Citi Tech Conference, and I'm Brian Keane. I cover the IT services sector here. We're excited to have Cognizant here, and we have Head of Americas, Surya Gummadi, who's going to help us understand what's happening in the IT services market, and especially with Cognizant. So with that, Surya, thanks for being here.
Thank you. Thank you for having me here.
You know, I guess I wanted to just kick off and think about the bigger landscape, and we're obviously in dynamic times here. So maybe you could help us characterize the IT services market from your point in the Americas, looking back the last couple of years and getting to today, and how you see it going forward.
Yeah. So, you know, good afternoon, everyone. You know, the AI has disrupted almost every single value chain, every single market across the planet in the last two years or so. So we have seen the evolution of AI across the sectors. And currently, you know, at Cognizant, we have characterized the AI market opportunity in three steps or three vectors, as we call it. The first step, the clients are leveraging AI to unlock productivity in their value chains or in their estate. And the next step after they do that is to infuse AI across their tech stack to reduce their tech debt and, you know, to start agentifying. The third step in the process is deploying agents and agentifying the value chain.
As we see right now, the demand is more in the Vector One, which is almost every single client is focused on deploying AI to unlock productivity, to drive efficiencies, and to drive cost optimization. As a result, there are a number of cost optimization plays or there are many cost optimization deals in the market today. But we expect this to evolve into Vector Two, which is industrialization of AI, which is infusing AI across the value chain as we progress over the next few quarters, and then eventually into the agentification. And we strongly believe that the market opportunity in Vector Two, which is industrializing AI and agentification, is far more than what we are seeing right now in the Vector One. That's how I would characterize the broad market today that we are in.
Yeah. So I guess, you know, before we jump to my next question, when do we get to more scale in AI where we see it visibly in the revenues, for the revenue growth? Is that going to be a couple of years before we get to Vector Two in size, or can Vector One be enough?
No, no, no. Vector One is already in play. Almost every single client that we work with has deployed AI in some shape or form to unlock productivity, to, you know, drive efficiencies, to drive cost optimization. Now we are already beginning to see the Vector Two opportunities, which is, you know, industrializing AI, infusing AI across the tech stack. Let me break that down. Let me break that Vector Two into two or three parts. The first step in the Vector Two is the data layer, where we will have to get the data layer ready for the AI deployment and consumption, which includes getting the LLMs, SLMs, DGMs, and stuff like that. After you do that, the next step will be the compute layer. You have to modernize your cloud and the infrastructure and things like that.
Then comes the digital engineering layer, which is, you know, building the native AI applications. So right now, clients are beginning to work across all three: data, the infrastructure, and cloud, as cloud and the digital engineering. And even at Cognizant, if you look at our internal service lines, the service lines that support data, infrastructure, and cloud, and digital engineering are growing faster than company average, which shows that Vector Two opportunities are beginning to emerge.
Yeah. Obviously, with Ravi's tenure and large deals has been a key focus, and I think you run a lot of the large deal stuff. I think large deals were up 29 in deals in 2024, and that was up from 17. The first half of 2025, though, I have large deals at 10 versus 13 in the first half of 2024. So has some momentum stalled in the large deal based on what you're seeing in the Americas?
No, not really, so first of all, large deals has been a focus area for Cognizant for the last three years. We have overhauled our, you know, large deal engine. We have built a surround around it. You know, we have built a support system around it, and we also have strengthened our execution model for the large deals, so historically, over the last few quarters, we have been winning four to six large deals each quarter consistently. And sometimes these large deals tend to get lumpy, so for example, in the last quarter, we announced $2 billion deals in the same quarter. It just so happened that sales cycles panned out that way, so it might come across as if it is a bit lumpy in, you know, a few quarters, because that's the nature of the large deals.
But we are very confident in our pipeline in the large deals. And as I said, we have been winning four to six large deals consistently each quarter. These are $100 million-plus deals. And we will continue to focus on structure and go after mega deals too. And when I say mega deals, these are $500 million-plus deals or $1 billion-dollar-plus deals.
