Cognizant has reported net margins of approximately 11% over the past four quarters, maintaining stability even as its gross margin has contracted from 36% in fiscal 2013 to 29% in the latest period. Management achieved this by reducing selling, general and administrative expenses from 18% of revenue five years ago to 14% most recently. While structural pressures persist—driven by a 7% year-over-year increase in Indian wage costs and limited pricing power in legacy IT services—the firm’s disciplined cost control has offset roughly 60 basis points of margin erosion annually.

Cognizant is investing $450 million this year in artificial intelligence and automation tools designed to improve consultant utilization by an estimated 3 percentage points. The company’s digital services, which now represent 45% of revenues (up from 30% three years ago), command average bill rates 20% higher than traditional application management. Although competition from Infosys and Wipro has intensified—both reporting 12% growth in digital contracts during the same period—Cognizant’s diversified portfolio across healthcare, financial services and manufacturing verticals supports forecasted revenue growth of 5% to 7% in the coming year. Management cautions that sustaining net margin expansion above 50 basis points will remain challenging in a cost-sensitive market environment.