Cognizant has ambitious plans to position itself among the top four IT services companies globally by 2027. The firm is aiming for significant revenue growth, market share enhancement, and securing large-scale contracts. However, industry analysts caution that meeting these lofty goals could prove challenging, given Cognizant’s previous difficulties and the competitive landscape.
Cognizant’s Vision for the Future
S. Ravi Kumar, the CEO of Cognizant, expressed a clear ambition: “We aspire to be in the winner’s circle by 2027.” This term refers to the elite group of the fastest-growing and largest IT service providers. Kumar emphasizes that their goal is not just about revenue; it’s about becoming a top-tier player in the sector.
Current Market Performance
Cognizant’s financial trajectory has not matched that of its key rivals, which include Accenture, Tata Consultancy Services (TCS), Capgemini, and Infosys. While Cognizant recorded a modest 2% revenue growth in 2024, competitors like Accenture and TCS saw growth rates of 4% and 4.1% respectively. Cognizant anticipates revenues between $5 billion and $5.1 billion for the January-March quarter and a total of $20.3 billion to $20.8 billion for the fiscal year.
Strategic Framework for Growth
To achieve its goals, Cognizant has outlined a comprehensive four-point strategy:
- Enhancing Profitability
- Gaining Market Share
- Focusing on Large Contracts
- Ensuring Consistent Revenue Growth
Kumar stated, “Being in the winner’s circle means not just achieving top-tier revenue growth but also gaining market share and maintaining momentum in large deals while preparing for future challenges.”
Improving Margins and Leveraging AI
Cognizant is committed to boosting its profit margins by 30 basis points annually until FY27. This will be accomplished through better workforce utilization, shifting customer focus towards outcomes, growing managed services, and utilizing artificial intelligence to enhance productivity.
The company is also placing a strong emphasis on AI, adopting a three-part approach that includes:
- Hyper Productivity through Platform Capabilities
- Strengthening AI Capabilities
- Integrating Digital Agents into Business Processes
Market Expansion and Sector Focus
Cognizant aims to broaden its reach by targeting less explored areas in the Americas and selectively expanding within Europe, the Middle East, and Africa (EMEA). The firm is also concentrating on critical industry sectors such as healthcare, banking, and life sciences. By leveraging AI, automation, and cloud modernization, Cognizant seeks to drive cost efficiencies and bolster its competitive edge.
Analyst Perspectives on Growth Potential
Despite Cognizant’s strategic initiatives, analysts from Kotak Institutional Equities express skepticism regarding the company’s ability to achieve top-tier growth in the current business environment. They noted that while Cognizant has successfully secured significant contracts and advanced AI-driven productivity, sustaining this growth will be essential. They believe that Cognizant’s focus on large contracts and enhancing AI productivity could intensify competition within the Indian IT sector.
Leadership Changes and Performance Overview
Since stepping into the CEO role in January 2023, Kumar has been focused on revitalizing the company. His first year, however, was marked by a revenue decline. Although Cognizant reported a 4% revenue growth in 2024, totaling $19.7 billion, this figure includes contributions from acquisitions like Belcan and Thirdera, indicating challenges in achieving organic growth.
Cognizant’s operating margins have fluctuated, dipping from 15.3% in 2022 to 13.9% in 2023, before rebounding to 14.7% in 2024. This recovery can be attributed to cost-cutting measures, including a workforce reduction of nearly 11,000 employees.
In summary, Cognizant’s ambitious strategy for the coming years highlights its commitment to growth and innovation, but the path forward will require overcoming significant challenges in a highly competitive landscape.