And then we did see a bounce back in small deals in the second quarter. Can you just talk about, are we seeing that pickup in discretionary work in the Americas, or is that too early?
No, it is both. There are certain sectors where we are definitely seeing a pickup in the discretionary spend and deals, and case in point being the Financial Services and the insurance segment, where we are seeing green shoots or the demand pickup in the small projects and the discretionary spend, but when we look at other markets, I mean, for example, in the Healthcare, Healthcare continues to be a little cautious because it's a tale of two cities across payers, providers, and biopharma medical devices. Payers and providers are cautious watching, you know, the government spending dynamic across Medicare and Medicaid sectors, whereas life sciences companies are a little more cautious on the broader trade and tariff situation. As a result, spending in Healthcare still continues to remain cautious.
In the Products and Resources, which includes retail, manufacturing, logistics, utilities, and not utilities, the hospitality segments, they are more impacted by the trade, the trade anxiety. They have more anxiety related to the macroeconomic dynamics. So there we see a bit of congestion in the small deals and, you know, spend. And there is no significant departure in the, you know, discretionary spend in Communications, M edia, and Tech to where we were one or two quarters ago. So it's not uniform across. There are certain sectors like Financial Services and insurance where we are seeing the uptick. There are certain sectors that remain cautious. There are certain sectors that are still congested. And it's kind of, it's all over the place there.
Yeah. So I guess taking those two sectors, the Healthcare sector and Financial Services, both have kind of reversed their growth rates. I guess why is that? And then what's the outlook for growth in those Financial Services and Healthcare in particular?
For Cognizant, you mean?
Yeah, for you guys in Americas.
Yes, exactly. I mean, both Financial Services and Healthcare have been our largest businesses for many years. And let's talk about Financial Services. This has been our largest business unit for many years. And over the past several years, I think, you know, we had, we did not perform that well in Financial Services, for two reasons. One is the market. There are the macroeconomic issues or the macro market issues. And second was we had our own Cognizant-centric structural issues when it came to Financial Services. So over the last two or three years, we have addressed our Cognizant inherent structural issues. So when I say that, so we have, you know, brought in the focus at subsegment level in Financial Services. Earlier, Financial Services was all lumped as one unit. So we have broken that down into several units to bring in the subsegment-wise focus.
We have infused the fresh leadership team into the mix, and we have aligned well with the market, so we have aligned well. Our strategy in Financial Services is now well aligned with the market, you know, in terms of solutions that we offer and things like that. As a result of all of this, we saw a good rebound in the Financial Services segment after many years. Actually, if I'm not wrong, for the last four consecutive quarters, we have delivered year-on-year growth in the Financial Services segment, and we feel good about it now that, as I said, since we feel we are seeing green shoots and discretionary spend coming back in Financial Services, I feel good about that side. Healthcare has been our, you know, strongest business, if I say, for a long time, because we serve the entire continuum in Healthcare.
We serve the entire nine yards. We serve payers, we serve providers, we serve biopharma, medical devices. It's just not that. We also have our own platforms for the Healthcare market, the TriZetto suite of platforms, and it's a privilege and honor for me to say that TriZetto platforms cover two-thirds of the U.S. insured population across two-thirds of U.S. roughly two-thirds of the U.S. insured population, so that's a huge responsibility on us to improve the health of communities that we live in, so with this kind of, you know, deep and domain expertise in Healthcare, our solutions and, you know, our go-to-market offerings in Healthcare continue to remain strong, so I think we're going to build on our platform strength. We are expanding our platforms into our adjacencies, into provider market in the Healthcare space, so we continue to feel strong and good about our Healthcare business.
Got it. Looking back at the March Analyst Day, I know you highlighted five areas of focus for the Americas portfolio. Two of those areas I wanted to ask about were the under-penetrated markets and then industry-leading platforms. Can you just help us understand those two levers and how there might be some upside potential?
