Cognizant’s first quarter results for 2025 have delivered a strong surprise to the market, with better-than-expected revenue growth, strong profitability, and a bold hiring plan. At a time when many of its Indian IT peers are cautious with hiring, Cognizant’s decision to recruit 20,000 freshers has caught the industry's attention and fueled optimism in the sector.

Key Financial Highlights

Cognizant’s financial results for the January–March 2025 quarter were significantly above market expectations:

• Revenue stood at $5.12 billion, marking a 7.5% year-on-year growth, exceeding earlier estimates.

• Net profit came in at $663 million, up by 21.4% YoY.

• Earnings per share (EPS) rose to $1.23, a 10% increase from the previous year.

On a constant currency basis, the company’s top-line growth stood at 4.2%, again ahead of Street estimates.

Hiring Push Amid Cautious Sector Sentiment

While most IT companies in India, including Infosys, Wipro, and HCLTech, have taken a conservative stance on hiring, Cognizant CEO Ravi Kumar has taken a contrarian approach. The company plans to hire 20,000 freshers, showing confidence in long-term demand.

This move has been hailed as a sign of resilience and strategic positioning for future growth, especially in areas like AI-led transformation and productivity enhancement platforms.

“Today, productivity, cost reduction, and resiliency are especially important,” said CEO Ravi Kumar, “and we believe our differentiated AI and platform capabilities are helping clients navigate the near-term uncertainty while embarking on longer-term AI-led transformation.”

Sector-Wide Rally and Sentiment Boost

Cognizant’s positive earnings lifted sentiments across the IT sector. Stocks of leading Indian IT players such as TCS, Infosys, Wipro, HCLTech, and Tech Mahindra saw a spike in early trade on May 2, immediately after Cognizant's earnings call.

Despite this rally, the Nifty IT Index remains 17.5% lower in 2025 compared to the beginning of the year, even after a 16% rise since April 7, when it had hit a 52-week low of 30,918.

Rebound in BFSI and Healthcare Vertical

One of the standout trends from this earnings report is the recovery in BFSI (Banking, Financial Services, and Insurance), a vertical that has been under pressure for nearly two years. Healthcare services have also shown growth.

This rebound is significant for Cognizant and its peers, as both verticals are considered major revenue contributors. Analysts at CLSA have termed Cognizant’s earnings as “excellent,” and believe that the BFSI turnaround could have positive implications for Indian IT players who are heavily reliant on this sector.

Guidance Reaffirmed Despite Global Headwinds

Cognizant has reaffirmed its guidance of 3.5% to 6% revenue growth for the full year ending December 2025, which is a clear sign of confidence in its growth strategy despite global uncertainties.

However, not all analysts are fully optimistic. CLSA has also advised investor caution, noting that rising competition within the sector could lead to pressure on margins and profitability.

Impact of the US Economic Outlook

The company’s outlook also comes amid a challenging macroeconomic environment. The US economy contracted in Q1 2025, marking the first economic shrinkage since 2022. This decline is being linked to trade tensions with China and the resurgence of tariffs under former President Donald Trump’s policies.

This has triggered risk aversion among investors in the Indian IT sector, given the high exposure to the US market.

Despite the negative sentiment, Cognizant’s results have stood out, proving that a well-executed strategy can buffer against macroeconomic shocks.

Cognizant’s Differentiated Strategy with AI

A key highlight from the CEO’s address was the emphasis on AI and platform-based solutions. According to Ravi Kumar, clients are increasingly looking for cost-effective, resilient, and scalable digital solutions, especially those powered by AI technologies.

This focus is helping Cognizant win and retain clients, particularly in an uncertain global economic climate where companies are prioritizing operational efficiency over expansion.

Stock Market Reaction and Analyst Sentiment

Following the earnings report:

• Cognizant shares traded higher, indicating strong investor confidence.

• Peer stocks in the Indian IT sector also saw positive momentum, reflecting improved sentiment.

• Analysts from CLSA and other firms noted that while short-term caution is warranted, the long-term outlook looks encouraging if the momentum in BFSI and healthcare continues.

What It Means for Job Seekers and Investors

For job seekers, particularly fresh graduates, Cognizant’s hiring announcement is great news. It indicates a recovery in tech hiring, albeit selectively.

For investors, the company’s ability to deliver strong earnings amid economic concerns, coupled with its future-forward focus on AI and client productivity, makes it a stock to watch closely.

However, analysts advise maintaining a balanced approach, given the still-evolving US-China trade dynamics and their potential impact on IT demand.

In Summary:

• Cognizant outperformed expectations in Q1 2025 with 7.5% revenue growth and 21.4% profit jump.

• The company plans to hire 20,000 freshers, bucking the trend in the Indian IT sector.

• Recovery in BFSI and healthcare signals a positive shift for tech players, but caution remains amid US economic slowdown and geopolitical tensions.

The Upcoming IPOs in this week and coming weeks are Srigee DLM, Manoj Jewellers.

The Current active IPO are Wagons Learning, Kenrik Industries, Arunaya Organics.

Start your Stock Market Journey and Apply in IPO by Opening Free Demat Account in Choice Broking FinX.

Join our Trading with CA Abhay Telegram Channel for regular Stock Market Trading and Investment Calls by CA Abhay Varn - SEBI Registered Research Analyst.