TCS, Infosys, HCL Tech, Wipro, TechM: Cognizant IPO buzz, Q3 cues for Indian IT

Kotak Institutional Equities said Cognizant’s Q3CY25 performance offered meaningful cues for Indian IT peers such as TCS, Infosys, HCL Tech, Wipro, and Tech Mahindra. The company’s strong organic growth, raised guidance, and sustained margin resilience point to an effective turnaround under CEO Ravi Kumar, even as its proposed India IPO listing adds a new competitive dimension to the sector.

Kotak highlighted that Cognizant’s sharper execution and financial discipline have intensified competition in an environment of subdued industry growth. Its broad-based growth and market share gains in financial services and healthcare are eroding the edge historically enjoyed by Indian IT peers. The brokerage cautioned that increased competition for a limited pool of large deals could trigger more aggressive pricing and tighter margin management across the sector, especially as vendors make stronger productivity commitments through AI-led delivery models.

Kotak also noted that Cognizant has initiated a comprehensive review to evaluate a potential primary offering and secondary listing in India. While no final decision has been made, Kotak noted that any such move would be a multi-step process given regulatory complexities. An India listing, if pursued, could further sharpen Cognizant’s brand visibility and investor access in a market dominated by its Indian counterparts.

For Q3, Cognizant reported organic revenue growth of 4 per cent year-on-year, outpacing all major Indian IT firms. The company raised its Calendar 2025 growth guidance to 6–6.3 per cent (3.5–3.8 per cent organically) from 4–6 per cent earlier. Revenue for the quarter stood at 5.4 billion, up 3.2 per cent sequentially and 7.4 per cent year-on-year in dollar terms, driven by ramp-ups in large deals and healthy traction across BFSI and healthcare. Growth was broad-based across verticals and geographies.

Adjusted EBIT margin for Cognizant expanded 40 bps quarter-on-quarter and 70 bps year-on-year to 16 per cent, aided by cost efficiencies and lower SG&A expenses. Management lifted its full-year margin guidance to the upper end of 15.5–15.7 per cent, underscoring resilience despite integrating the lower-margin Belcan acquisition. Earnings per share guidance was also revised upward to US$5.22–5.26, implying 10–11 per cent annual growth.

Large deal total contract value (TCV) remained strong at $27.5 billion on a trailing twelve-month basis, up 5 per cent year-on-year, with a healthy book-to-bill ratio of 1.3 times. The quarter saw six deals above US$100 million, taking the year-to-date tally to 16. Kotak noted that Cognizant’s deal mix has become more balanced between cost optimisation and innovation-led engagements, a shift from its earlier focus on cost takeouts.

Kotak noted that Cognizant remained upbeat on leveraging AI for software development productivity and business process transformation. The company expects AI-led savings to be reinvested in scaling enterprise-wide modernisation, while its BPO operations stand to benefit from agentic AI deployment.