The tech sector continues to be in focus after the sharp selloff following Anthropic introduced the latest AI Plugin. However, Nomura continues to be bullish on key technology counters like – Cognizant Technology Solutions, one of the large global IT services companies. The global brokerage house Nomura has reiterated ‘Buy’ rating on this Nasdaq-listed tech firm and sees an upside potential of 34% from current levels.
As per the brokerage house report, steady execution, improving margins, and strong deal activity are helping the company navigate an uncertain global environment.
Let’s take a look at the key reasons why the brokerage house has a ‘Buy’ on this stock and what is the rationale behind it –
Nomura on Cognizant: December quarter performance lifts sentiment
Cognizant, which follows the calendar year, reported an 18.7% year-on-year (YoY) rise in net profit to $648 million for the December 2025 quarter, compared with $546 million in the same period last year.
Revenue for the quarter stood at $5,333 million, a 3.8% YoY growth in constant currency terms, which was higher than the company’s guided range of 2.5-3.5%.
Nomura in the report noted that the company delivered a “Q4FY25 – beat across all parameters” as revenue, margins, and earnings per share all came in ahead of expectations.
The brokerage highlighted that growth was “entirely organic”, without any help from acquisitions during the quarter.
Nomura on Cognizant: North America and financial services drive growth
According to the brokerage report, growth was led by North America, which recorded 4.2% YoY growth in constant currency terms. Among business segments, financial services stood out, growing 9.3% YoY. The brokerage noted that this reflects improving discretionary spending in certain pockets, even as some sectors remain cautious due to tariff-related pressures.
Adjusted operating margin, also known as earnings before interest and taxes (EBIT) margin, came in at 16%, up 30 basis points year on year, and higher than Nomura’s estimate of 15.7%. Adjusted diluted earnings per share rose to $1.34, a 22% YoY.
Nomura on Cognizant: Full year growth beats guidance
For the full FY25, Cognizant reported 6.4% growth in constant currency terms, beating its earlier guidance of 6-6.3%. Nomura pointed out that this growth included an “~260 basis point inorganic component”.
The brokerage believes this shows the company’s ability to execute well despite global macroeconomic uncertainty. It added that Cognizant is “firmly establishing itself in the winner’s circle” among global information technology service providers.
Nomura on Cognizant: FY26 outlook balanced amid uncertainty
Cognizant has guided for 4-6.5% YoY growth in constant currency terms for FY26. This includes around 150 basis points of inorganic contribution. At the midpoint, organic growth is expected to be about 3.8%, which Nomura described as “reasonable in the face of macro uncertainties”.
The company’s trailing twelve month order bookings stood at $28.4 billion, up 5% year on year, with a book-to-bill ratio of 1.3 times.
According to Nomura, this indicates healthy demand visibility. The brokerage also noted management’s comment that “cost pressures are driving demand for optimisation, vendor consolidation and productivity-led deals.”
Nomura on Cognizant: Artificial intelligence strategy
According to the brokerage report, Cognizant currently has around 4,000 live assignments related to artificial intelligence across its clients.
Nomura on Cognizant: Margins supported by cost actions
Cognizant’s margins continue to benefit from its internal efficiency programme. Nomura said “margin recovery continued under NextGen initiative”, supported by cost savings and the depreciation of the Indian rupee.
Utilisation levels stood at 83%, while headcount increased marginally to around 3,52,000 employees.
Management expects 10-30 basis points YoY margin improvement in FY26, driven by artificial intelligence-led productivity and workforce optimisation. Nomura expects the company to deliver an average 15.9% operating margin over FY26–FY27.
Nomura on Cognizant: Valuation and target price
Nomura has made a small 1-2% cut to its FY26-27 earnings estimates. This is mainly due to a slightly higher tax rate. Even after this adjustment, the brokerage noted that its estimates remain 3-4% higher than Bloomberg consensus.
Conclusion
The brokerage continues to value Cognizant at 17 times first-half FY27 earnings per share and has set a target price of $100, slightly lower than the earlier $102, while maintaining its Buy call.
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor.