Core Viewpoint - Cognizant Technology Solutions Corp. is considering a public listing on Indian stock exchanges, which would position it as India's second-largest listed IT services company, following Tata Consultancy Services (TCS) [1][2] Company Strategy - Cognizant's board and management are evaluating opportunities to enhance shareholder value, including a potential primary offering and secondary listing in India, with legal and financial advisors involved [2][3] - The company ended the previous year with $19.74 billion in revenue and has a significant workforce in India, with over two-thirds of its 241,500 employees based there [2] Market Valuation - The motivation behind the potential India listing is attributed to better valuation opportunities in the Indian market, where Cognizant's price-to-earnings ratio is around 13, compared to 22-23 for local firms like TCS and Infosys [4][5] Industry Context - Cognizant's potential listing follows the upcoming public listing of Carlyle-backed Hexaware Technologies Ltd. in February 2025, indicating a trend of American firms seeking to tap into the Indian market [6] Financial Performance - Cognizant reported better-than-expected performance for the July-September period, with revenue of $5.42 billion, reflecting a 3.24% sequential increase and a 7.36% year-over-year growth, surpassing analyst estimates [7][8] - The company raised its full-year revenue guidance to $21.05-$21.1 billion, indicating a projected annual growth of 6.6%-6.9%, up from a previous range of 4.7%-6.7% [11] Growth Dynamics - Cognizant's organic growth has improved as reliance on acquisitions has decreased, with year-on-year growth rates of 8.2%, 7.2%, and 6.5% in the first three quarters of the year [12][13] - The Belcan acquisition contributed significantly to growth in earlier quarters, but its impact has diminished, suggesting a shift towards more sustainable growth strategies [13][14] Operational Insights - The company's net profit declined by over half sequentially to $274 million due to higher one-time income tax expenses [15] - Operating margin increased by 40 basis points to 16%, attributed to a depreciating Indian rupee and disciplined expense management [16] Workforce and Hiring Practices - Cognizant's employee count rose to 349,800, an increase of 6,000 from the previous quarter, amidst scrutiny over hiring practices in the US [17][18] - The company has reduced its dependency on visas and increased local hiring, mitigating potential impacts from recent US policy changes [19][20]

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Financial Data and Key Metrics Changes - Revenue for Q3 2025 grew 6.5% year over year in constant currency to $5.4 billion, marking the fifth consecutive quarter of year-over-year organic revenue growth [5][24] - Adjusted operating margin improved by 70 basis points year over year, driven by disciplined expense management and an increasingly AI-enabled delivery model [8][28] - Adjusted EPS grew approximately 11% year over year, reaching $1.39, excluding a one-time non-cash income tax expense [30][33] - Free cash flow for Q3 was $1.2 billion, representing 170% of adjusted net income, compared to $791 million a year ago [30] Business Line Data and Key Metrics Changes - All four operating segments experienced organic revenue growth year over year, with financial services leading due to healthy discretionary spending trends [25][26] - The digital engineering business grew about 8% organically year to date, while the cloud and infrastructure modernization business grew 10% year over year [13][14] - BPO revenue grew 10% in the last two quarters and is on track to reach $3 billion in annualized revenue [20] Market Data and Key Metrics Changes - North America contributed significantly to revenue growth, with nearly 8% year-over-year growth in constant currency [26] - Demand trends in Europe and the rest of the world remained stable but were affected by recent tariffs and geopolitical uncertainty [26] Company Strategy and Development Direction - The company is evolving into an AI builder, focusing on scaling agentic AI across enterprises and enhancing productivity through AI-led initiatives [9][21] - Cognizant's strategy includes three vectors: AI-led productivity, industrializing AI, and agentifying the enterprise, which are forming a flywheel of new value creation [10][18] - The company is investing in platforms, intellectual property, and partnerships to support its AI builder strategy and long-term growth [23][60] Management's Comments on Operating Environment and Future Outlook - Management noted a complex demand environment with clients navigating uncertainty around trade policy, but also highlighted a growing pipeline of modernization projects [24][25] - The company expects to meet or exceed the high end of its revenue guidance for the year, with a forecasted revenue growth of 6%-6.3% in constant currency [32][33] - Management expressed confidence in the financial services sector, indicating a shift from cost takeout to innovation-led spending [82] Other Important Information - The company signed six large deals in Q3, each with a total contract value of $100 million or more, bringing the year-to-date total to 16 [6] - Cognizant's workforce is being upskilled in AI-related skills, with over 250,000 employees trained [53] Q&A Session Summary Question: Insights on new business pipeline for smaller deals - Management noted a healthy pipeline for discretionary small projects, particularly in financial services and healthcare, driven by AI-led spending [40] Question: Sustainability of revenue per employee increase - Revenue per employee rose 8%, and margin per employee grew 10%, indicating a shift towards fixed-price managed services and AI-led productivity [42][44] Question: Tracking success of employee upskilling in AI - The company is pioneering AI-related skill development, with significant training initiatives and a focus on embedding AI in software development processes [49][51] Question: Impact of large deal signings on revenue and margins in 2026 - Management expects large and mega deals to continue positively impacting revenue and margins, with a focus on both productivity and innovation-led spending [56][72] Question: Partnership strategy and its importance - The company is broadening its partnership strategy to include both traditional SaaS companies and frontier model companies like OpenAI and Anthropic [58][60] Question: Financial services vertical spending trends - Improved spending in financial services is transitioning from cost savings to innovation, with significant AI-led projects being implemented [81][82] Question: Outlook for the healthcare vertical - The healthcare vertical is expected to grow, particularly through the BPaaS offering, which is seeing increased demand due to AI-led instrumentation [85]

