Key Highlights

• Europe's 1,000 largest non-financial public companies hold an estimated €1.26 trillion in excess working capital, equivalent to 14% of annual revenue

• The average cash conversion cycle improved by 1.8 days (4%) to 44.8 days in 2025

• Revenue for Europe's top 1,000 firms grew just 0.8% compared to 6% in North America

• AI-enabled process redesign could reduce dispute resolution times from 48 to 27 days, according to Hackett's modeling

The Hackett Group, Inc.(NASDAQ:HCKT), an enterprise AI transformation firm, released findings from its 2026 European Working Capital Survey on November 4, 2026. The study analyzed the 1,000 largest non-financial publicly traded companies headquartered in Europe and found that despite improving working capital performance, these companies continue to hold a substantial amount of excess cash within their operations.

Working Capital Metrics Show Mixed Progress

By working capital measures, Europe's largest companies had a generally positive year. The average Cash Conversion Cycle (CCC) improved by 1.8 days, or 4%, to 44.8 days. Days Sales Outstanding (DSO) fell by 1.9 days (4%) to 47.4 days, while days inventory outstanding (DIO) declined by 3.3 days (5%) to 67.3 days. However, Days Payable Outstanding (DPO) moved in the opposite direction, falling 3.3 days (5%) to 69.8 days, which returned part of the Cash Flow gains achieved through receivables and inventory improvements.

The broader financial picture was less encouraging. Revenue for Europe's top 1,000 firms rose just 0.8% in 2025, compared to 6% in North America. Operating Cash Flow fell 3% to 13% of revenue, and EBITDA dropped 2% to 17%. The average cash-to-current Liability ratio slipped 1% to 29%, while Debt as a share of revenue improved 1% to 47%, although Leverage remains 13% higher than three years ago.

The €1.26 Trillion Opportunity

Despite improvements in the cash conversion cycle, the total working capital opportunity across Europe's largest companies remains substantial at €1.26 trillion, representing 14% of annual revenue. While this figure declined 8%, or €113 billion, from the previous year, the remaining opportunity is distributed across three areas: €464 billion in Accounts Payable opportunity (37%), €404 billion in inventory opportunity (32%), and €391 billion in Accounts Receivable opportunity (31%).

The research noted that the relatively even distribution of the opportunity across all three areas means that isolated initiatives are unlikely to deliver substantial gains. The study also highlighted that one of the most widely used working capital strategies — extending payment terms — is becoming more constrained, with DPO falling by 3.3 days in 2025 after two years of improvement.

AI as a Potential Catalyst

The study pointed to AI-enabled process redesign as a pathway for organizations to accelerate working capital improvements. Separate AI World Class benchmark modeling by The Hackett Group shows that redesigned order-to-cash processes could reduce dispute resolution times from 48 to 27 days and average days delinquent from 9.9 to 1.5 days. These modeled performance levels illustrate the potential of combining AI with process, governance, and operating model changes rather than simply automating existing workflows.

Anne Morgan-Smith, director at The Hackett Group and author of the research, noted that with revenue growth slowing and profitability under pressure, working capital efficiency is becoming an increasingly important source of self-funded liquidity. Releasing cash tied up in receivables and inventory can help companies fund operations, reduce borrowing needs, and preserve capacity for strategic investment.

The Bottom Line

The Hackett Group's 2026 European Working Capital Survey paints a picture of incremental improvement against a backdrop of slowing growth and declining profitability. While the cash conversion cycle has tightened, the €1.26 trillion in excess working capital signals that significant operational improvements remain achievable. As traditional approaches like payment term extension face growing resistance from suppliers and regulators, the study suggests that AI-integrated process redesign may represent the next phase of working capital optimization for Europe's largest companies.