. is financing its $2 billion share repurchase through bank credit, in a departure from the information technology (IT) industry’s practice of using cash reserves for such transactions. The development underscores the twin challenges of keeping shareholders content and keeping enough cash for business and acquisitions.
In Nasdaq filings last week, the US-headquartered IT services giant said it will draw $1 billion for the buyback from a $1.85 billion revolving credit facility. Cognizant had secured the credit line in 2014 to support the $2.7 billion acquisition of Trizetto, a healthcare-focused IT firm.
Cognizant, which had decided earlier this year to buy back up to $1 billion of its shares, informed Nasdaq on 18 May that it would to $2 billion. The generous cash return mirrors an industry practice: Tata Consultancy Services Ltd, Infosys Ltd, HCL Technologies Ltd and Wipro Ltd collectively paid $10.7 billion to shareholders in FY26 and $51.2 billion over the last five years. However, what’s different with Cognizant is the source of funds—both domestic IT firms as well as foreign peers such as Accenture Plc and Capgemini SE, have always turned to their own cash chests.
Cognizant, which follows a January-December fiscal year and has three-fourths of its employees in India, reported a free cash flow of $198 million in the March quarter, and ended with $950 million in cash and $568 million in debt. It has already paid $603 million to shareholders during the first quarter, including $444 million in share repurchases and $159 million in dividends, while spending $730 million on acquisitions.
Acquisition path
However, the management has stated its intention to spend more on acquisitions, including agreeing last month to spend $600 million for Astreya, a California-based IT services firm that manages data centre and AI lab infrastructure for large tech companies.
Over the last 11 years, Cognizant has drawn on its revolving credit line to fund many acquisitions, and repaid in subsequent years. Hence, it started 2026 with the full credit facility, having replenished it after prior repayments. The credit line is due in October 2027.
“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,” Cognizant chief executive officer S. Ravi Kumar said in a Nasdaq filing. “We believe our current share price significantly undervalues those prospects”.
“It (leveraged buyback) is certainly a first for IT services firms, and this move is more about capital structure optimization,” said Pramod Gubbi, founder of Marcellus Investment Managers. “However, it is common for other (non-IT services)companies to take a loan if it comes at lower interest rates.”
Global path
Gubbi’s comment applies to many global firms that use debt to pay shareholders, including and McDonald’s. Last week, Birkenstock Holding plc, the German footwear maker, agreed to repurchase $250 million in shares using cash and a revolving credit facility.
“With high interest rates, debt is no longer as cheap as it used to be and homegrown IT services firms are sitting on piles of cash through which they can fund buybacks,” added Gubbi. Amit Chandra, vice-president of HDFC Securities, agreed that buybacks are generally done through internal cash reserves.
“This won’t be a trend for the IT services sector,” said Karan Uppal, lead IT analyst for Phillip Capital. “Because of the AI narrative, large buybacks have not cheered shareholders. Investors want tangible returns in terms of growth and higher margins from AI-led investments”.
To be sure, Indian and Indian-heritage IT firms’ approach to increasing share repurchases comes even as global tech titans have eschewed their historic record of share buybacks. Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla, which splurged on share buybacks in 2024 and 2025, have cut back on repurchases as they invest billions in data centres and AI.
Cognizant had returned large amounts to shareholders last year too. On 5 February 2025, it announced plans to repurchase $600 million of shares and give $600 million in dividends, totalling $1.2 billion. Less than 50 days later, on 25 March, it said it would repurchase up to $1.1 billion in shares. The company planned to return $1.7 billion to shareholders in 2025. Cognizant ended 2025 by returning nearly $2 billion, including $1.38 billion in buybacks and $610 million in dividends.
Activism?
The increase in buyback prompted at least two executives and one analyst to question whether the decision was driven by investor feedback, including from an activist investment firm, Mantle Ridge. Mantle Ridge does not have a direct stake in Cognizant. According to one executive, it has a stake through derivatives like cash-settled forwards and options. Barclays said Mantle Ridge held a 2.4% stake until last year. Cognizant shares have underperformed the IT’s Big Five, falling 36% since the start of the year.
“I would not be surprised if activist investors are after this move, especially when the company’s shares are down,” added Gubbi of Marcellus.
In its response to a Mint query, Cognizant did not address the matter of leveraged buyback; a company spokesperson said that increasing the buyback was the decision made by Cognizant’s board and management, and that attributing it to feedback from investors, including Mantle Ridge, was “completely false and without any merit”.
An email sent to Mantle Ridge seeking comment went unanswered.
Cognizant, which does not have a promoter, with former and current employees owning about 4% of the shares, counts the world’s largest index fund, The Vanguard Group, owning 11.86%, followed by BlackRock, the money manager, owning 9.19%. Additionally, 19 asset management firms and hedge funds each own more than 1% of the stock.