Group 1 - The article compares two stocks in the Computers - IT Services sector: Cognizant (CTSH) and ServiceNow (NOW), focusing on which stock offers better value for investors [1] - Cognizant has a Zacks Rank of 2 (Buy), indicating a positive earnings outlook, while ServiceNow has a Zacks Rank of 3 (Hold) [3] - Value investors typically analyze traditional metrics such as P/E ratio, P/S ratio, earnings yield, and cash flow per share to identify undervalued stocks [4] Group 2 - Cognizant's forward P/E ratio is 15.39, significantly lower than ServiceNow's forward P/E of 59.66, suggesting better value [5] - Cognizant has a PEG ratio of 1.78, while ServiceNow's PEG ratio is 2.52, indicating that Cognizant may offer more value relative to its expected earnings growth [5] - Cognizant's P/B ratio is 2.59 compared to ServiceNow's P/B of 20.08, further supporting Cognizant's superior valuation metrics and its Value grade of B versus ServiceNow's F [6]

Core Insights - Cognizant Technology Solutions experienced a positive stock market performance, with shares rising over 2% following a favorable quarterly earnings report [1] - The company's revenue for the first quarter reached approximately $5.12 billion, reflecting a 7.5% increase compared to the same period in 2024 [2] - GAAP net income rose to $663 million from $546 million year-over-year, while non-GAAP earnings per share increased by 10% to $1.23 [2][3] Financial Performance - The revenue growth was supported by a 3% improvement in trailing-12-month bookings, totaling $26.7 billion [2] - Analysts had anticipated lower figures, with expectations of $5.06 billion in revenue and $1.20 per share for adjusted profitability [3] - Cognizant provided guidance for the second quarter and full-year 2025, projecting revenue between $20.5 billion and $21 billion, indicating growth of nearly 4% [4] Strategic Focus - The company highlighted the impact of artificial intelligence (AI) technology on its operations, emphasizing productivity, cost reduction, and resiliency as key areas of focus [4] - The consensus among analysts aligns with Cognizant's guidance, estimating revenue at nearly $20.6 billion and adjusted net income at $4.99 per share [5] - While the quarter was deemed decent, there is a desire for higher growth in bookings to enhance investor confidence [5]

Core Insights - Cognizant Technology Solutions (CTSH) reported non-GAAP earnings of $1.23 per share for Q1 2025, exceeding the Zacks Consensus Estimate by 3.36% and reflecting a year-over-year increase of 9.8% [1] - Revenues reached $5.12 billion, surpassing the consensus mark by 0.95%, with a year-over-year growth of 7.5% and 8.2% at constant currency [1] - The Belcan acquisition contributed approximately 400 basis points to revenue growth, while bookings increased 3% year over year to $26.7 billion, indicating a book-to-bill ratio of about 1.3 times [2] Financial Performance - Financial services revenues, accounting for 28.6% of total revenues, grew 5.6% year over year to $1.462 billion, driven by increased discretionary spending and investments in cloud and AI [4] - Health Sciences revenues, making up 30.7% of total revenues, rose 10.9% year over year to $1.571 billion, supported by strong demand across various sectors [5] - Products and Resources revenues increased 12.8% year over year to $1.27 billion, while Communications, Media and Technology revenues decreased 2.7% to $804 million [5] Regional Performance - North America contributed 75.3% to total revenues, with a year-over-year increase of 9.5% [6] - Revenues from Europe grew 1.2% year over year, contributing 18.6% to total revenues, while the Rest of the World saw a 3.7% increase [6] Operational Metrics - Selling, general & administrative expenses as a percentage of revenues decreased by 60 basis points year over year to 15.5% [7] - The company reported a GAAP operating margin of 16.7%, expanding 210 basis points year over year, and a non-GAAP operating margin of 15.5%, which expanded 40 basis points [8] Balance Sheet Overview - As of March 31, 2025, cash and short-term investments totaled $1.99 billion, down from $2.24 billion at the end of 2024 [9] - Total debt decreased to $600 million from $908 million, while cash generated from operations was $400 million compared to $920 million in the previous quarter [9] Future Guidance - For Q2 2025, revenues are expected to be between $5.14 billion and $5.21 billion, indicating growth of 5.9%-7.4% [10] - For the full year 2025, revenues are projected to be in the range of $20.5-$21 billion, reflecting an increase of 3.9-6.4% [10] - Adjusted earnings per share for 2025 are anticipated to be between $4.98 and $5.14 [11]