Yes, sure. You know, Cognizant operates in four broader markets, which are Financial Services, Health, Communications, Media, and Tech, and Products and Resources, which includes retail, manufacturing, and things like that. Underneath these broad market segments, there are certain subsegments that Cognizant never participated in, or Cognizant is light. We are under-penetrated. You know, some of those examples of under-penetrated segments are like Healthcare provider. While we are extremely strong and deep in Healthcare, we are a little relatively light in the provider segment, which is under-penetrated for us. Same thing with Communications and Media. While we are present, but we are not present to the extent that we want to. And there are certain market segments like aerospace and defense, oil and gas, where Cognizant never participated in that market in the past.
As a strategy earlier this year, we have identified some of these subsegments within these broad markets where we would want to double down on and where we would want to focus more on. We have executed on provider and Communications, M edia, and Tech. We have added more talent. We have strengthened our offerings in that segment. We have enhanced our go-to-market teams in those segments. We are executing well on the plan that we had for both provider and Communications and Media. On aerospace and defense, last year, as you all know, we have made an acquisition of Belcan, which directly provides us access to the aerospace and defense market. It not only provides access to the aerospace and defense market, it also helps us strengthen our engineering muscle. We plan to address.
So we will continue to address our under-penetrated market segments and the market segments where we do not have presence today, either through building solutions in-house or looking at, you know, acquisition opportunities or both.
Got it. Got it. Wanted to ask about the platform piece of that strategy and how you guys are going to price that and if you're seeing any traction there?
Right. I mean, you know, as we spoke about our Healthcare platforms in the TriZetto suite. So we are trying to double down on our platform strategy in the Healthcare market because we have the relevant platforms there. We are trying to expand into adjacent markets leveraging our platforms. We're trying to expand TriZetto into Healthcare provider. And we are also trying to expand TriZetto. We're considering expanding TriZetto into the insurance market, property and casualty, life insurance market. So we are exploring opportunities in both ways. And in provider, I think, you know, we have built prior authorization applications around our platform. We have connected our platform to the clearing house. So the strategy there is to wherever we have platforms, we want to expand into adjacencies.
In the markets that we do not have platforms, we will continue to look for the right asset to, you know, acquire a platform or into that market segment. And by the way, this is outside of the AI-related platforms that we talk about, our Neuro suite of platforms and things like that. Those are more AI-related platforms that are broader across the markets. And the platforms like TriZetto are more domain-centric platforms. So we are focused on both.
Got it. So obviously, we've talked a little bit about the elephant in the room, AI. As you know, talking to everybody in the halls, there's a big debate on, you know, where is AI and what's it going to mean for IT services? You know, the big question and pushback we always hear is, isn't the IT service vendor going to have to give up productivity gains as the corporation is serving and generating? And then obviously you serve and generate less revenue versus the old model, which was headcount-based. You know, 30% of code is now AI-generated, which you guys talk about. But the fear obviously is that's just going to be less revenue generated from Cognizant. Can you just help us understand? That's the bare thesis that everybody's worried about and how that, you know, doesn't hold water.
Yeah. So I think as I articulated earlier, we see AI opportunity in three vectors, as I said. And right now, Vector One, which is the productivity unlocking, is where the maximum focus and attention is across in the market. When we execute projects in Vector One, yes, clients expect the productivity back. Some of the productivity savings or most of the productivity that we unlock in Vector One is passed back to the clients. But the way Cognizant is addressing that issue is when we unlock the productivity in an estate for a client, we backfill that. We backfill that by two means.
Either we go back to the client and we articulate that we can burn down more of inventory for the same cost, or we can do more for the same, or we can leverage the funds that are unlocked to do some of the additional projects. That is one way to backfill the productivity part of it. On top of it, on top of it, when we proactively or reactively go to clients, we also build a broader solution around consolidation. So we make a pitch for consolidation to say that, you know, we'll not only unlock the productivity in our estate, we'll also unlock the productivity in the surround if it gives us an opportunity. So that helps us retain our base of estate and grow on top of it.
