Fortune India Explainer: What is Project Leap and why is Cognizant cutting jobs
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What is the latest ‘Project Leap’ announced by Cognizant?
The Teaneck headquartered company during its latest earnings call announced that it is undertaking a cost saving exercise - Project Leap. The aim is to have a workforce that is future proof for the company in which AI plays a pivotal role in its operating model. The company expects the savings to start kicking in in 2026 of approximately $200 million-$300 million with a full year benefit in 2027. “We anticipate approximately two-thirds of the savings generated by Project Leap will be directly reinvested to support future growth across integrated offerings, AI capabilities and partnerships, and roughly one-third toward upskilling our workforce, all while maintaining an active and strategic M&A posture," said Jatin Dalal, CFO, in the past earnings analysts .
What is the impact of the cost reduction exercise on the financials?
According to the company, the savings will help in accelerating the profitability margins. Following the announcement of Project Leap, Cognizant has raised its 2026 adjusted operating margin guidance range to 16%-16.2%, a 20 to 40 basis point of year-on-year expansion. “This is on the top of 50 basis points of margin expansion we delivered in 2025 and in line with our long-term aspiration to expand margins,” Dalal added.
Cognizant expects nearly $230 million-$320 as the expected expenses for undertaking the exercise and a bulk of it being incurred during the current fiscal year. A large part of this cost nearly $200 million-$270 million will go towards employee severance and other personnel related costs and $30 million-$50 million of other charges.
Why is Cognizant undertaking cost reduction exercise?
With AI tools now being a part of the company’s operations, the company sees Leap exercise as a realignment of its workforce pyramid to the AI age operating models. With the annual savings, Cognizant intends to plough back the cash into the platforms, AI enabling the enterprise and tokenising the enterprise. "When we get to that new operating model quicker, we are going to seize these opportunities faster, and we'll be having a more optimized, operating model, and we will have a kitty for investing into our future so that we can seize the opportunities ahead of others," S. Ravikumar , CEO & MD.
Who are the people likely to be affected by the cost reduction exercise?
At the end of last year, with nearly 2.56 lakh of the 3.51 lakh total employees based in India, much of this retrenchment impact is likely to be felt here, especially those in the middle of the pyramid and the number likely to be below 5,000. On the future structure, Ravikumar said that it will result in a broader pyramid. "That's why we're hiring more school graduates, earlier careers, and shorten the height of the pyramid so that you get to expertise much faster. That's our model. It is margin accretive because the more you broaden the pyramid, the more you could deliver the services in a more AI native way, if I may," he added.