Cognizant Technology Solutions Corp. earns more revenue than Infosys Ltd, yet the Nasdaq-listed information technology services firm is valued at barely half its peer, which is listed in India as well as the US.
While Infosys, India’s second-largest IT outsourcer, has a market capitalization of $70.5 billion, Cognizant is valued at $35.01 billion—even though both closed their last fiscal year with comparable revenues of $19.74 billion and $19.28 billion, respectively. Cognizant follows a January–December fiscal year.
It is this arbitrage that the Teaneck, New Jersey-based company appears to be targeting as it weighs an India listing, announced on Wednesday during the September-quarter results.
"Exactly the same thing was being considered in the 2000 technology boom by several Indian entrepreneurs in the US who were looking to list their American companies in India because Indian IT services firms were trading at 400 times earnings. It is just that the boom ended; otherwise, it would have happened 25 years ago,” said Shankar Sharma, veteran market investor and founder of wealth management firm GQuant Investech.
Cognizant, which started as a software services arm of Dun & Bradstreet with 175 employees in 1994 in Chennai, served as its in-house technology unit until 1996, when it spun off to become a separate company. Two years later, it got listed on the tech-heavy Nasdaq.
For the Ravi Kumar S.-led firm, which derives nearly three-fourths of its revenue from North America, the prospect of investors assigning it a higher valuation than its homegrown peers is a compelling one.
Cognizant trades at a price-to-earnings (P/E) ratio of 16.59, compared with 18-25 for its Indian peers, including Tata Consultancy Services Ltd, Infosys Ltd, HCL Technologies Ltd, and Wipro Ltd. This is despite it generating more business than Infosys, HCLTech, and Wipro.
A high P/E ratio, calculated by dividing the share price by its earnings per share, indicates a strong growth outlook and a higher valuation for shares listed on the market.
“CTSH (Cognizant) management stated it is in the exploratory phase of a dual listing in India. We think this move could further support the shares, and we await further details at this current juncture,” said financial advisory firm BMO Capital Markets' analysts Keith Bachman, Bradley Clark, Adam J. Holets, and Jonathan Stein, in a 29 October note.
It is this valuation that Cognizant might chase, at least according to a third expert. "Value unlocking - better valuations," said Yogesh Aggarwal, head of research, HSBC India.
A fourth expert added that the company might also be able to attract investments from India-specific funds, which it could not otherwise do due to its US listing.
“Cognizant will now be able to access India-centric funds, which could further improve its valuations,” said a Chennai-based expert on condition of anonymity.
However, a fifth analyst said Generative AI is another possible reason for Cognizant's India listing plan. “GenAI is compressing margins and forcing every IT services firm to reinvent its economic model. A listing in India gives it fresh financial flexibility to invest in AI platforms, automation, and upskilling while signalling its deep commitment to the country as a strategic hub,” said Phil Fersht, chief executive of global consultancy HFS Research.
“It’s both a hedge against deflationary pressure and a bet on India’s rising tech capital markets,” he added.
Cognizant’s push to list its shares in India would give it additional capital to invest in AI platforms and newer offerings, as automation tools reduce the bargaining power of IT services firms to secure higher margins.
Cognizant ended 2024 with operating margins of 14.7%, compared to TCS's 24.3% and Infosys's 21.1%.
Homecoming
Ironically, it was the Chennai-born Cognizant that marked the entry of an Indian IT firm into the US market during the Y2K (the year 2000 problem) boom, when businesses scrambled to fix computers that read the year “2000” as “1900”. With access to vast pools of skilled engineers, Indian IT giants such as Tata Consultancy Services, Infosys, and Wipro led the charge in solving this global problem.
For Cognizant, however, the real inflection point came after the 2008 financial crisis. Under then-chief executive Francisco D’Souza, it took a contrarian bet: reinvesting cash into growth initiatives while peers cut spending. The bet paid off as revenue jumped 16% in 2009 and 40% in 2010. In comparison, TCS and Infosys grew just 6.8% and 11.7% in 2008-09, respectively.
But its momentum faltered again during the following decade. Rising attrition, sluggish growth, and the failure to win big-ticket deals eventually led to the exit of CEO Brian Humphries when his tenure ended. S. Ravi Kumar took the helm in January 2023 and has steered the firm for two challenging years. It reported a revenue decline in 2024, with much of its 2025 recovery driven by just two acquisitions. Yet, a turnaround seems to be taking root.
It ended the last quarter with $5.42 billion in revenue, a 3.2% sequential increase, marking its best performance in four quarters. It has signed three deals valued upwards of $500 million since the start of the year, and also raised its growth guidance for the full year to an industry-leading 6.9% at the upper end.