Shares of leading Indian IT companies, including Wipro, Infosys, Tata Technologies, Persistent Systems, and Mphasis, experienced a notable rally in Thursday's trading session. This surge followed positive commentary from Cognizant regarding its Business Process Outsourcing (BPO) and Banking, Financial Services, and Insurance (BFSI) segments during its second-quarter results announcement.
Positive Outlook for Indian IT Peers
Analysts at Nuvama Institutional Equities highlighted Cognizant's insights into the BPO and BFSI sectors as a favorable indicator for Indian IT firms. The expectation is for a medium-term recovery in technology expenditures, driven by enterprises resuming investments in modernizing their legacy IT systems. However, Nuvama also cautioned that volatility is likely to persist in the near term.
Specific stock movements on Thursday included Wipro rising 2.45%, Persistent Systems gaining 2.34%, Infosys advancing 2.29%, Tata Technologies increasing 2.12%, and Mphasis climbing 2.02%. Other IT majors like Coforge, Tech Mahindra, HCL Tech, L&T Technology Services, and Tata Consultancy Services also saw gains of 1-1.4%.
Deal Momentum and Discretionary Spend
JM Financial noted that while large-deal momentum remains robust, the conversion of revenue from these deals is expected to be gradual due to extended durations. The brokerage also observed that Cognizant's cautious near-term view on discretionary spending and elevated macroeconomic uncertainty aligns with the guidance provided by large-tier Indian IT companies. This suggests that factors like AI deflation, ongoing macro uncertainty, and intense industry competition continue to influence the sector.
Despite these challenges, Cognizant reported increased AI engagements, rising to over 8,000 from 5,000 in Q1. This reflects a sustained demand for enterprise AI adoption and the deployment of AI at production scale, with financial services leading the charge in leveraging AI for growth and new discretionary spending.
Cognizant's Q3 Guidance and Full-Year Outlook
For the third quarter of 2026, Cognizant projected revenue growth of 3.8-5.3% year-over-year in constant currency, including 200 basis points from inorganic contributions. However, the company adjusted the upper end of its full-year 2026 revenue growth guidance downwards to 4-5.5% from the previous 4-6.5%, attributing this revision to delays in discretionary spending recovery amidst heightened macroeconomic uncertainty. Margin guidance was maintained at 16-16.2%.
Cognizant also reiterated its plans to hire approximately 20,000 freshers in calendar year 2026, signaling continued investment in talent. Foreign brokerage Nomura highlighted Cognizant's strategy to position itself as an "AI builder," aiming to bridge the "AI velocity gap" between significant AI infrastructure investment and tangible business value realization.