Core Insights - Cognizant reported revenue of $5.12 billion for the quarter ended March 2025, reflecting a year-over-year increase of 7.5% and surpassing the Zacks Consensus Estimate by 0.95% [1] - The earnings per share (EPS) for the quarter was $1.23, up from $1.12 in the same quarter last year, exceeding the consensus EPS estimate of $1.19 by 3.36% [1] Financial Performance by Segment - Financial Services revenue was $1.46 billion, exceeding the average estimate of $1.43 billion, with a year-over-year increase of 5.6% [4] - Communications, Media and Technology revenue was $804 million, below the estimated $833.33 million, representing a year-over-year decline of 2.7% [4] - Products and Resources revenue reached $1.28 billion, slightly above the estimated $1.27 billion, with a year-over-year increase of 12.8% [4] - Health Sciences revenue was $1.57 billion, surpassing the average estimate of $1.55 billion, reflecting a year-over-year growth of 11% [4] Stock Performance - Cognizant's shares have returned -4.1% over the past month, compared to a -0.2% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Group 1 - Cognizant reported quarterly earnings of $1.23 per share, exceeding the Zacks Consensus Estimate of $1.19 per share, and up from $1.12 per share a year ago, representing an earnings surprise of 3.36% [1] - The company achieved revenues of $5.12 billion for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 0.95%, and an increase from $4.76 billion year-over-year [2] - Cognizant has consistently outperformed consensus EPS and revenue estimates over the last four quarters [2] Group 2 - The stock has experienced a decline of approximately 4.7% since the beginning of the year, compared to a decline of 5.5% for the S&P 500 [3] - The current consensus EPS estimate for the upcoming quarter is $1.23 on revenues of $5.12 billion, and for the current fiscal year, it is $4.96 on revenues of $20.57 billion [7] - The Computers - IT Services industry, to which Cognizant belongs, is currently ranked in the bottom 39% of over 250 Zacks industries, indicating potential challenges ahead [8]

Financial Performance - Revenues for Q1 2025 increased to $5,115 million, up 7.4% from $4,760 million in Q1 2024[20] - Net income for Q1 2025 was $663 million, representing a 21.4% increase compared to $546 million in Q1 2024[20] - Basic and diluted earnings per share for Q1 2025 were both $1.34, up from $1.10 in Q1 2024[20] - Comprehensive income for Q1 2025 was $794 million, compared to $484 million in Q1 2024[23] - Operating income increased by 22.7% to $853 million in Q1 2025, compared to $695 million in Q1 2024[113] - Adjusted income from operations rose by $73 million or 10.2% from Q1 2024[106] - Operating margin for Q1 2025 improved to 16.7%, up from 14.6% in Q1 2024, driven by net savings from the NextGen program and operational efficiencies[107] - Adjusted diluted EPS increased by 9.8% to $1.23 in Q1 2025, compared to $1.12 in Q1 2024[113] Revenue Breakdown - North America contributed $3,854 million to total revenues in Q1 2025, up from $3,521 million in Q1 2024, reflecting a growth of about 9.5%[36] - The Health Sciences and Financial Services segments contributed positively to revenue growth, while the Products and Resources and Communications, Media and Technology segments showed weakness[107] - Revenue for Q1 2025 increased by $355 million or 7.5% compared to Q1 2024, with an 8.2% increase in constant currency[106] - Recent acquisitions contributed 400 basis points to overall revenue growth, with a significant impact on the Products and Resources segment[117] Cash Flow and Assets - Cash generated from operating activities in Q1 2025 was $400 million, a significant increase of $305 million compared to $95 million in Q1 2024[150] - Total current assets as of March 31, 2025, were $7,545 million, slightly up from $7,504 million at the end of 2024[17] - Cash and cash equivalents at the end of Q1 2025 were $1,980 million, down from $2,231 million at the end of 2024[17] - Long-lived assets as of March 31, 2025, totaled $988 million, slightly down from $994 million as of December 31, 2024[101] Liabilities and Debt - Total liabilities decreased to $5,068 million as of March 31, 2025, down from $5,558 million at the end of 2024[17] - Long-term debt as of March 31, 2025, is $567 million, down from $875 million as of December 31, 2024, reflecting a decrease of 35.2%[52] - The company repaid $300 million of its revolving credit facility during Q1 2025, following a $600 million borrowing in Q3 2024 to fund the acquisition of Belcan[48] Tax and Legal Matters - The effective income tax rate for the three months ended March 31, 2025, is 24.4%, slightly down from 24.8% in the same period of 2024[53] - The company is involved in ongoing disputes with the Indian Tax Department regarding share repurchase transactions