US multinational IT consulting and outsourcing company Cognizant has significantly stepped up its capital return plans after its board approved an additional $1 billion share repurchase programme in the second quarter of 2026 to $2 billion.
The company also doubled its FY26 buyback target to $2 billion from the earlier guidance of $1 billion. The company said the extra $1 billion repurchase is likely to be executed during the September quarter of 2026.
The announcement was made on Monday, May 18 and triggered a sharp rally in Cognizant shares, with the stock ending nearly 10% higher on the Nasdaq in the last session. It closed at $51.395.
On May 17, the company’s board of directors approved the proposal under its existing share repurchase programme, taking the total remaining buyback authorisation to nearly $3.45 billion.
As part of this plan, and in anticipation of the previously announced acquisition of Astreya, Cognizant plans to utilise $1 billion from its existing revolving credit facility, the company said in a filing. The company reiterated that its long-term capital allocation strategy remains unchanged and continues to provide flexibility for pursuing strategic acquisitions.
The rebound comes after a prolonged period of weakness for the IT services major. The stock has declined almost 39% over the past year amid concerns over growth slowdown and broader pressure on global technology stocks.
According to a recent report by The Times of India, Cognizant’s market capitalisation had fallen to nearly $22.3 billion as of last Friday, reflecting a 22% erosion over the past month and a 44% decline over the past year. The sharp correction has brought the company’s valuation close to the lower end of its FY26 revenue guidance band of $22.1 billion to $22.6 billion.
Following the Monday rally, the stock's one-month losses now stand at 15%, while its one-year losses stand at 37%.
“Our plan to increase the amount of share repurchases reflects our strong conviction in the long-term opportunity AI creates, and our critical role in it as an AI builder,” CEO Ravi Kumar S said. “We believe a fundamental shift in IT services is underway, one that strengthens Cognizant’s position for future growth. Our current share price significantly undervalues those prospects. I am confident that our early investments will position us to emerge as a leader in AI-led enterprise transformation in the years ahead.”
Chief Financial Officer Jatin Dalal said the company’s strong balance sheet and healthy cash generation provide enough flexibility to return more capital to shareholders without compromising growth investments. “A strong balance sheet and robust free cash flow give us flexibility to opportunistically accelerate return of capital to shareholders while we continue to invest for growth, including through strategic M&A,” he said.
(Disclaimer: The recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times.)