Financial Data and Key Metrics Changes - Revenue grew 6.5% year over year in constant currency to $5.4 billion, marking the fifth consecutive quarter of organic revenue growth [4][21] - Adjusted operating margin improved by 70 basis points year over year, reaching 16% [6][24] - Adjusted EPS grew approximately 11% to $1.39, excluding a one-time non-cash income tax expense of $390 million [26][29] - Free cash flow for Q3 was $1.2 billion, representing 170% of adjusted net income, compared to $791 million a year ago [26][27] Business Line Data and Key Metrics Changes - All four operating segments experienced organic revenue growth year over year, with Financial Services leading due to healthy discretionary spending trends [22][23] - The digital engineering business grew about 8% organically year to date, while the cloud and infrastructure modernization business grew 10% year over year [11][12] - BPO revenue grew 10% in the last two quarters, on track to reach $3 billion in annualized revenue [17] Market Data and Key Metrics Changes - North America contributed significantly to revenue growth, with nearly 8% year-over-year growth in constant currency [23] - Demand trends in Europe and the rest of the world remained stable but were affected by recent tariffs and geopolitical uncertainty [23] - The trailing twelve months bookings increased by 5% year over year, with a book-to-bill ratio of 1.3 [24] Company Strategy and Development Direction - The company is evolving into an AI builder, focusing on AI-led productivity, industrializing AI, and agentifying the enterprise [7][8] - Investments in platforms, intellectual property, and partnerships are aimed at scaling AI across enterprises [4][8] - The strategy includes increasing the mix of fixed bid, transaction, and outcome-based services [5][6] Management's Comments on Operating Environment and Future Outlook - Management noted a complex demand environment with clients navigating uncertainty around trade policy, leading to cautious technology investments [21][22] - The company expects to meet the high end of its adjusted operating margin guidance and anticipates continued revenue growth into 2026 [28][29] - There is optimism regarding the financial services sector, which is transitioning from cost takeout to innovation-led spending [74] Other Important Information - The company recorded a one-time non-cash income tax expense of $390 million due to changes in U.S. tax policy [26] - The M&A pipeline remains active, providing flexibility for strategic investments while returning substantial capital to shareholders [27] Q&A Session Summary Question: Insights on new business pipeline for smaller deals - Management noted a healthy pipeline for discretionary small projects, particularly in financial services and healthcare, driven by AI-led spending [32][36] Question: Sustainability of revenue per employee increase - Revenue per employee rose 8%, and operating income per employee grew 10%, attributed to the shift towards fixed-price managed services and increased productivity [37][39] Question: Tracking success of employee upskilling in AI - The company has trained over 250,000 employees in AI skills, with 30% of internal code now AI-generated, indicating a strong focus on AI fluency [42][45] Question: Impact of large deal signings on revenue and margins - Management expects large and mega deals to continue positively impacting revenue and margins, with a significant increase in total contract value [46][48] Question: Partnership strategy and its importance - The company is focusing on partnerships with both traditional SaaS providers and frontier model companies like OpenAI and Anthropic to enhance its AI capabilities [50][52] Question: Financial services vertical spending trends - Improved spending in financial services is transitioning from cost savings to innovation, with significant AI-led projects being implemented [72][74] Question: Outlook for healthcare vertical and BPO opportunities - The healthcare vertical is expected to grow, particularly through the BPaaS offering, which is seeing increased demand [76][77]

Core Insights - Cognizant (CTSH) reported quarterly earnings of $1.39 per share, exceeding the Zacks Consensus Estimate of $1.29 per share, and up from $1.25 per share a year ago [1] - The earnings surprise was +7.75%, and the company has surpassed consensus EPS estimates in all four quarters over the past year [2] - Revenues for the quarter ended September 2025 were $5.42 billion, surpassing the Zacks Consensus Estimate by 1.63% and up from $5.04 billion year-over-year [3] Earnings Performance - Cognizant's earnings surprise of +7.75% indicates strong performance relative to expectations [2] - The company has consistently exceeded earnings estimates, achieving this in the last four quarters [2] Revenue Analysis - The reported revenue of $5.42 billion for the recent quarter reflects a year-over-year increase and has also surpassed consensus estimates [3] - Cognizant has topped revenue estimates in each of the last four quarters [3] Stock Performance and Outlook - Cognizant shares have declined approximately 11.8% year-to-date, contrasting with the S&P 500's gain of 17.2% [4] - The future performance of the stock will depend on management's commentary during the earnings call and the earnings outlook [4][5] Earnings Estimates and Industry Context - The current consensus EPS estimate for the upcoming quarter is $1.31, with expected revenues of $5.26 billion, and for the current fiscal year, the estimate is $5.16 on revenues of $20.95 billion [8] - The Computers - IT Services industry, to which Cognizant belongs, is currently ranked in the top 24% of Zacks industries, indicating a favorable outlook [9]