So that way, I think, you know, there is. I strongly believe there is still a certain amount of growth in the productivity vector. On top of it, when you transition to Vector Two and Vector Three, there is a tremendous amount of opportunity there, which remains untapped. So we are broadly speaking right now at Cognizant. We have, you know, we started speaking about pivot from SDLC to ADLC, software development lifecycle to agent development lifecycle, where there is a humongous opportunity, you know, across in the Vector Two, across data, compute, and the application layer where you'll have to, where service providers or SI firms are needed or will be required to help clients build those agents across as you pivot from SDLC to ADLC.
And the surface area of ADLC will be much higher than SDLC as the agent-to-user ratio, business-to-user ratio is much higher compared to the traditional software. So we see that there is a tremendous opportunity in Vector Two. And Vector Three is agentification. As I said, we already see, you know, some of the projects emerging in both Vector Two and Vector Three. And we believe the growth rates of Vector Two and Vector Three will be far higher than what we are seeing in the Vector One. So they will outgrow to give away, to give the breakaway growth opportunities for firms like Cognizant. And we see those evolving right now. The market is evolving into Vector Two and Vector Three.
How do we think about as AI evolves and we get into Vector One, you know, in one and then now Vector Two and Vector Three, how do we think about the pricing models? You know, traditionally it's been a time and materials headcount model, but now we're going to have to move more to productivity output-based and different kind of platform-based models. How do you think about that transition?
The pricing models will evolve over a period of time. You're right, actually. Historically, we have been consistently pricing as a time and material or a fixed rate, and in some cases, outcome-based. From there, we pivot now. We'll have to pivot now to a hybrid pricing model where you have a digital workforce, digital agents, and a physical workforce. And then where you would have to price for value, price for outcomes with risk baked in. So these pricing models will evolve. As we started, you know, doing some of these large deals with Vector Two and Vector Three components involved in it. So we are already, you know, working on some of those pricing models at Cognizant where we pivot more towards value, outcome-driven, hybrid with digital workforce and physical workforce and things like that.
You know, the other pushback we hear is that there's a lot of internal resources that people want to do their GenAI in-house and they don't want to outsource to other vendors. Are you seeing that in the marketplace that there's a little bit of a, you know, we don't want to commoditize our data out to others, we want it internally only?
No, actually, I don't see that. There was a discussion around that two or three quarters ago. But now I think the clients have gotten over that because now if you have to deploy AI at scale across enterprise, so you know, they need participation of service providers too in that market.
Can you talk about just in the Vector Two and Three in your crystal ball, which, you know, it's going to be difficult, but when do we see in the horizon, in the pipeline, when do you see that becoming? As you said, it's Vector Two and Three, you're going to be more material for you guys. But when does that happen? Is that six months, 12 months, or are we still three years away from those vectors to really hit it?
No, I don't. I know. Actually, as I said, in Vector Two, we participate through three service lines within Cognizant: the data, the cloud, and the digital engineering. All those three subsegments of service lines in Cognizant are growing much faster than the company average, which indicates that the opportunity in Vector Two is already taking off, is already taking off. I mean, to predict when it reaches its peak, it's a little, you know, hard to articulate at this point in time. But we strongly believe that Vector Two is taking off right now because we are seeing those opportunities and the subsegments within Cognizant that support or that, you know, serve those Vector Two are growing much faster than the average Cognizant average.
So, what's holding back Cognizant and other IT service companies from growing back to high single digits to low double digits, the industry, let's say, because you're seeing depressed growth rates? You see positive commentary from management teams, but the numbers don't reflect the positive commentary. When do those two things align where we can see the organic growth be back to at or above the previous, you know, growth rates?
See, right now the whole market is, I would say, more concentrated on Vector One. Vector One is more of a consolidation play or more of an optimization play, cost optimization or consolidation with, you know, unlocking productivity and driving efficiencies as a hedge. So that Vector, you know, is because you are compressing the market to a certain extent and providers like us are trying to expand by consolidation. So that's why I think you see the growth rates that you're seeing in the market today. Once we pivot to Vector Two and Vector Three, I think, you know, we should start, you know, Vector Two and Vector Three are expected to grow at a much faster rate than Vector One. And when that happens, the market should pivot back to the growth rates that you just mentioned.
