government.
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A focus on U.S. expansion
The headline numbers from Q3 fiscal 2026 (ended in December) look modest at first glance. Revenue came in at $115.2 million, roughly flat year over year. But the mix of that revenue tells a very different story.
The U.S. segment grew 12.7% year over year, reaching $55 million. It now makes up 48% of total revenue, up from just 39% when Alithya began its current three-year strategic plan. That shift matters given that the U.S. IT services market is far larger than Canada’s.
Two acquisitions have fueled most of this growth south of the border.
- eVerge, acquired in June 2025, added Salesforce implementation capabilities and opened new verticals, including construction and engineering.
- CEO Paul Raymond noted on the Q3 earnings call that global infrastructure replacement spending is surging and that Alithya is now well-positioned in that space.
The Canada slowdown, meanwhile, is deliberate. Management has been systematically walking away from low-margin government contracts in Quebec, replacing that revenue with higher-value transformation engagements.
Gross margins in Canada actually improved year over year despite the revenue decline. As COO Bernard Dockrill explained at the earnings call, the transition is roughly halfway through, and the margin benefits are already showing up.
The AI moat that investors are missing
Many investors worry that AI will hollow out IT services companies. Alithya’s management team addressed this directly, and the answer is more nuanced than the bears suggest.
Clients don’t hire Alithya to write code or draft documents. They hire it to own complex, end-to-end transformations such as integrating AI into mission-critical systems, managing regulatory risk, and overseeing change management.
In fact, Alithya is already using AI to boost its own productivity. Its consultants are building projects faster, thereby improving margins without reducing headcount. The company recently earned Microsoft Copilot Specialization certification, validating its AI expertise with one of its most important partners.
And then there’s the Datum spin-off. Alithya is separating certain AI-based intellectual property assets into a new venture focused on healthcare AI.
Rather than burying these assets inside a services business, they’ll have a dedicated operational focus to scale independently. Alithya retains a minority stake, giving shareholders exposure to the upside without carrying the cost.
A balance sheet that supports growth
Alithya’s trailing 12-month adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) sits at $52.6 million.
It ended Q3 with net debt of $101.9 million, or a leverage ratio of just 1.9 times. That’s down from 2.3 times just one quarter earlier, even after completing the eVerge acquisition.
Operating cash flow came in at $25.5 million in Q3, up $13.8 million year over year. That cash generation is giving management room to pursue additional acquisitions while continuing to reduce debt.
Raymond confirmed at the earnings call that the pipeline for further M&A remains healthy.
Bookings of $130.9 million in Q3 produced a book-to-bill ratio of 1.1. That means Alithya is winning more new business than it’s delivering: a leading indicator of future revenue growth.
Analysts forecast the TSX tech stock to more than double free cash flow, from $31.4 million in fiscal 2026 to $70.5 million in fiscal 2030. Even if the small-cap stock is priced at 10 times FCF, it could gain 400% from current levels over the next three years.
The Foolish takeaway
Alithya is a profitable, growing IT services company with 80%-plus repeat revenue, expanding U.S. operations, a clean balance sheet, and a credible AI strategy.
Moreover, it trades at a fraction of what U.S. peers command. For patient investors, this is the kind of setup that tends to reward handsomely.
