Zensar Technologies has joined a growing list of Indian IT services companies facing pressure from major clients, as Cisco Systems reduces its vendor base in a cost-cutting initiative. The development makes Zensar the fifth Indian IT firm in the past year to experience challenges with top accounts, highlighting a broader industry trend affecting mid-tier outsourcers.

Financial Impact and Client Relationship

The Pune-based IT outsourcer, part of the RPG Group, receives approximately $40 million annually from Cisco, representing about 6% of its total business. According to industry sources, Zensar's revenue from this key client has been declining as the networking giant rationalizes its vendor relationships.

Sector-Wide Challenges

Much of Zensar's recent weakness stems from the telecom, media, and technology (TMT) segment, which comprises about a fifth of the company's total business. The TMT vertical declined 8.7% quarter-on-quarter in constant currency terms during Q3, primarily due to higher furloughs, particularly affecting the top client.

Equirus Securities analysts Sandeep Shah and Deep Modi noted that excluding TMT, the rest of the business showed modest growth of just 0.3% quarter-on-quarter in Q3.

Industry-Wide Vendor Rationalization

Phil Fersht, chief executive of HFS Research, explained that Cisco's approach forms part of a broader vendor rationalization and spend discipline effort. The company is:

• Tightening discretionary spending
• Reducing lower-value staff augmentation work
• Prioritizing fewer vendors capable of delivering higher-value programs
• Focusing on AI, cloud, and platform modernization initiatives

San Jose-based Cisco reported revenue of $56.70 billion in its last fiscal year, representing a 5% year-on-year increase.

Broader Industry Impact

Zensar's situation reflects challenges faced across the Indian IT services sector, particularly affecting mid-sized outsourcers with revenues between $1 billion and $5 billion. Other companies experiencing similar pressures include:

Management Response and Strategy

CEO Manish Tandon, who took over in December 2022, acknowledged the challenges during the company's post-earnings analyst call on January 23. He emphasized the need to look beyond the TMT segment for growth opportunities.

"There is no point in saying TMT, TMT, TMT. I mean, let's get beyond it now. And now the proportion of TMT to the overall mix has come down from the past," Tandon stated.

The management attributed revenue decline to clients shifting spending toward automation-related hardware from traditional IT services, with significant capital investment moving toward AI infrastructure.

Growth Outlook and Analyst Concerns

Technology, telecom, and media companies represented over a third of Zensar's revenue four years ago but now account for less than a fifth. Despite this diversification, brokerages remain cautious about the company's growth prospects.

Bank of Baroda Capital Markets analysts Girish Pai and Lopa Notaria noted that when Tandon became CEO, he aspired to move Zensar up one quadrant annually from a revenue growth standpoint, reaching the leaders quadrant by FY27.

The analysts emphasized that achieving leadership position would require:

• Building both sales and delivery capabilities
• Developing significant expertise in efficiency-based projects
• Competing effectively with better-performing tier-II companies

Lower revenue from top accounts could complicate Tandon's efforts to steer Zensar toward its aspirational $1 billion revenue target and achieve top-tier growth performance by FY27.

Zensar Technologies Limited announced its unaudited financial results for the quarter ended December 31, 2025, showcasing strong operational performance and rewarding shareholders with an interim dividend declaration. The IT services company demonstrated consistent growth across both standalone and consolidated operations during the third quarter of fiscal year 2026.

Financial Performance Highlights

The company's consolidated financial results revealed impressive growth momentum across key performance indicators. Revenue from operations and profitability metrics showed substantial improvement compared to the corresponding quarter of the previous year.

Nine Months Performance

The nine months ended December 31, 2025 demonstrated sustained growth trajectory across both consolidated and standalone operations. Consolidated revenue from operations reached ₹42,370 million compared to ₹39,217 million in the corresponding nine-month period of the previous year. Net profit after tax for the nine months stood at ₹5,640 million, marking an increase from ₹4,734 million in the same period last year.

Segment-wise Performance

The company operates through two primary business segments, both contributing to the overall growth story during the quarter.

Interim Dividend Declaration

The Board of Directors declared an interim dividend of ₹2.40 per equity share of face value ₹2.00 each for the financial year 2025-26. Key dividend details include:

Exceptional Items and Regulatory Impact

The company reported exceptional items of ₹254 million in consolidated results and ₹239 million in standalone results related to the statutory impact of new Labour Codes. This impact arose from the Government of India's notification of four Labour Codes on November 21, 2025, consolidating 29 existing labour laws. The incremental impact primarily relates to changes in wage definition affecting employee benefits provisions.

Earnings Per Share Performance

Earnings per share metrics reflected the company's strong profitability across both consolidated and standalone operations.

The financial results were reviewed and recommended by the Audit Committee and approved by the Board of Directors at their meeting held on January 22, 2026. The company continues to monitor regulatory developments and will provide appropriate accounting treatment as clarifications emerge regarding the Labour Codes implementation.