Cognizant lowers FY26 growth outlook to 4% to 4.4% in constant currency
Bengaluru: Cognizant shares fell 4.5% in early Nasdaq trade after the IT services company lowered its revenue growth outlook for the second consecutive quarter, expecting 2026 growth to be at the lower end of its original 4-6.5% guidance range. Macroeconomic uncertainty , inflation, policy changes and supply-chain disruptions are delaying client decisions in some sectors.
The company expects revenue of $22 billion to $22.1 billion in 2026, representing year-on-year growth of 4.5% to 4.9%, or 4% to 4.4% in constant currency. The outlook includes about 150 basis points of contribution from acquisitions.
“The change in the outlook reflects two sectors where macroeconomic factors, policy uncertainty, oil prices and supply-chain disruptions are causing decision delays and uncertainty among customers. Momentum in these sectors has been lower than we anticipated in July,” CEO Ravi Kumar S said during the company’s third-quarter earnings call on Thursday.
Cognizant guided revenue growth of 3% to 4.5% in the March quarter, indicating a slowdown from the September quarter. It also revised the expected spending on its Project Leap programme to $180 million-$250 million, citing the redeployment and retraining of more employees than initially planned.
In the September quarter, revenue rose 4.6% year-on-year to $5.6 billion, or 4.8% in constant currency. Acquisitions, mainly Astreya and 3Cloud, contributed about 210 basis points to growth, while third-party product sales added around 190 basis points.
Growth was uneven across business segments. Financial services grew 12.3% in constant currency, marking its third consecutive quarter of double-digit growth. Health sciences revenue declined 1.1%, while products and resources fell 0.9%. North America grew 5.7%, compared with 1.4% in Europe.
Kumar said healthcare spending was affected by regulatory uncertainty around Medicaid and Medicare funding and enrolments. “That uncertainty is affecting enrolment levels and customer spending. As the funding environment becomes clearer, we expect the sector to stabilise. Funding cycles could support a recovery in 2027.”
Retail and consumer goods customers remained cautious amid concerns over interest rates, affordability and tariffs.
Kumar said AI remained a growth opportunity, with the focus gradually shifting from productivity improvements in existing work to developing new products and services. However, discretionary spending has not picked up as quickly as expected.
“As the macroeconomic environment improves, we expect new AI-led opportunities to outpace the productivity-related revenue deflation,” he said.
CFO Jatin Dalal said about 50% of Cognizant’s code was now assisted by machines. Revenue per employee rose 3%, while profit per employee increased 5%, reflecting the contribution of digital labour.
The bookings mix is also changing, with new expansion bookings rising to 60% of the total from 48%. Trailing 12-month bookings grew 4%, while large-deal bookings rose 9%. The higher share of new business could help bookings translate into revenue faster than renewals, Kumar said.
Cognizant added 3,200 people sequentially, taking the tally to 3.6 lakh employees, up about 10,000 year-on-year. Voluntary attrition stood at 12.6%. Dalal said the company had around 32,000 employees in the US, the vast majority of whom were local hires, and planned to recruit close to 1,000 employees through US campus hiring this year. He said immigration changes were not expected to affect its US talent strategy.
On the proposed India listing, Dalal said the company was awaiting changes to the regulatory framework and would decide once the final rules were available, expected in the coming weeks to a couple of months.
The company expects revenue of $22 billion to $22.1 billion in 2026, representing year-on-year growth of 4.5% to 4.9%, or 4% to 4.4% in constant currency. The outlook includes about 150 basis points of contribution from acquisitions.
“The change in the outlook reflects two sectors where macroeconomic factors, policy uncertainty, oil prices and supply-chain disruptions are causing decision delays and uncertainty among customers. Momentum in these sectors has been lower than we anticipated in July,” CEO Ravi Kumar S said during the company’s third-quarter earnings call on Thursday.
Cognizant guided revenue growth of 3% to 4.5% in the March quarter, indicating a slowdown from the September quarter. It also revised the expected spending on its Project Leap programme to $180 million-$250 million, citing the redeployment and retraining of more employees than initially planned.
In the September quarter, revenue rose 4.6% year-on-year to $5.6 billion, or 4.8% in constant currency. Acquisitions, mainly Astreya and 3Cloud, contributed about 210 basis points to growth, while third-party product sales added around 190 basis points.
Growth was uneven across business segments. Financial services grew 12.3% in constant currency, marking its third consecutive quarter of double-digit growth. Health sciences revenue declined 1.1%, while products and resources fell 0.9%. North America grew 5.7%, compared with 1.4% in Europe.
Kumar said healthcare spending was affected by regulatory uncertainty around Medicaid and Medicare funding and enrolments. “That uncertainty is affecting enrolment levels and customer spending. As the funding environment becomes clearer, we expect the sector to stabilise. Funding cycles could support a recovery in 2027.”
Retail and consumer goods customers remained cautious amid concerns over interest rates, affordability and tariffs.
Kumar said AI remained a growth opportunity, with the focus gradually shifting from productivity improvements in existing work to developing new products and services. However, discretionary spending has not picked up as quickly as expected.
“As the macroeconomic environment improves, we expect new AI-led opportunities to outpace the productivity-related revenue deflation,” he said.
CFO Jatin Dalal said about 50% of Cognizant’s code was now assisted by machines. Revenue per employee rose 3%, while profit per employee increased 5%, reflecting the contribution of digital labour.
The bookings mix is also changing, with new expansion bookings rising to 60% of the total from 48%. Trailing 12-month bookings grew 4%, while large-deal bookings rose 9%. The higher share of new business could help bookings translate into revenue faster than renewals, Kumar said.
Cognizant added 3,200 people sequentially, taking the tally to 3.6 lakh employees, up about 10,000 year-on-year. Voluntary attrition stood at 12.6%. Dalal said the company had around 32,000 employees in the US, the vast majority of whom were local hires, and planned to recruit close to 1,000 employees through US campus hiring this year. He said immigration changes were not expected to affect its US talent strategy.
On the proposed India listing, Dalal said the company was awaiting changes to the regulatory framework and would decide once the final rules were available, expected in the coming weeks to a couple of months.
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