DXC Surprises, Cognizant Outperforms, and TCS Realigns Workforce: IT Services Weekly Highlights (July 28 – Aug 3, 2025)

The Industry Pulse: 3 Takeaways for the Week

• Mixed earnings signals amid AI optimism: Quarterly results showed a split landscape. Cognizant’s strong 7%+ growth and raised outlook, and even DXC’s forecast upgrade, point to pockets of resilience. Yet, TCS’s plan to cut ~12,000 jobs (2% of its workforce) underscores that macro pressures are prompting belt-tightening even at industry bellwethers. Providers are balancing AI-fueled demand in select areas with caution on discretionary spend.
• AI and efficiency dominate new deals: The week’s major engagements, namely Infosys automating RWE’s workplace and HCLTech partnering with Pearson on AI learning tools, all revolved around automation, cloud and AI as clients seek productivity gains. Even cybersecurity is getting an AI boost. Accenture teamed with Microsoft to offer generative AI-powered cyber defenses as 90% of firms remain unprepared for AI-driven threats. In short, “AI-first” is now default in IT services offerings.
• Cautious optimism in spending outlook: There are glimmers of a demand uptick. DXC cited steady enterprise IT upgrades (cloud, infrastructure) behind its improved guidance, and U.S. economic data surprised to the upside with 3.0% GDP growth in Q2. Despite the TCS’s news, Cognizant’s plan to hire 8,000 at a new India campus – even as they control costs. The remainder of 2025 will test whether these green shoots can offset continued client caution in Europe and interest-rate sensitive sectors.

Earnings Highlights – Big Variations in Growth and Guidance

Cognizant defies the slowdown: Cognizant delivered an upbeat Q2 2025, with revenue reaching $5.25 billion, up 8.1% year-on-year (7.2% in constant currency). This outpaced most peers and prompted a guidance hike to ~5% constant-currency growth for the full year. Notably, bookings jumped 18% in the quarter (TTM book-to-bill 1.4×), including two mega-deals over $1 billion. Cognizant’s operating margin improved to 15.6%, and it added 7,500 employees during the quarter. Management cited strength in BFSI and healthcare and affirmed that “AI is no longer experimental but central to clients’ strategies,” as evidenced by robust deal wins in AI and cloud services.

European softness weighs on Capgemini: In contrast, Capgemini’s H1 2025 results reflected a more sluggish environment, especially in Europe. H1 revenue was €11.11 billion, essentially flat (+0.2% at constant currency). Q2 revenue grew a modest 0.7% CC, indicating a slight improvement over Q1. Capgemini trimmed its full-year outlook to between –1% and +1% revenue change (from a prior –2% to +2%), essentially bracing for zero growth. Profitability held steady (H1 operating margin ~12.4%) and the company reiterated its 13.3–13.5% margin goal for 2025. The tempered outlook underscores persistent weakness in Continental Europe’s IT spending, manufacturing and telecom clients there have been particularly cautious, even as North America and financial services show pockets of growth. Still, the flat forecast underlines that any broad-based recovery in IT services will be gradual.

DXC’s surprise turnaround: A notable bright spot came from DXC Technology, which has struggled in recent years but delivered better-than-expected results for the quarter ended June 30. Revenue of $3.16 billion beat estimates and, while still down year-over-year, showed sequential stability. DXC raised its annual revenue guidance by roughly $430 million, now expecting $12.6–12.9 billion for FY26 (vs $12.2–12.4 B prior), and also lifted profit forecasts. The CEO credited “steady enterprise spending on cloud-based solutions” and a surge in demand as companies upgrade and outsource infrastructure, “further boosted by AI advancements” driving cloud usage.

TCS realigns workforce amid macro headwinds

Industry leader TCS made waves by announcing it will reduce headcount by ~2% (≈12,000 employees) over the coming year. This move, surprising given TCS’s historical aversion to layoffs, is aimed at “structural realignment” of skills and roles. TCS cited persistent inflation, an “uncertain demand outlook” and delays in decision-making, especially in sectors facing U.S. trade policy and tariff uncertainties. Industry analysts note that generative AI and automation are starting to “eat into” the traditional manpower-based services model, pressuring big firms to rebalance their pyramids.

However, TCS’s layoffs is focused on mid/senior levels and tied in part to a stricter “bench policy” underscore an industry pivot. Even as companies invest in future skills, they are eliminating redundant roles and intensifying performance management. Importantly, TCS stressed it is not cutting due to AI efficiency per se, but due to alignment of talent with business needs.

Strategic Deals and Partnerships – Automation and AI at the Core

Despite a cautious climate, the past week saw several notable deal signings and partnerships that illuminate where clients are spending, namely, solutions that drive efficiency, modernization, and AI-enabled innovation:

• Infosys + RWE (Energy): Infosys announced a strategic collaboration with German utility RWE AG to transform RWE’s digital workplace with advanced automation. Using its AI-powered Infosys Workplace Suite, Infosys will implement self-service IT platforms, process automation, and tools like Office 365 migration factories and chatbots to modernize RWE’s employee experience.
• HCLTech + Pearson (Education/Skills): HCLTech and global learning company Pearson inked a multi-year partnership to develop AI-powered learning and upskilling tools. This collaboration aims to combine HCL’s engineering and AI capabilities with Pearson’s content and assessment expertise. In practice, they are likely to co-create digital platforms that use generative AI for personalized learning, intelligent tutoring, and skills verification for enterprises and individuals.
• DXC + Banco Sabadell: DXC was selected by Spain’s Banco Sabadell to build an advanced accessibility testing framework across its digital platforms. The initiative combines AI, automation, and manual testing to ensure inclusive experiences for the bank’s 12 million customers. Led by the bank’s Alicante-based tech center, DXC will deliver 350,000 hours of testing annually.
• Accenture + Microsoft (Cybersecurity): Accenture expanded its alliance with Microsoft to offer generative AI-powered cybersecurity solutions for enterprise customers. The two giants are co-developing offerings in four key areas: modernizing Security Operations Centers (SOC) with AI and automation, automated threat intelligence and data protection, security-focused cloud migration, and enhanced identity/access management.

Talent and Delivery: Rationalization and Investment Both Continue

The week’s events highlight a nuanced approach to talent across the industry – simultaneous tightening in some areas and investment in others:

On one hand, companies like TCS are undertaking tough measures to rebalance their workforce in line with new realities. Several large providers froze lateral hiring and are redeploying internal staff to avoid adding headcount in non-growth areas. Industry hiring data for Q2 showed net additions among top Indian IT firms fell over 70% compared to the previous quarter.

On the other hand, strategic talent investments are still happening. Cognizant, for example, announced plans to develop a new delivery center campus in Visakhapatnam, India, over the next few years, creating capacity for 8,000 professionals. Similarly, many IT firms are ramping up upskilling programs. Providers are also expanding in high-demand onsite locations.

The apparent contradiction of layoffs alongside hiring can be explained by a skills mismatch: legacy roles (e.g. manual testing, older ADM support) are being trimmed, while roles in cloud architecture, cybersecurity, data science, and consulting are still hot.