Cognizant has message for TCS, Infosys, Wipro, HCL Tech & other peers

At its Investor Day in New York, Cognizant said it is expecting its revenue growth to be among the top-4 in its peer group. Its peers include Accenture, Capgemini, CGI, DXC, EPAM, Genpact and India listed companies such as HCL Technologies Ltd, Infosys Ltd, Tata Consultancy Services Ltd (TCS) and Wipro Ltd. 

Cognizant highlighted its ambition to achieve top-tier revenue growth among its peers by 2027, while steadily bridging the gap with them in terms of revenue growth rate, Nomura noted. The key read-through for Indian IT is that the sluggishness may persist in the near term and that the expanding of addressable market is an imperative, said Kotak Institutional Equities, adding that competitive intensity for Indian IT sector may rise in the near term. 

Nomura India said Cognizant’s revenue growth gap against peers’ average improved steadily from minus 800 basis points (bps) in 2022 to 50 basis points in 2024, and the company aspires to grow above the peer average in 2025-26.

"Cognizant is aiming for top-tier revenue growth and market share expansion by maintaining large deal momentum and delivering steady 10-30bp annual margin expansion over CY25-27E," Nomura noted.

Kotak Institutional Equities said Enterprise AI adoption is picking up gradually, but is initially focused on improving productivity and optimising costs. 

"AI capabilities are evolving with improving accuracy and reduction in operational costs. New revenue streams will emerge as new use cases are identified and proven. We believe the  leaderboard would rejig with every technology wave. However, companies that have trailed the pack across multiple cycles are likely to drop further behind," Kotak Institutional Equities said.

Cognizant sees growth drivers including market share gains, strengthening AI capabilities and leveraging platforms, sustaining large deal momentum, tapping underpenetrated markets in the Americas and selective expansion in the EMEA and  leveraging partnership channel. 

Kotak said Cognizant's renewed focus on large and mega deals, coupled with a focus on driving productivity in  technology through AI and sharing it with clients and consolidating out vendors where possible, can increase the competitive intensity for Indian IT in the near to medium term.

It has 'Buy' on Infosys (target price: Rs 2,000) and TCS (Rs 4,100), 'Reduce' on HCL Tech (Rs 1,650) and 'Sell' on Wipro (Rs 265).