But when, whether it is two quarters from now, three quarters from now, I mean, it depends on a lot of other macro dynamics that we are dealing with today in the market too. Yeah, once Vector One is consolidated, I think now if the Vector Two continues the trajectory that it is on right now, I think I expect it to progress, you know, swiftly from there, barring all things being equal on the macroeconomic dynamics is a little.
So as head of Americas, how much visibility do you have in the pipeline, in deal signings, in the revenue trajectory? Is it still pretty macro sensitive? So, you know, only three months that you can really know for sure, or is there enough of a pipeline that you can see it out six to nine months?
I mean, these segments are specific again. So for example, in segments like Financial Services and Healthcare, we have relatively more visibility for segments like Products and Resources, which are very dependent, which is retail manufacturing and the group, which are very heavily, you know, impacted or, you know, by tariffs and the trade situation. I think they have relatively less visibility. Their focus is more on short term. Whereas the sectors which are kind of relatively more confident, relatively more insulated from the macro dynamics, we have a long term view.
Got it. In the Americas, can you just talk about the overall company's focus on margins, guidance, and their ambition to improve margins? How does, you know, obviously America is a big percentage of revenue. So you're obviously a big part of that. Can you talk about what you're doing to leverage the margin?
I mean, always the focus is growing revenue and at a healthier margin or at a relatively good margin. So that has always been the focus and that will continue to be the focus. We're doing a wide variety of things. For example, when we, as I said, we not only strengthened our large deal sales part of it, we also have strengthened the large deal execution part of it so that we stay on track on bid versus did. So we have rigorous governance processes within to make sure that we are delivering, you know, on bid and to make sure our bid versus did is the right place because we have unprecedented focus on large deals. So we continue to do that. That's one thing that we are, you know, rigorously executing on that.
The second thing, you know, then we have executed NextG en at Cognizant, as you all know, and we continue to see, you know, the benefits of that. And we will continue to remain focused as this market evolves and as this pivots to AI on the revenue per resource and the traditional levers like pyramid optimization, global delivery, and things like that. So we will continue to execute on the traditional levers. We will continue to focus and execute rigorously on our large deal governance and large deal delivery and execution. And we will kind of continue to look for other levers to make sure that we grow revenue at the right margins.
Where's the market in pricing right now, and I think competitively, if demand, you know, discretionary spend is lower and if it's just discretionary or if it's, you know, the productivity that's driving a lot of it, you would think that vendors were still going to be super aggressive on price in order to win any business at all, so is there any upside to pricing? I mean, I'm sure there's upside, but is there any signs of that pricing has stabilized at least?
Yeah, the pricing market, the pricing scenario in Vector One continues to remain highly competitive because it's more of a productivity play and it is a little more, you know, competitive than what it used to be a year ago, I would call in Vector One. Yeah, but as you pivot to Vector Two and Vector Three, where specialized skills are needed, you know, specialized, special focus, because in Vector Two, you not only need technology prowess, you also need domain, you need context, you need relevance to the client environments. There, we, you know, I expect the pricing to be a little more premium and the pricing to evolve from where we are in the Vector One, which is highly competitive. So in the moment you transition to Vector Two and Vector Three, you know, there will be premium pricing in those segments.
So how do you guys compete versus your main competitors in Vector Two and Three?
In terms of pricing, you mean?
No, in terms of win rate or experience that you pitch to the table when you're, you know, pitching it.
So I think it's a thank you for asking that. You know, our unique differentiator when it comes to Vector Two and Vector Three is how we bring together three or four key dimensions, which is our deep domain expertise in the markets that we serve, like Healthcare, Financial Services, and other segments. Combine that with our client context. We have Cognizant historically had a deep partnership with a select few clients that we have served. Combine that with deep domain expertise, with the context of the client that we have, along with the, you know, the investments and the AI that we have made in the last one and a half, two years. I think we were one of the first few players to pledge $1 billion. We have invested a lot in building the last mile infrastructure.
