The technology industry continues to thrive, driven by constant innovation and businesses' increasing reliance on digital solutions. From cloud computing to AI-powered automation, companies are leveraging cutting-edge technology to stay competitive, enhance efficiency, and streamline operations. With this surge in demand, the global IT services market is projected to hit $1.88 trillion by 2029, growing at a CAGR of 5.6%.
As business operations become more complex, companies are offloading non-core tasks to specialized service providers, allowing them to focus on their strengths. IT outsourcing, in particular, has gained momentum, with enterprises turning to third-party providers for cloud computing, cybersecurity, and digital transformation projects. This shift has fueled rapid growth in IT outsourcing, which is expected to expand at 8.3% annually, reaching $812.70 billion by 2029.
Against this backdrop, let’s compare two outsourcing tech stocks, Cognizant Technology Solutions Corporation (CTSH) and Wipro Limited (WIT), to determine which one offers better growth prospects.
The Case for Cognizant Technology Solutions Corporation Stock
With a market cap of $41.45 billion, Cognizant Technology Solutions Corporation (CTSH) is a professional services company that provides consulting technology and outsourcing services in North America, Europe, and internationally. It operates through four segments: Financial Services, Health Sciences, Products and Resources, and Communications, Media, and Technology.
CTSH’s stock has gained 26.2% over the past nine months and 8.7% year-to-date to close the last trading session at $83.60.
In terms of the trailing-12-month CTSH’s EBITDA margin of 17.88% is 69.9% higher than the 10.52% industry average. Similarly, its 11.60% trailing-12-month net income margin exceeds the 4.07% industry average by 185.1%. However, its trailing-12-month gross profit and levered FCF margins of 34.36% and 8.48% are 31.6% and 26.4% lower than their respective industry averages of 50.27% and 11.52%.
CTSH’s revenues for the fourth quarter that ended December 31, 2024, increased 6.8% year-over-year to $5.08 billion. Its non-GAAP income from operations grew 4.7% from the year-ago value to $800 million. However, CTSH’s net income for the quarter declined by 2.2% year-over-year to $549 million.
Nonetheless, its adjusted EPS came in at $1.21, indicating a 2.5% increase from the prior year’s quarter. Also, the company’s free cash flow stood at $837 million, up 27% year-over-year.
Street expects CTSH’s EPS for the quarter ended December 2024 to decrease 4.7% year-over-year to $1.13. However, its revenue for the same quarter is expected to grow by 6.6% from the year-ago value to $5.07 billion. In addition, the company surpassed the consensus revenue estimates in three of the trailing four quarters, which is promising.
CTSH’s POWR Ratings reflect mixed prospects. It has an overall rating of C, which translates to Neutral in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
CTSH is ranked #7 out of nine stocks in the A-rated Outsourcing - Tech Services industry. It has a C grade for Growth, Value, and Sentiment. To see CTSH’s Momentum, Stability, and Quality ratings, click here.
The Case for Wipro Limited Stock
Based in Bengaluru, India, Wipro Limited (WIT) is a global information technology, consulting, and business process services company. It operates through three segments: IT Services, IT Products, and India State Run Enterprise Services (ISRE). The company also provides cybersecurity consulting services. Its current market cap is $38.80 billion.
Shares of WIT have surged 37.4% over the past nine months and 28.6% over the past year to close the last trading session at $3.71.
In terms of the trailing-12-month EBITDA margin, WIT’s 18.89% is 79.7% higher than the 10.52% industry average. Similarly, its trailing 12-month net income margin and ROCE of 13.97% and 15.66% compare favorably to the industry averages of 4.07% and 4.68%, respectively.
WIT’s net sales for the fiscal third quarter that ended on December 31, 2024, increased marginally year-over-year to ₹223.19 billion ($2.56 billion). Its gross profit rose 1.5% from the year-ago value to ₹69.27 billion ($793.40 million). The company’s attributable profit for the period came in at ₹33.67 billion ($385.64 million), up 24.7% year-over-year, and its EPS rose 24% from the prior year quarter to ₹3.20.
Analysts expect WIT’s EPS for the fourth quarter (ending March 2025) to increase 14.1% year-over-year to $0.04, while its revenue for the same period is expected to come in at $2.62 billion. It is no surprise that the company has topped the consensus EPS and revenue estimates in three of the trailing four quarters.
WIT’s bright prospects are reflected in its POWR Ratings. The stock has an overall B rating, translating to a Buy in our proprietary rating system.
It also has an A grade for Stability and a B for Momentum, Sentiment, and Quality. Out of nine stocks in the same A-rated industry, it is ranked #2. Click here for the additional POWR Ratings for WIT (Growth and Value).
Wipro Ltd. vs. Cognizant Technology: Which IT Services Giant Offers Better Growth Prospects?
When comparing Wipro and Cognizant in terms of growth potential, it’s clear that WIT has been outpacing CTSH in several key areas. Over the past three years, WIT has demonstrated a more robust performance, with its revenue growing at a 6% CAGR, significantly higher than CTSH’s 2.7% annual growth. Additionally, WIT’s total assets expanded at an 8.6% CAGR, while CTSH’s asset growth lagged at 5.4%.
These figures reflect WIT’s ability to scale its business more efficiently and its stronger position in capturing growth in the technology outsourcing space. Moreover, WIT’s profitability metrics also suggest a stronger financial performance, which, combined with its promising outlook, positions it as the more favorable stock for those seeking growth potential.
Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. Click here to see all the top-rated stocks in the Outsourcing - Tech Services industry.
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CTSH shares . Year-to-date, CTSH has gained 8.71%, versus a 3.10% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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