Information technology (IT) firm Cognizant has joined a growing list of global IT services firms, cautioning that artificial intelligence (AI) and automation could replace parts of the work they have historically performed for clients, even as they ramp up investments to capture the AI opportunity
In its latest annual 10K filing, the company said some services it traditionally delivered have been and will continue to be replaced by AI or other forms of automation.
However, the caution appears in Cognizant’s Risk Factors section, where the company lays out a wide range of uncertainties that could materially affect its business, alongside risks linked to macroeconomic conditions, climate change, among others.
The IT major, last week, said the assumption that new AI tools can be plugged into enterprise environments and immediately replace large parts of IT services work is misplaced.
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Meanwhile, the shift could lead to reduced demand for certain services and hurt its ability to secure favourable pricing terms, potentially impacting business performance.
“Some services that we historically performed for our clients have been and will continue to be replaced by AI or other forms of automation, including our own AI-enabled client offerings. Each of the foregoing may lead to reduced demand for our services or harm our ability to obtain favourable pricing or other terms for our services, which could have a material adverse effect on our business, results of operations and financial condition,” it read.
Within that framework, Cognizant flags AI as a structural transition risk rather than an immediate earnings warning.
Nevertheless, the disclosure highlights a broader transition in the IT services industry, where firms are racing to deploy generative AI and automation tools while grappling with the risk of cannibalising legacy revenue streams.
Teaneck-headquartered firm said the AI services market is highly competitive and rapidly evolving, with pressure coming not only from traditional rivals but also from AI-native players and clients building in-house capabilities
To counter that, Cognizant has been stepping up investments in AI and automation across client offerings and internal operations, but flagged that pricing models for AI-led work are still evolving and may not immediately offset the impact of service displacement.
The company also highlighted regulatory, operational, and reputational risks tied to AI adoption, including compliance with emerging frameworks such as the European Union’s AI regulations
Despite these risks, the company reiterated that clients are accelerating their shift toward AI-driven operating models, forcing service providers to adapt portfolios and delivery models.
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