US-based IT services major Cognizant on Wednesday lowered the upper end of its full-year revenue growth guidance, signalling that clients continue to remain cautious on discretionary technology spending despite the company reporting steady second-quarter growth, improving margins and healthy deal momentum.
The Nasdaq-listed firm now expects FY26 revenue to grow 4-5.5%, compared with its earlier forecast of 4-6.5%. The revision comes even as Cognizant maintained that it continues to outpace the broader IT services industry and expects demand for AI-led projects to remain resilient.
For the April-June quarter – its second quarter as it follows January-December financial year – Cognizant reported revenue of $5.48 billion, up 4.5% year-on-year, or 4.1% in constant currency, broadly in line with analysts’ estimates. Net profit at $636 million, was lower by 1.4% from $645 million posted in the second quarter last year.
For the September quarter, it guided for revenue of $5.60-5.68 billion, implying year-on-year growth of 3.4-4.9%, marginally below the consensus estimate of $5.70 billion. The company also raised its adjusted earnings per share guidance for the year to $5.70-5.82, representing growth of 8-10%.
AI Deal Momentum
“The revision reflects continued macroeconomic pressures from restrained discretionary spending,” Chief Executive Officer Ravi Kumar S said, adding that Cognizant’s revenue growth remains well ahead of its peer group. He said the company’s organic growth was at the upper end of expectations, driven by continued demand for AI-led engineering, infrastructure and data modernisation work. Financial services, Cognizant’s largest business, delivered a second consecutive quarter of double-digit growth, reflecting strong client demand.
Kumar said the company expects total contract value to improve further in the current quarter, with banking and financial services deal bookings at historic highs. While many AI engagements continue to focus on efficiency and productivity, Cognizant is increasingly signing a larger number of mid-sized AI deals worth $20-50 million, indicating that enterprises are expanding AI deployments beyond pilot projects.
Trailing 12-month bookings rose 5% to $29.1 billion, translating into a healthy book-to-bill ratio of 1.3. Cognizant signed seven large deals during the quarter, unchanged from the previous quarter, of which three were net new. However, second-quarter bookings were down 6% from a year earlier, reflecting a tougher base.
Operating Margin Expansion
The company also continued to improve profitability. Operating margin expanded 30 basis points year-on-year to 15.9%, while adjusted operating margin rose 40 basis points to 16%. Chief Financial Officer Jatin Dalal said the company remained focused on disciplined execution while continuing to invest in AI capabilities through acquisitions and share buybacks.
Among business segments, financial services remained the standout performer with 12% year-on-year growth, while health sciences grew 1.4% and communications, media and technology rose 1.5%. Headcount stood at 356,700 at the end of June, down 900 sequentially following the workforce optimisation programme announced last quarter, but up 12,900 from a year ago. Voluntary attrition edged up to 13% from 12.3% in the previous quarter.