We have invested a lot in strengthening the AI muscle across the firm, so we bring these three or four entities together, our AI capability and strength, combine that with our deep domain expertise and the client context, which is very important in the Vector Two and Vector Three. Along with technology, you need to know the client context to identify the value chains. That is going to be our unique differentiator for Cognizant.
I want to ask you about M&A, and I know we're running out of time, but I have to ask you about the culture of Cognizant since, you know, Surya, you've been there a few years, one or two, but I think you started originally as a fresher.
Yes, yes.
So you have a huge history. I've covered Cognizant for many years, but you have me beat. I'm interested in, we could go back a lot of years here, but maybe over the last five to seven years and then the transitions that happened with the new CEOs, with Brian coming in and now Ravi. And where are we culturally at Cognizant? And you've seen a lot of different regimes. So I'm just interested to get your perspective.
So, this is. I just completed 25 years at Cognizant. You're right. Thank you. I just, I joined Cognizant, you know, as a fresher when Cognizant was a startup in many ways. Yeah, so I have seen the evolution of Cognizant, growth of Cognizant, hyper growth of Cognizant, the next phase of Cognizant, and now the resurgence of Cognizant. So I've seen it all. See, the one thing that remained constant across all these eras is the client centricity, which we call it as the DNA of Cognizant. That, or you can call it as a culture of Cognizant. Cognizant was built on client centricity, and we continue to be very client centric and client focused. And that is one of our unique differentiators. Even if you ask our clients to tell something that is different for Cognizant, they would name that today, even today. That is one thing.
Over the last, you know, five or seven years, I think yes, there was a few transitions, but, you know, now the business is more stable. So actually, if we look at the first phase of Cognizant, I think since we grew as a startup and we went through the hyper growth phase and things like that. So we were more of a, we still carried that startup mentality. We were a large small company in many ways. And so the pendulum was completely on one side when it came to the agility, decentralization, and things like that. The next phase when Brian set out, we were trying to correct that to get to the right point. But unfortunately, we swung it a little completely on the opposite side.
So that's when clients started seeing us as more rigid, tough to work with, highly processed, you know, very rigid on processes and things like that. Now with Ravi coming in, we are trying to bring the pendulum back to the middle. And ever since Ravi has come, we said the focus for Cognizant is going to be growth. It's not change, it's growth. So that's when we said we're going to double down on large deals. We want to get it back to the Winners' Circle . We want to fill our capability gaps. So it was all around growth, growth and growth. Yeah, so I think, you know, we have executed on that really well. And for someone who has been here for 26 years, I feel, you know, the Cognizant culture is still intact.
Yeah, and to me, even after 25 years, I still feel that today morning when I woke up, I feel that this is my first day at work. So I feel as excited as I was back then. So I feel.
Yeah, that's great. I know we only got about 60 seconds here. So wanted to ask about how Belcan is doing organically, because I know it was, there was some issue there. You guys had called out. So how is that doing organically? And then any other M&A assets that you guys might be adding here? Because I think it's $500 million available to invest this year.
Belcan is, the integration of Belcan into Cognizant is on track. And Belcan, you know, is doing well for Cognizant and as per our plan. Obviously, the market dynamics of, you know, when we acquired Belcan to where we are right now have changed. But Belcan's performance, you know, is as per our plan. And the integration also is on plan. Coming to the acquisition, I mean, we are constantly on lookout for the right opportunities. And our focus for capital deployment or M&A is on three dimensions. One is either we get access to the newer market or under-penetrated market that we are in, or would help us build the capability that is missing in Cognizant, or would help us expand into new geographies that we are not present today.
If we're looking for assets that take one of these or a combination of these, then we are on the lookout for the right opportunities. We will continue to look at either tuck-in acquisitions or acquisitions of size that satisfy these three criteria.
Okay, with that, Surya, we're going to keep it there. Thanks so much. Thanks for being here.
Thank you so much.