Cognizant appears to be in slight trouble. In two of the last three years, the company’s revenue growth fell below the 5% mark, and in one of the years, it reported a negative growth. The outsourcing firm’s financials show some visible signs of distress emerging across its operations, which include giving away its workspace and also reducing headcount.
According to a recent report, Bagmane Group is in advanced talks to acquire the Chennai office property of Cognizant for approximately ₹800 crore.
The campus, which has served as Cognizant’s India headquarters for over two decades, spans 13.39 acres and includes 5.6 lakh square feet of office space along Chennai’s bustling IT corridor. According to estimates, the Chennai office has a capacity of around 55,000 employees.
Following the acquisition, the site has the potential for expansion, with the possibility of developing up to 3 million square feet of additional space.
Cognizant says that this transaction aligns with its ongoing cost-optimisation strategy, which aims to cut $400 million in expenses over two years as part of its 2023 restructuring plan. Cognizant has strategically shifted towards an asset-light model, focusing on shedding non-core real estate holdings.
The company has been reducing its global office footprint, shedding 11 million square feet of space worldwide. In 2023 alone, Cognizant reduced its Chennai office space by 1.15 million square feet to enhance operational efficiency and also sold its office spaces in Hyderabad of 10 acres, citing similar reasons.
The company had plans to consolidate its Chennai operations into three of its own buildings located at Madras Export Processing Zone (MEPZ), Sholinganallur, and Siruseri, with headquarters relocating to the MEPZ campus near Tambaram by December 2024.
The Thoraipakkam property, historically significant as the site where Cognizant remotely rang the Nasdaq opening bell, has faced challenges including flooding issues due to its proximity to a water body, leading to increased maintenance costs.
This practical consideration further justifies the strategic nature of the sale rather than indicating financial distress.
A mail sent by AIM to Cogizant seeking clarification on the matter went unanswered.
In August 2024, Cognizant expanded its presence in Indore with its first office, a move set to create over 1,500 jobs with potential growth to 20,000 in the future. However, all seems fine for Cognizant at the moment.
The Employee Problem Remains Real
Despite the positive outlook for selling its office spaces, Cognizant has experienced notable changes in its workforce structure, with headcount declining by 10,700 employees year-over-year to 3,36,800 as of December 31, 2024.
AI adoption hasn’t been all good news for Indian IT. For the most part, firms integrate generative AI products into their client offerings. At the same time, there have been several reports about how these AI tools are slowly going to reduce the demand for services themselves, making them rethink their business models.
Cognizant has been quite vocal about implementing generative AI into its workflow and also for its clients. This might indicate why there is a decline in headcount.
Another interesting aspect is that Cognizant employees in India will have to wait until August 2025 for their next salary hike, marking the second consecutive year of delays. Even last year, the company postponed increments, eventually providing only a 5% raise in August.
Meanwhile, eligible employees have began receiving their bonuses from March 10, according to an internal memo.
Reports suggest the delay is part of an effort to manage high attrition rates. Voluntary attrition at Cognizant climbed to approximately 16% in the last fiscal year, up from 13.8% for the period ending December 31, 2023.
This reduction in headcount included a sequential decrease of 3,300 employees in the final quarter of 2024. Simultaneously, the company’s attrition rate has increased to 15.9% on a trailing twelve-month basis, representing a rise of 2.1 percentage points.
Leadership Remains Confident
Despite these reductions, company leadership has expressed confidence about future hiring. CFO Jatin Dalal revealed, “As we look forward, we feel that we will add headcount as we need to grow and as we grow during the course of 2025.”
Notably, CEO Ravi Kumar S highlighted a positive trend in talent attraction, highlighting that 13,000 former employees had returned to Cognizant, with an additional 10,000 expressing interest in rejoining.
This suggests the company is adjusting its workforce strategically rather than implementing crisis-driven cuts. The company’s utilisation rate declined by 2 percentage points to 82%, though management emphasised that utilisation improvements remained strong throughout 2024.
Speaking of utilisation, a former Cognizant employee shared their experience of spending over two years at the company with little to no real work. After onboarding and four months of Java Spring Boot training, they waited two months for a project assignment.
When placed, they, along with two other freshers, were told to wait another three months until a vacancy opened. Even after receiving knowledge transfers (KTs), they were overlooked for the role and continued waiting.
Placed on the bench, they struggled to find another project amid intense competition. HR advised them to train in Apache Camel, which led to another two months of unproductive learning. Forced to work from the office five days a week without their personal laptop, they were unable to prepare for external opportunities.
Despite a year of “experience”, actual work remained elusive. A senior eventually gave them minor tasks, but within two months, they were relieved from the project due to cost-cutting amidst the time of severe layoffs.
Five months later, they were terminated with three months of severance pay.
Financials Remain Sceptical
Cognizant reported full-year 2024 revenue of $19.736 billion, representing a 1.98% increase compared to the previous year.
This growth reverses the slight downward trend in 2023, when the company reported revenue of $19.353 billion, a marginal 0.39% decline from 2022 and a 4.9% revenue growth in 2022.
For FY21, the company reported total revenue of $18.5 billion, with 11.1% year-on-year growth, with business momentum in the digital business after a relatively flat performance in 2020, which had seen a slight decline of 0.78% compared to 2019.
This has been the case for most of the Indian IT firms as most of them reported single digit growth over the last few quarters.
Despite this, Cognizant has provided a positive outlook for 2025, forecasting revenue growth of 3.5% to 6.0% in constant currency terms, with revenue expected to reach between $20.3 billion and $20.8 billion.
For the first quarter of 2025 specifically, the company expects revenue between $5.0 billion and $5.1 billion, representing growth of 5.6% to 7.1% year-over-year.
The numbers, however, continue to be single digit.
Based on the available evidence, Cognizant appears to be a company in transition rather than in trouble, just like any other Indian IT firm. While workforce reductions and real estate divestitures might initially raise concerns, these actions align with a deliberate strategy to optimise operations, reduce costs, and position the company for future growth.
The upcoming Investor Day on March 26 will likely provide further clarity on the company’s strategic direction and growth plans.
