Cognizant's Q4 results were decent and its commentary was in line with Indian peers such as Tata Consultancy Services Ltd (TCS), Infosys Ltd, Wipro Ltd, HCL Technologies Ltd and Tech Mahindra Ltd. The management of the Dublin-based IT firm guided for 2025 growth of 3.5 per cent to 6 per cent YoY in constant currency terms, including an inorganic contribution of 250 basis points. Its bookings stood at 27.1 billion (up 3 per cent YoY) with the trailing 12-month month (TTM) backlog at 1.4 times book-to-bill. IT analysts are optimistic.
Kotak Institutional Equities said Cognizant's return to growth in Calendar 2025 (1-3.5 per cent or 2.25 per cent on a mid-point basis) on an organic basis indicates an improvement in execution — the company is delivering extremely well in the healthcare vertical, with an acceleration in growth through 2024.
Cognizant reported revenue of $5,082 million, up 6.7 per cent CC YoY, slightly above Street’s estimate of $5,071 million. "Cognizant's results and commentary are pretty much in line with that of Indian peers—which are also talking about green shoots and recovery in discretionary spends. Two years under the new CEO, CTSH is showing signs of a turnaround, even as big-ticket acquisitions (like Belcan) are playing out along expectations," Nuvama said.
The domestic brokerage said that Cognizant's results and commentary reflect a business that appears to be turning around from its bottom.
"The management commentary is also in line with that of peers — early signs of green shoots and recovery in discretionary spends in BFSI. We remain positive on the sector, anticipating favourable US macro and strong deal flow momentum to drive growth in the near term, and the Gen AI-led opportunity over medium–long term," Nuvama said.
Kotak said Cognizant has demonstrated better execution in financial services, though there are still a few rough edges that need to be smoothened out. The discretionary spending environment is improving, it said.
"The management comments on increasing contribution to deal TCV from shorter-cycle projects and a better discretionary spending environment are a positive. At the same time, growth for the industry is yet to reach normalised levels, given that the recovery is measured and not broad-based. The rough edges are in the aero, auto and manufacturing verticals," it said.
Kotak has suggested 'ADD' on TCS and TechM, Buy on Infosys, 'Reduce' on HCL Technologies, Sell on Wipro.