Cognizant Forecasts Weak Quarterly Revenue as IT Spending Remains Cautious

Cognizant has forecast quarterly revenue below market expectations, reflecting continued caution among clients in spending on IT services amid an uncertain economic environment. The company’s outlook signals that businesses across industries are holding back on discretionary technology investments, which has started to impact deal sizes and overall revenue growth.

The New Jersey-based IT services firm expects its current-quarter revenue to be in the range of $5.45 billion to $5.52 billion, falling short of analysts’ average estimate of $5.56 billion. The muted guidance weighed on investor sentiment, with the company’s shares declining by around 5% in premarket trading following the announcement.

The softer forecast comes at a time when enterprises are prioritizing cost optimization and efficiency measures, leading to restrained spending on non-essential IT projects. Discretionary spending, which often drives growth in consulting and digital transformation services, remains under pressure. At the same time, broader macroeconomic headwinds have reduced visibility for businesses, making companies more cautious in committing to large-scale technology investments.

In addition to the quarterly outlook, Cognizant has slightly trimmed its full-year revenue forecast. The company now expects annual revenue to be between $22.11 billion and $22.64 billion, compared with its earlier projection of $22.14 billion to $22.66 billion. While the revision is modest, it underscores the ongoing challenges faced by the IT services sector as clients delay or scale back spending plans.

Despite the cautious outlook, Cognizant delivered stable performance in the first quarter. Revenue grew 5.8% year-on-year to $5.41 billion, meeting market expectations. According to CEO Ravi Kumar, the company managed to achieve growth in the upper half of its guidance range, supported by consistent deal bookings and strong performance in its financial services segment.

However, not all business segments performed equally well. The company’s health sciences division reported revenue of $1.58 billion, which fell short of analysts’ expectations of $1.66 billion. This indicates that certain verticals continue to face demand challenges, particularly in an environment where clients are scrutinizing spending more closely.

To navigate the evolving market landscape, Cognizant has launched a new initiative called “Project Leap” in the second quarter. The program is designed to accelerate the company’s transition toward an AI-driven operating model. It includes investments in integrated service offerings as well as efforts to streamline internal operations, reflecting the growing importance of artificial intelligence in the IT services industry.

The company expects Project Leap to deliver cost savings of approximately $200 million to $300 million by 2026, which could help improve profit margins over time. However, the initiative will also involve restructuring efforts, with anticipated charges ranging from $230 million to $320 million. These costs are largely associated with workforce reductions and other measures aimed at improving efficiency.