Goldman Sachs Communacopia + Tech Conf. 2025: Cognizant CEO Ravi Kumar on IT Svcs Demand, AI Strat, and M&A Outlook

Key Takeaways

TL;DR: Cognizant CEO Ravi Kumar flagged strong momentum in large deal signings and ACV growth into 2025–26, driven by sustained demand in BFSI and healthcare, while expanding into engineering, digital, and AI/IP-led svcs. The co is pivoting to outcome-based and transaction-based pricing via AI/agentic tech. Mgmt sees ongoing M&A targeting AI and IP-rich assets, aiming to diversify beyond US and BFSI/healthcare verticals. AI-led cost saves are fueling new discretionary spend and unlocking further transformation/automation, esp. in core verticals. Risks remain for mfg sector exposure, but this is a smaller focus vs. BFSI and healthcare.

Key Discussion Points by Topic

1. Current Demand Env. & Sector Outlook

• BFSI:
  • Demand recovery: "Banking and financial svcs...conversations have moved from...efficiency and productivity to innovation."
  • Backlog clearing: “There was a lull for a couple of years, so all of the backlog is getting cleared now.”
  • Macro resilience: "Financial svcs is not getting impacted by the macro so much, right? So it's spending."
• Healthcare:
  • Admin burden = big opp: "In the last 20 years, the admin load on healthcare is actually up 400%...unique transformation opps."
  • Tech-driven transformation: “Excited about unique transformation opps…using AI tech, agentic capital to shrink that [admin load]…transfer that to proactive care and predictive care.”
• Mfg:
  • Muted near-term, limited exposure: "Mfg...needs an external catalyst for growth...unlock on productivity will continue, but triggering new innovation cycles will take time."
  • Mgmt: Minor exposure; sees opp but not a near-term focus.

2. M&A and Strat Focus

• Geo & Sector Diversification:
  • “We are over-indexed on US...lesser proportion of rev. outside the US vs. peers.”
  • Targeting deals to expand intl presence and reduce BFSI/healthcare concentration.
• Evolving Svc Portfolio:
  • Recent M&A (Belcan, Softvision, Mobility, Mobica) strengthened eng, aerospace, auto, and chip-to-cloud svcs.
  • Digital eng now CEO's “second fastest growing svc.”
• AI/Agentic & IP-Led M&A Strat:
  • “The next big thing I am now starting to look for is IP on the edge.”
  • “Boutique bolt-on acquisitions...AI-led assets, which will help us on this process. So that’s a new streamline we are opening up.”
  • Focus on outcome-based and transaction-based pricing, enabled by advanced AI, beyond trad. T&M models.
  • “We have 56 patents…huge eng team working on AI-led IP...enterprise grade.”

3. Large Deals, Pipeline Quality, and ACV Growth

• Large Deal Momentum:
  • "I've got $2B needs last Q. Every Q, we’re doing 4–5 >$100M yield [deals]…since I've come on board, ~55–60 such deals we are tracking."
• Backlog & Rev./Margin Ramp:
  • “2023, I didn’t have a backlog of deals…and normally large deals have a ramp on margin and of rev.”
  • Backlog built in '23/'24 will drive ACV and rev./margin growth in '25/'26.
  • "I have now a unique advantage because I've created the hustle from 2023–2024, which will lead to ACV growth, annual contract value growth in 2025 and 2026."
• Smaller/Mid-sized Deals:
  • Discretionary spend returning in BFSI: "Smaller deals have come back because discretionary has come back..."
  • Savings from large deals fund new projects: "Savings...are not really savings which go as lower budgets. They...unlock agentic journeys, embedding AI, migrating the cloud..."

4. AI/Agentic Tech & Pricing Models

• IP-led differentiation:
  • "You can differentiate now based on IP, you can build on the edge."
  • “With agentic journeys coming in, we can do outcome-based pricing and transaction-based pricing...”