Nasdaq-listed IT services giant Cognizant reported a 0.1% decline in net profit year-on-year in the first quarter of 2026, at $662 million, amid a tepid demand environment, while the company also announced potential employee layoffs for the year. Net profit was $663 million in the same period a year earlier. However, sequentially, net profit gained by 2.1%. Despite the flat profit growth, revenue for the quarter grew 5.8% YoY to hit $5.4 billion, beating its own forecast for the quarter. On a constant currency basis, revenue for the quarter grew 3.9%, against its estimates of a growth between 2.7% to 4.2%. The New Jersey-headquartered company announced 'Project Leap' alongside its results, a project to restructure its workforce, "to streamline operations and enhance productivity through AI-led efficiencies, creating a more agile and cost-effective operating model," the company said. While Cognizant did not disclose the number of employees who stand to be laid off, the process has begun in the current quarter, with severance costs estimated between $230 million and $320 million. "We are going to implement (Project Leap), to make sure that we build an operating model for the future and bet AI to our operating model, and in some ways, start to pivot towards an operating model which is outcome-based, has more platforms and incorporates human and digital labour, supporting our journey to the AI builder stack," chief executive officer Ravi Kumar S said. "It is a global programme, and various parts of the organisation will be impacted. We have not called out any number regarding employees who will be impacted by it," chief financial officer Jatin Dalal added. The announcement follows similar moves from its industry peers as companies resize their workforce to accommodate AI-led efficiencies and investments. While Oracle laid off nearly 30,000 employees globally in March, Tata Consultancy Services had laid of 2% of its workforce in 2025. Despite the announcement of the layoffs, the company is aiming to hire over 20,000 freshers in 2026, after hitting its target to hire 20,000 freshers last year. "People at the bottom can create more throughput, and they have more native AI skills. I also have a belief that the pyramid will shape with digital and human labour together," Kumar said. The company also announced that it had entered a definitive agreement to purchase Astreya, a US-based IT company, in a deal valued at about $ 600 million. The deal follows its recent acquisition of 3Cloud in 2025, and Belcan in 2024, aimed at strengthening the company's AI business. The guidance for the full-year revenue also remained largely flat, with revenue estimated to come in between $22.11 billion and $22.64 billion, translating into a growth between 4% and 6.5% in constant currency. Previously, its revenue guidance was between $22.14 billion and $22.66 billion. "We achieved these results against a softening demand environment. Market conditions have become more complex since the start of the year, and we expect the impact from heightened macroeconomic uncertainty to persist in the near term," the chief executive officer said in the post-earnings call. "The (demand) environment has definitely become more uncertain than what it was in the beginning of the year, but we are continuing to focus on market success. The large deals we won in Q4 and Q1 are all ramping up, and will start delivering to the revenue potential in the second half, so all that has been factored in," Dalal said. For the second quarter, it anticipates clocking revenue between $5.45 billion and $5.52 billion, growing between 3.2% to 4.7% YoY in constant currency terms. The guidance includes about 150 basis points of contribution from the company's acquisitions, with the recent purchase of Astreya accounting for about 50 basis points. Aided by seven large deals in the first quarter, deal bookings grew 21% YoY to hit $29.6 billion. Among verticals, financial services, its largest sector, led growth, gaining 10.2% year-on-year in constant currency, while communications & media and the products & resources verticals gained 6.5% and 1.1%, respectively. Health sciences, its second biggest sector, however, declined by 0.9%. Revenue from the North America geography grew 4.9% YoY in constant currency terms, while Europe and the rest of the world gained by a modest 0.6% and 1.5% respectively. Cognizant's operating margins, a key metric for IT service firms, expanded by 10 basis points year-on-year to 15.6%, leading the company to guide for its full year 2026 operating margins between 16.0% to 16.2%, compared with 15.9% to 16.1% earlier. In the quarter, Cognizant added 6000 employees to its payroll, taking its headcount to a total of 357,600. On a year-on-year basis, it added 21,300 employees.
