The project, announced on Wednesday as part of the company’s first-quarter (January-March/Q1) results, aims to transform the company’s operating model by investing more in artificial intelligence (AI) capabilities and offerings, upskilling the workforce, realigning it to market demands, and improving productivity. It is expected to generate savings of $200-300 million this year and lift margins by 20-40 basis points (bps).
“The pyramid structure is changing and it will be broader at the base, with people at the bottom being AI-native. Humans are not the way to look for value. It is one input parameter. Rather, enterprises have to own outcomes for their clients and price their products and services to deliver these outcomes,” Chief Executive Officer Ravi Kumar S said.
Cognizant declined to comment on how many people will be shown the door, but said redundancies will be across geographies and all parts of the company. The industry thumb rule is a severance cost of about $100 million for every 10,000 employees.
The decision to lay off employees comes on the same day the company said it will buy Astreya, an IT services and technology provider focused on AI infrastructure and data centre services, for an undisclosed sum. Reports peg the deal at about $600 million.
Most of the company’s employees are based in India, making the impact potentially sizeable. As of December 31, it had about 351,600 employees, including 256,900 in India, 41,600 in North America, 14,600 in continental Europe and 7,800 in the UK. That rose to 357,600 at the end of March.
The move mirrors that of Tata Consultancy Services, which laid off 12,000 people in July — mostly mid-level and senior managers — who were seen as not equipped with the latest technologies.
This is the second restructuring programme under Kumar after the NextGen programme three years ago, when Cognizant spent $400 million over two years to restructure operations amid sluggish growth. That resulted in the elimination of 3,500 non-billable roles and corporate functions, besides reducing its real estate footprint.
In 2020, at the height of the pandemic, Cognizant undertook a Fit for Growth programme that envisaged restructuring charges of $170-200 million, leading to annual gross savings of $500-550 million. It also targeted cutting about 10,000 employees, improving efficiency, reducing costs, streamlining the operating model, and winning more digital deals.
Meanwhile, for Q1 of calendar year 2026 (the company follows a January-December financial calendar), revenue rose 5.8 per cent to $5.4 billion and 3.9 per cent in constant currency. Net income was flat at $662 million, while adjusted operating margin rose 10 bps to 15.6 per cent from a year earlier.
On a trailing 12-month basis, bookings increased 11 per cent year-on-year to $29.6 billion, representing a book-to-bill ratio of about 1.4x. First-quarter bookings rose 21 per cent year-on-year and included seven large deals — contracts with total value of $100 million or more — including one mega deal valued at $500 million or more.
The company guided full-year revenue of $22.11 billion to $22.64 billion, implying growth of 4.8 per cent to 7.3 per cent, or 4 per cent to 6.5 per cent in constant currency. Second-quarter revenue is expected at $5.45 billion to $5.52 billion, implying growth of 3.8 per cent to 5.3 per cent, or 3.2 per cent to 4.7 per cent in constant currency.
Kumar added that the company’s AI-led strategy is beginning to gain traction, with over 5,000 AI engagements underway.
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