📢 Earnings Summary — CTSH

Cognizant delivered a solid Q3 with revenue and margin ahead of expectations, broad-based organic growth across all segments, and strong performance in North America. Large-deal momentum remained robust with six $100M+ signings in the quarter and a healthy TTM book-to-bill of 1.3x, though quarterly bookings were lumpy. The company is executing on its AI builder strategy, showing tangible productivity gains (30% AI-generated code), expanding platform adoption (Flowsource), and scaling agentic use cases across industries. Margins expanded on NextGen savings and an increasingly AI-enabled delivery model, while capital returns reached roughly $1.5B year-to-date. Management expects to outperform its initial 2025 revenue guidance and reach the high end of its adjusted operating margin range despite macro uncertainty and discretionary spend pressures. Overall tone was confident, emphasizing sustained large-deal visibility and the compounding benefits of AI-led, outcome-based work.

📈 Growth Highlights

• Revenue $5.4B, up 6.5% YoY in constant currency (Q3); fifth consecutive quarter of organic YoY growth
• All four operating segments grew organically YoY
• North America up nearly 8% YoY in constant currency
• Signed 6 large deals ($100M+ TCV each) in Q3; 16 large deals YTD; large-deal TCV up ~40% YTD YoY
• Trailing 12-month bookings up 5% with 1.3x book-to-bill; Q3 bookings down ~5% YoY (lumpiness)
• Digital engineering (~$2B run-rate) up ~8% organically YTD
• Cloud and infrastructure modernization up ~10% YoY
• BPO revenue up ~10% over the last two quarters; tracking toward ~$3B annualized in coming quarters
• Revenue per employee up ~8% TTM; income per employee up ~10% TTM

🔨 Business Development

• New collaboration with Anthropic to deploy Claude models and agentic tooling across client platforms and internal operations
• Early launch partner for Google Gemini Enterprise to enable unified, secure agentic journeys
• Partnership with Workfabric AI to scale context engineering; building tailored AI foundations
• Leveraging Salesforce Agentforce for agentic order management use cases
• Awarded AI GitHub Services and Channel Partner of the Year
• Flowsource platform used at 70+ clients; 120 in pipeline
• 3,500+ early AI engagements across clients
• Built 1,500+ domain/workflow-specific agents via Agent Foundry
• 400+ platform deployments (e.g., Neuro AI) bundling platforms, services and IP
• Client wins/use cases: Pearson modernization on Flowsource; national grocery chain cut online pickup time by 20%–45%; digital sales agents cut order response times from 5 days to 90 seconds for a food distributor; patient onboarding transformation for a cell-free DNA diagnostics provider; agentic order management for a crop sciences company; intelligent lead generation for a labeling/packaging provider; multi-agent workflows linking TriZetto to Salesforce/Genesys/ServiceNow for common health plan interactions
• Launched Cognizant Enterprise Vibe Coding Blueprint for client AI fluency programs

💵 Financial Performance

• Q3 revenue $5.4B, +6.5% YoY CC; Belcan contributed just under 250 bps of inorganic growth
• YTD revenue +7.3% YoY CC, including ~350 bps inorganic
• Q3 adjusted operating margin 16%, up ~70 bps YoY; YTD adjusted operating margin up ~50 bps
• Q3 adjusted EPS up ~11% YoY
• TTM bookings +5%; TTM ACV growth consistent with TTM TCV; TTM book-to-bill 1.3x
• Q3 bookings down ~5% YoY due to lumpiness
• Utilization 85% (third consecutive quarter), up from 84% a year ago
• Voluntary attrition 14.5%, down 70 bps sequentially and 10 bps YoY
• Noncash income tax expense of ~$390M (~$0.80 per share) related to deferred income tax
• Margin drivers: NextGen program savings and INR depreciation tailwind; partially offset by large-deal ramps and Belcan dilution

🏦 Capital & Funding

• Returned approximately $1.5B to shareholders (buybacks/dividends) year-to-date
• Balanced capital allocation while funding organic/inorganic AI initiatives, platforms and partnerships
• Belcan acquisition/inorganic contribution supported growth (~250 bps in Q3; ~350 bps YTD)
• No material near-term operational/financial impact expected from recent U.S. H1B policy changes due to greater local hiring and nearshore capacity

🧠 Operations & Strategy

• Executing AI Builder strategy across three vectors: (1) AI-led productivity, (2) Industrializing AI, (3) Agentifying the enterprise
• Approximately 30% of internal code generated by AI in Q3; target ~50% over time
• Embedded AI across 150+ internal use cases (finance, operations, sales enablement, pricing) to streamline decisions and cycle times
• Increased mix of fixed-bid and outcome-based services; early signs of nonlinear, AI-led growth
• Flowsource platform integrates gen/agentic AI across SDLC to accelerate delivery
• Agent Foundry provides library/framework of industry/workflow agents; 10,000+ specialists in AI data training/fine-tuning
• Focus on small language models and context engineering as critical disciplines; partnership with Workfabric AI
• IP on the edge (e.g., Neuro AI) bundling platforms with services and IP to deliver outcomes; 400+ deployments
• Upskilling 350k+ associates; global hiring of new graduates for AI training; Guinness-record genAI hackathon (53k participants, 30k prototypes)
• Delivery model increasingly AI-enabled; vendor consolidation and modernization fueling large-deal momentum

🌍 Market Outlook

• Expect to outperform initial 2025 revenue guidance and meet the high end of adjusted operating margin range
• Demand environment remains complex with trade policy and geopolitical uncertainty; clients scrutinizing discretionary spend (notably in Products & Resources)
• Cost pressures driving productivity-led programs and vendor consolidation
• Growing pipeline of modernization projects laying AI foundations
• North America remains strongest; Europe and Rest of World stable but exposed to tariff/geopolitical impacts
• Healthy backlog and sustained large-deal momentum provide visibility exiting 2025
• Products & Resources expected to see more meaningful ramp from new wins into 2026

⚠ Risks & Headwinds

• Elevated uncertainty around trade policy/tariffs and geopolitical backdrop
• Pockets of discretionary spend weakness in Products & Resources and parts of CMT
• Belcan acquisition dilutive to margins near term; ramp of large deals also a margin headwind
• Bookings lumpiness (Q3 bookings down ~5% YoY)
• Uncertainty around government funding in segments of Health Sciences
• Currency volatility (INR depreciation currently a tailwind but can reverse)
• Regulatory/visa policy changes (mitigated by local/nearshore hiring and automation)

AI-generated earnings recap sourced from company results & conference call observations. Not investment advice — verify with official filings.