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CompaniesJas Bardia
4 min
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16 Feb 2025, 04:14 PM
ISTCognizant Technology Solutions India Pvt Ltd,a leading global IT and business process outsourcing services provider at their offices at Old Mahabalipuram Road,Chennai. PIC:MADHU KAPPARATHSummaryBelcan, which Cognizant acquired for $1.3 billion in June 2024, gets more than three-fourths of its business from commercial aerospace, defence and space, whereas 40% comes from US federal contracts. With the US clamping down on govt spending, sectors that contribute to Belcan’s growth may suffer.
Cognizant Technology Solutions Corp.’s second-largest acquisition is facing an uncertain road, as a big chunk of its work comes from US federal contracts, many of which are now under scrutiny.
Belcan, which Cognizant acquired for $1.3 billion in June 2024, gets more than three-fourths of its business from commercial aerospace, defence and space, whereas 40% comes from US federal contracts. With the US Department of Government Efficiency (DOGE) led by Elon Musk clamping down on government spending, sectors that contribute to Belcan’s growth may suffer.
“The new administration clearly is committed to cutting federal spending,” said Peter Bendor-Samuel, founder and chief executive of Everest Group. “The commitment to significantly reduce government spending will undoubtedly create a significant head wind for all government contractors including ER&D (engineering research and development (ER&D),” said Bendor-Samuel.
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Slower growth from clients looking to digitize core engineering operations further slows growth for companies like Belcan, which compete in the ER&D space.
“We believe Belcan is subject to industry headwinds across the aerospace and automotive industry which is pressuring growth versus pre-acquisition levels,” said Keith Bachman, an analyst at BMO Capital Markets, in a note dated 5 February.Cognizant’s revenue growthAt the time of the acquisition, Cognizant said the privately held company was expected to bring $800 million in full-year revenue.
“The revenue that the acquired business will contribute to Cognizant in 2024 will depend on the timing of the close but is expected to be over $800 million on an annualized basis,” said Jatin Dalal, chief financial officer of Cognizant, in an analyst interaction dated 10 June after the company announced the Belcan acquisition.
Cognizant clocked revenue of $19.74 billion in 2024. In an analyst call in February, the company management said it expects Belcan to fetch 2.5% of this—or $494 million—in incremental revenue in the January-August period of 2025. This, plus the $300 million that Belcan already earned in the August to December period in 2024, would add up to $794 million—a shade below the $800 million it targeted at the time of the acquisition.
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