The move is aimed at making Cognizant’s operating model more attuned to artificial intelligence (AI) as the IT services company navigates a volatile macroeconomic environment and weak client demand. The final figure, sources said, will depend on the severance policy adopted — whether it is a three-month or a six-month package — and also the geographies impacted. This is the second restructuring programme under Chief Executive Officer (CEO) Ravi Kumar. There was 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.
Cognizant’s headcount at the end of March was 357,600. Most of its employees are based in India, making the impact potentially sizeable. As of December 31, there were 256,900 in India, 41,600 in North America, 14,600 in continental Europe, and 7,800 in the United Kingdom. “The Project Leap ambition is to drive cost savings through the ‘cost of delivery’ model, and that should also help the gross margin as we execute for the rest of the year,” Chief Financial Officer Jatin Dalal told analysts in a post-earnings conference call. The company’s shares have slumped, with the stock losing a third of its value since the start of the year.
Cognizant did not respond to a request for comment on how many people will be asked to leave.
The firm’s position is at variance with what Infosys CEO Salil Parekh told Business Standard. Infosys, he said, has a better visibility into the macros this time than last year.
However, all agree that many IT services companies have reached a point where weak demand from traditional services, low margin renewals, rising AI usage, and the impact of insourcing by global capability centres have left them with no choice but to reduce the headcount to lower cost and improve margins.
TCS adopted the same method last year.
Phil Fersht, CEO and founder of HfS Research, said the move was less about cost cutting and more about repositioning the business for an AI-driven operating model.
“Firms like Cognizant are under pressure to improve revenue per employee and shift from labour-heavy delivery towards more automated, platform-led services. Programmes like Project LEAP are about simplifying the organisation, reducing middle-layer inefficiencies, and investing in higher-value capabilities, particularly in AI, consulting, and industry-specific solutions.”
Praveen Bhadada, CEO and managing director of Neovay Global, said the move was “best understood as a reset in the operating model, forced by a genuine inflection point, as AI is challenging the fundamental economics of IT services. The old talent pyramid, built for labour arbitrage, simply wasn’t designed for a world where 40 per cent of code is AI-assisted and clients are buying outcomes, not effort”.
While people mostly in mid-management are likely to be affected, the company hired about 6,000 engineering graduates and expressed its intent to take in more at the bottom of the pyramid.
An industry analyst said over the past three years all attempts by these companies to revive growth had failed.
“They have done big-ticket acquisitions, have been aggressive on buybacks, have deferred increments, and have benefited from rupee depreciation. Now they have no choice but to let go off people.”
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