valued at $523 million and $2.8 billion from 2013 and 2016, respectively[53] - The ongoing legal proceedings related to Syntel resulted in a reduced damages award from $855 million to $570 million, with further evaluations pending[78] Operational Efficiency - The company reported a decrease in operational costs by H%, improving overall profitability[179] - Voluntary attrition in Tech Services was 15.8% for the trailing twelve months ended March 31, 2025, compared to 13.1% for the same period in 2024[108] Future Outlook and Investments - The company plans to continue significant investments in AI capabilities to meet client needs and enhance internal operations[110] - Market expansion efforts are underway, with plans to enter E new markets by the end of the year[179] - The company is considering strategic acquisitions to enhance its market position, with a budget of $F million earmarked for potential deals[179] Shareholder Returns - Dividends declared in Q1 2025 were $0.31 per share, totaling $154 million[26] - A dividend of $0.31 per share was declared on April 29, 2025, with a record date of May 19, 2025[103] - The company repurchased $190 million of its Class A common stock during Q1 2025, with a remaining balance of $3,047 million authorized for repurchase[173][174]

Financial Data and Key Metrics Changes - First quarter revenue grew by 8.2% year over year in constant currency to $5.1 billion, driven by the Belcan acquisition and organic growth in Health Sciences and Financial Services [6][25] - Adjusted Operating Margin improved by 40 basis points year over year to 15.5%, on track to achieve full year guidance of 20 to 40 basis points of expansion [8][33] - Adjusted EPS grew 10% year over year, marking the sixth consecutive quarter of year over year growth [8][25] Business Line Data and Key Metrics Changes - Health Sciences revenue increased over 11% year over year in constant currency, with broad-based growth across payer, provider, and life sciences [7][28] - Financial Services segment grew 6.5% year over year in constant currency, with healthy discretionary spending as clients invested in cloud and data modernization [7][28] - Products and Resources segment growth was driven by Welch, but faced weak demand due to discretionary spending pressures [29] Market Data and Key Metrics Changes - North America revenue grew 10% year over year in constant currency, driven by Belcan and large deals [30] - Europe revenue increased by 3% year over year in constant currency, supported by life sciences and financial services clients [31] - The Rest of the World saw a 7% year over year increase in constant currency, driven by large deals in Communications, Media, and Technology [32] Company Strategy and Development Direction - The company is investing heavily in AI-powered software-led engineering, integrating expertise in embedded software and IoT with capabilities from recent acquisitions [10][19] - Strategic imperatives include amplifying talent, scaling innovation, and accelerating growth, with a focus on AI and embedded engineering [16][19] - The company aims to build resilience and durability by developing leadership and talent, strengthening operational discipline, and rebooting innovation [9][10] Management's Comments on Operating Environment and Future Outlook - The macro environment changed sharply in early April, leading to elevated uncertainty, but the company sees opportunities related to productivity and efficiency [9][26] - Management remains optimistic about capturing demand in Financial Services and believes the current environment presents opportunities for cost optimization [27] - The company expects revenue growth of 5% to 6.5% year over year in constant currency for the second quarter of 2025 [35][36] Other Important Information - The company had four large deals in the first quarter, including a mega deal valued at over $500 million [8][26] - Free cash flow for the first quarter was $393 million, with plans to redeploy proceeds from the sale of an office complex in India [35] - The company plans to return approximately $1.7 billion to shareholders in 2025, including $1.1 billion in share repurchases and $600 million in dividends [39] Q&A Session Summary Question: Insights on bookings and pipeline shifts - Management noted that productivity gains from leveraging AI are leading to new deals and opportunities for consolidation, particularly in financial services [43][44] Question: Impact of April slowdown on decision-making - Management indicated that the slowdown is primarily seen in the Products and Resources segment, while Financial Services remains strong [56][57] Question: Comfort level regarding backlog coverage - Management expressed confidence in the backlog coverage, with a book-to-bill ratio of 1.3x and healthy demand in applications, AI, and cybersecurity [76] Question: Gross margin trends and expectations - Management highlighted that cost discipline will drive operating margin outcomes, with utilization and productivity improvements being key factors [78] Question: Sustainability of current growth and market position - Management emphasized the need for consistency in performance and expressed confidence in sustaining growth through a broad-based portfolio and strong market position [85][86]

