IT Stocks Rally as Cognizant Beats Q1 Estimates, Raises Outlook

Shares of major Indian IT companies such as TCS, Infosys, Wipro, and HCL Technologies surged on May 2 after Cognizant Technology Solutions reported stronger-than-expected first-quarter results and raised its annual revenue forecast, fueled by increased demand for AI-driven IT services. These gains outpaced the 1% rise in the Nifty IT index.

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Indian IT stocks, including TCS and Infosys, surged following Cognizant’s impressive Q1 results and its upbeat outlook for the year.

Nifty IT Index Shows Recovery Amid Strong Earnings Reports

Despite a challenging start to the year, with the Nifty IT index down nearly 17.5% so far in 2025, the sector has seen a notable rebound of around 11% since April 9. This recovery coincided with US President Donald Trump’s decision to pause reciprocal tariffs for 90 days, providing some relief to the IT sector.

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The Nifty IT index has rebounded by 11% since April 9, with Cognizant’s results boosting investor sentiment.

Cognizant Exceeds Expectations with Strong Q1 Performance

Cognizant’s first-quarter performance exceeded both its own guidance and Wall Street estimates. The company reported Q1 revenue of $5.1 billion, reflecting a 7.5% year-over-year increase (8.2% in constant currency), surpassing its forecasted $5.07 billion. Net profit surged by 21%, reaching $663 million for the quarter ended March 31, 2025.

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Cognizant’s revenue grew by 7.5% year-over-year, surpassing expectations, with a notable 21% increase in net profit.

Annual Revenue Forecast Raised, But Q2 Outlook Remains Cautious

Cognizant maintained its full-year constant currency revenue growth forecast at 3.5–6%, though it issued a more cautious projection for Q2, expecting sequential growth of 5–6.5%. Despite the slightly weaker Q2 forecast, the company reported no significant macroeconomic disruptions or client cancellations during Q1, with resilient demand from the financial services sector.

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Cognizant raised its full-year revenue forecast but projected slower growth in Q2 due to a cautious outlook.

Strong Bookings and Healthy Book-to-Bill Ratio

Cognizant’s bookings rose by 3% year-over-year to $26.7 billion, with a healthy book-to-bill ratio of 1.3x. However, Q1 bookings were 7% lower than the same period last year. The company signed four large deals, each valued at over $100 million, down from ten in the previous quarter.

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Bookings grew 3% year-over-year, but Q1 bookings fell by 7%, with four large deals signed during the quarter.

A Shift in Key Sectors

Analysts from CLSA noted that the rebound in healthcare and BFSI (Banking, Financial Services, and Insurance) sectors, particularly after a two-year slump in BFSI, represents a significant shift for IT firms with high exposure to these sectors. This change could benefit companies like Cognizant and other IT players heavily involved in these industries.

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The recovery in healthcare and BFSI sectors signals a positive shift for IT firms with substantial exposure to these markets.