Cognizant Technologies, in its first-quarter results for FY2025, outperformed market expectations by posting revenues of $5.1 billion, up 8.2% year-on-year in constant currency (cc), with nearly half of it coming inorganically. The company has retained its constant currency revenue growth guidance for the full year at 3.5% to 6.0%, while guiding for 5.0% to 6.5% or $5.14–$5.21 billion for the second quarter of the year. Cognizant has also maintained its operating margin guidance in the range of 15.5% to 15.7% for the full year.

Commenting on the company’s performance, CEO and MD Ravi Kumar said, “We saw healthy discretionary spending as clients continued to invest in cloud and data modernization, and then building foundations for AI-led innovation. On a trailing 12-month basis, bookings grew 3% over the prior year, providing a healthy backlog to support our outlook for this year. We had four large deals in the first quarter, including a mega deal valued at more than $500 million. TCV from large deals was up mid-single digits year-over-year.”

While the trailing twelve-month bookings at $26.7 billion in Q1 inched up 3% year-over-year, Cognizant bagged four large deals, including a mega deal valued at over $500 million in the quarter. While the TCV from large deals was up mid-single digits y-o-y, Q1 saw bookings drop by 7% y-o-y, largely due to the decline in business from the Rest of the World region, according to the company.

The CEO pointed out that with investments and capabilities built around AI, he sees a strong opportunity for the company, given that several recent large deals were driven by clients looking for efficiency and savings. “Sharing this AI-led hyper-productivity has been among the key differentiators for us in originating large deals led by productivity and lowering technology deployment costs,” Ravi added.

CFO Jatin Dalal also noted that there is intense pricing pressure in large deals, and what helps win these deals is the ability to reduce the cost of technology deployment for the customer — not just rate card negotiations. In large productivity or cost-takeout deals, “Deploying Gen AI into your solution and overall architecture of the deal — the more comprehensive it is, the better your pricing will be — and that's what is playing out in the marketplace. As you can imagine, there are different scales of technologies and capabilities out there. We believe that we have an early mover advantage,” he added.

At the company’s Investor Day in March 2025, it had outlined three areas where it expects AI to take the foreground: one, to enable hyper-productivity across enterprises; two, industrialising AI; and three, deploying enterprise agentic AI. As Cognizant sees AI transformation opportunities in both productivity and innovation, its early Gen AI projects have increased from 1,200 last quarter to 1,400 in Q1FY25. “The 1,400 AI projects we are doing — a lot of them are innovation-led. They are small prototypes, proof of concepts, and rapid prototypes. But as discretionary spend starts to trigger, and more importantly, when we do these cost takeouts, we underwrite some of that money — the downstream opportunities are huge,” Ravi said on the analyst call.

For faster cross-industry adoption of AI technology, Cognizant has identified five key areas: Enterprise AI agents, industry-specific large language models, digital twins for smart manufacturing, foundational infrastructure for AI, and Cognizant's Neuro AI platform for integration with NVIDIA AI technology.

To feed the talent pipeline for its AI ambitions, Cognizant is also planning to establish a 14-acre immersive learning centre in Chennai, India, where it plans to train 1 lakh people annually in advanced AI technologies. Within Cognizant, in Q1, the use of AI-written code increased to more than 20%. The company will also continue its non-metro expansion strategy within India and will soon open a centre in GIFT City, Ahmedabad.

Nomura, in its report dated May 1, revised its CY25–27F EPS estimates upward by 2% and maintained a Buy on the stock. “Our new CY25–26F EPS estimates are higher than Bloomberg consensus by 3–4%. We value CTSH at an unchanged 17x CY26F EPS. We reiterate our Buy rating with a revised TP of $96 (vs $97 earlier). CTSH is one of our top picks in the Indian IT services space,” the report said.