Cognizant and Infosys are tapping a new trend in IT deals to combat tough times

Infosys Ltd and Cognizant Technology Solutions Corp, two of India’s biggest IT services companies, said during calls with analysts that the move towards so-called ‘vendor consolidation deals’ is poised to benefit them.

Jayesh Sanghrajka, CFO of Bengaluru-based Infosys, and Sandeep Mahindroo, the company’s financial controller, told analysts at Kotak Institutional Equities that such deals have become important for the company.

“The IT industry currently does not have a healthy flow of net new deals. Infosys has plenty of vendor consolidation deals in the pipeline, a key area of focus,” said Kotak analysts Kawaljeet Saluja, Sathishkumar S, and Vamshi Krishna, in a note dated 6 June.

A day earlier, larger peer Cognizant had echoed a similar perspective in a conversation between Surya Gummadi, president of Cognizant Americas, and Bank of America analyst Jason Kupferberg during the bank’s annual global technology conference.

“The clients are not necessarily solving for vendor consolidation, but they are solving for cost optimisation,” Gummadi said. “To accomplish the cost optimisation, they are trying to break the silos across multiple vendors and they are trying to consolidate players to a few who can deliver maximum value and provide end-to-end solutions.” Gummadi added that Cognizant is getting “benefitted in that segment”.

However, both Infosys and Cognizant said they have not seen any ramp-down in client spends or project cancellations.

New Jersey-based Cognizant is considered an Indian heritage IT firm as about three-fourths of its employees are based in the country.

To be sure, other Indian IT services companies such as Tata Consultancy Services (TCS), LTIMindtree Ltd, and Persistent Systems Ltd have also signalled that clients across segments are looking to reduce the number of IT outsourcers they work with.

“Companies do these vendor consolidation exercises to reduce expenses and incentivise their existing IT vendors to do the extra work at a lower cost,” said Pramod Gubbi, founder of Marcellus Investment Managers.

Tough times

In terms of financial performance, Cognizant ended 2024–its financial year is from January to December–with $19.74 billion in revenue, up 1.98% compared to a revenue decline of 0.4% in 2023. To be sure, much of its growth has been powered by acquisitions.

Infosys, India’s second-biggest IT company, clocked 3.85% growth in revenue to $19.28 billion in the fiscal year ended March 2025, compared to 1.9% growth in the previous fiscal.

As for other IT companies, market leader TCS reported revenue growth of 3.78% to $30.18 billion in FY25, while third-placed HCLTech led growth in the market with revenues climbing 4.3% to $13.84 billion. However, two other large companies–Wipro Ltd and Tech Mahindra Ltd–reported revenue decline of 2.72% and 0.21%, respectively, to $10.51 billion and $6.26 billion.

Large deals

A bright spark for Cognizant was when Gummadi announced that the company won two deals upwards of $500 million since the start of 2025, one of which exceeded $1 billion.

For Infosys, though, large deals were hard to come by, raising questions on revenue growth in the year ahead. The company reported a 34% year-on-year fall in value of large deals to $11.6 billion in FY25. To be sure, Infosys calls out only the large deals, those exceeding $50 million in annual revenue.

As for the current fiscal year, Cognizant expects to end 2025 with $21 billion, translating to a full-year revenue growth of 6.4%, even as Infosys projected flat-to-3% revenue growth in constant currency terms for FY26, its slowest projection at the start of the year since April 2009, when it had projected a revenue decline of 6.7-3.1% for FY10.

However, the Kotak analysts are optimistic on Infosys’s FY26 prospects. “The strong positioning in cost take-outs, vendor consolidation exercises and AI will help Infosys weather the storm,” said the Kotak analysts, adding that Infosys is vulnerable to pull-back in non-essential tech spending as it had higher exposure to such deals compared with peers.