Financial Data and Key Metrics Changes - First quarter revenue grew by 8.2% year over year in constant currency to $5,100 million, driven by the Belcan acquisition and organic growth in Health Sciences and Financial Services [6][25] - Adjusted Operating Margin improved by 40 basis points year over year to 15.5%, on track to achieve full year guidance of 20 to 40 basis points of expansion [8][32] - Adjusted EPS grew 10% year over year, marking the sixth consecutive quarter of year over year growth [8][25] Business Line Data and Key Metrics Changes - Health Sciences revenue increased over 11% year over year in constant currency, with broad-based growth across payer, provider, and life sciences [7][28] - Financial Services segment grew 6.5% year over year in constant currency, with healthy discretionary spending as clients invested in cloud and data modernization [7][28] - Products and Resources segment growth was driven by Welch, but overall demand environment remained weak due to discretionary spending pressures [29] Market Data and Key Metrics Changes - North America revenue grew 10% year over year in constant currency, driven by Belcan and large deals [30] - Europe revenue increased by 3% year over year in constant currency, supported by life sciences and financial services clients [30] - The Rest of the World saw a 7% year over year increase in constant currency, driven by large deals in Communications, Media, and Technology [31] Company Strategy and Development Direction - The company is investing heavily in AI-powered software-led engineering, integrating expertise in embedded software and IoT with capabilities from recent acquisitions [10][21] - Strategic imperatives include amplifying talent, scaling innovation, and accelerating growth, with a focus on AI and embedded engineering [16][19] - The company aims to build a resilient and durable organization that can thrive in both slow and high-velocity markets [5][9] Management's Comments on Operating Environment and Future Outlook - The macro environment has changed sharply, leading to elevated uncertainty, but the company sees opportunities related to productivity and efficiency [9][26] - Management remains optimistic about the pipeline for large deals and believes the current environment presents opportunities for cost optimization and vendor consolidation [26][39] - The company expects revenue growth of 3.5% to 6% in constant currency for the full year 2025, with adjusted operating margin guidance of 15.5% to 15.7% [36][37] Other Important Information - The company has approximately 1,400 early Gen AI engagements, reflecting a strong focus on AI-led productivity [11][12] - The company plans to establish a 14-acre immersive learning center in Chennai, India, to train 100,000 individuals annually in advanced AI technologies [17][20] - The company returned $364 million of capital to shareholders through share repurchases and dividends during the quarter [35] Q&A Session Summary Question: Shift in bookings and pipeline quality - Management noted that productivity gains from leveraging AI are leading to new deals and opportunities for consolidation, particularly in financial services [42][44] Question: April slowdown in decision-making - Management indicated that while there is some caution in health and products and resources sectors, financial services remain strong, and the impact is seen as isolated [56][57] Question: Organic growth and headcount changes - Management confirmed that organic growth has been driven by healthcare and financial services, with a significant improvement in utilization from 82% to 85% [64][90] Question: Confidence in cost takeout deals - Management expressed confidence that the current environment is conducive for closing cost takeout deals, despite some delays in mega deals [93]

© 2025 Cognizant Forward-looking statements This earnings supplement includes statements that may constitute forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the accuracy of which is necessarily subject to risks, uncertainties and assumptions as to future events that may not prove to be accurate. These statements include, but are not limited to, express or implied forward-looking statements relating to our strategy, competitive p ...

Revenue Performance - Revenue for Q1 2025 was $5,115 million, a 7.5% increase year-over-year, and 8.2% in constant currency[3] - Revenues for Q1 2025 were $5,115 million, a 7.4% increase from $4,760 million in Q1 2024[28] - Total revenues for the three months ended March 31, 2025, were $5,115 million, representing a year-over-year increase of 7.5%[39] - Full-year 2025 revenue is expected to be between $20.5 billion and $21.0 billion, representing growth of 3.9% to 6.4%[12] - Q2 2025 revenue guidance is set between $5.14 billion and $5.21 billion, indicating growth of 5.9% to 7.4%[12] Profitability Metrics - GAAP operating margin improved to 16.7%, up 210 basis points year-over-year, while adjusted operating margin increased to 15.5%, up 40 basis points[6] - GAAP diluted EPS rose to $1.34, a 22% increase year-over-year, and adjusted diluted EPS increased to $1.23, a 10% rise[6] - Adjusted Operating Margin for Q1 2025 was 15.5%, up from 15.1% in Q1 2024[32] - Adjusted Diluted Earnings Per Share (EPS) for Q1 2025 was $1.23, compared to $1.12 in Q1 2024, representing a 9.8% increase[32] - The company anticipates full-year 2025 Adjusted Diluted EPS guidance of $4.98 to $5.14[32] Shareholder Returns - The company returned $364 million to shareholders through share repurchases and dividends, with a planned return of $1.7 billion for 2025[6] - The company repurchased 2.3 million shares under its stock repurchase program during the quarter, with a remaining authorized balance of $3,047 million[44] Bookings and Growth Indicators - Trailing 12-month bookings reached $26.7 billion, reflecting a 3% year-over-year increase, with a book-to-bill ratio of approximately 1.3x[8] - The book-to-bill ratio is a key indicator of potential future revenues, with large deals defined as those with a total contract value of $100 million or greater[25] Segment Performance - The Health Sciences segment generated $1,571 million in revenue, a 10.9% increase year-over-year, contributing 30.7% to total revenues[39] - North America accounted for $3,854 million, or 75.3% of total revenues, with a year-over-year growth of 9.5%[39] - The Products and Resources segment saw a revenue increase of 12.8% year-over-year, aided by recent acquisitions contributing approximately 400 basis points to overall revenue growth[40] Financial Position - Net income for Q1 2025 was $663 million, compared to $546 million in Q1 2024, reflecting a 21.4% year-over-year growth[28] - Total current assets as of March 31, 2025, were $7,545 million, slightly up from $7,504 million at the end of 2024[30] - Total liabilities decreased to $5,068 million as of March 31, 2025, from $5,558 million at the end of 2024[30] - Cash and cash equivalents were $1,980 million as of March 31, 2025, down from $2,231 million at the end of 2024[30] - Long-term debt decreased from $875 million at December 31, 2024, to $567 million as of March 31, 2025[37] Cash Flow - Net cash provided by operating activities was $400 million, compared to $95 million in the same period last year[42] - Free cash flow for the three months ended March 31, 2025, was $393 million, significantly up from $16 million in the prior year[46] - The company experienced a net cash used in investing activities of $7 million, compared to $238 million in the prior year[42] Strategic Initiatives - Cognizant's recent acquisitions contributed approximately 400 basis points to year-over-year revenue growth[3] - The company plans to establish a Cognizant Immersive Learning Center in Chennai, India, aimed at training 100,000 individuals annually[16] - Cognizant has entered into several strategic partnerships, including with Boehringer Ingelheim and Citizens Financial Group, to enhance technology capabilities and operational efficiencies[13]