Financial Performance - Q3 2025 - Revenue increased by 74% year-over-year to $5415 million, or 65% in constant currency[5] - GAAP diluted EPS was $056, while adjusted diluted EPS reached $139[6] - GAAP operating margin was 160%, matching the adjusted operating margin[8] Cash Flow - Operating cash flow surged to $1227 million, compared to $847 million in Q3 2024[6] - Free cash flow also increased significantly to $1160 million from $791 million in the same period last year[6] Revenue Breakdown - Q3 2025 - Products & Resources segment revenue was $1383 million, a 126% year-over-year increase, or 114% in constant currency[17] - Health Sciences revenue reached $1604 million, up 59% year-over-year, or 51% in constant currency[17] - Financial Services revenue was $1578 million, reflecting a 62% year-over-year increase, or 54% in constant currency[17] - Communications, Media & Technology revenue totaled $850 million, a 42% year-over-year increase, or 36% in constant currency[17] Bookings and Employee Metrics - Trailing twelve-month bookings increased by 5% year-over-year to $275 billion, resulting in a book-to-bill ratio of 13x[39, 40] - Headcount increased to 3498 thousand[42] Guidance - Full-year 2025 revenue is projected to be between $2105 billion and $2110 billion, representing a 66% to 69% year-over-year increase, or 60% to 63% in constant currency[46] - Adjusted diluted EPS for the full year is expected to be in the range of $522 to $526[46]

Core Viewpoint - Cognizant Technology has raised its full-year 2025 adjusted profit forecast, driven by an expected increase in spending from enterprise clients on digital infrastructure upgrades with artificial intelligence [1] Group 1 - Cognizant anticipates a surge in enterprise client spending [1] - The company is focusing on upgrading digital infrastructure [1] - The adjustment in profit forecast reflects positive market trends [1]

Financial Performance - Third quarter revenue reached $5.42 billion, a 7.4% year-over-year increase, and 6.5% in constant currency, exceeding guidance[5] - Year-to-date revenue totaled $15.78 billion, reflecting a 7.6% increase compared to the same period last year[3] - Revenues for Q3 2025 were $5,415 million, a 7.4% increase from $5,044 million in Q3 2024[27] - Adjusted diluted EPS for Q3 2025 was $1.39, an 11% increase year-over-year, while GAAP diluted EPS was $0.56, down $0.61 year-over-year due to a one-time tax charge[5] - Adjusted diluted earnings per share for Q3 2025 was $1.39, compared to $1.25 in Q3 2024, marking an increase of 11.2%[31] - Operating income for Q3 2025 was $866 million, up from $738 million in Q3 2024, representing a 17.4% increase[27] - Net income for Q3 2025 was $274 million, a decrease of 53% compared to $582 million in Q3 2024[40] - Net income for the nine months ended September 30, 2025, was $1,582 million, compared to $1,694 million for the same period in 2024, reflecting a decrease of 6.6%[27] - Adjusted net income for the nine months ended September 30, 2025, was $1,931 million, compared to $1,762 million for the same period in 2024, reflecting a 9.6% growth[31] Revenue Guidance and Expectations - Full-year 2025 revenue guidance was raised to a growth range of 6.0% to 6.3% in constant currency[6] - The company expects fourth quarter revenue to be between $5.27 billion and $5.33 billion, representing a growth of 3.8% to 4.8%[11] Contracts and Bookings - The company signed six large deals in Q3 2025, contributing to a 40% growth in total contract value (TCV) year-to-date[3] - The trailing twelve-month bookings increased by 5% year-over-year to $27.5 billion, with a book-to-bill ratio of approximately 1.3x[7] - The company reported a book-to-bill ratio that indicates strong future revenue potential, although specific figures were not disclosed[24] Shareholder Returns - The company returned $1.5 billion to shareholders year-to-date through share repurchases and dividends, with a target of $2.0 billion for the full year[5] - The company repurchased 6.3 million shares in Q3 2025, compared to 3.1 million shares in Q3 2024[42] - The company had a remaining authorized balance for stock repurchases of $2,243 million as of September 30, 2025[42] Assets and Liabilities - Total current assets increased to $8,094 million as of September 30, 2025, compared to $7,504 million at the end of 2024, marking a 7.9% growth[29] - Total liabilities decreased to $5,237 million as of September 30, 2025, down from $5,558 million at the end of 2024, a reduction of 5.8%[29] - Cash and cash equivalents rose to $2,341 million as of September 30, 2025, compared to $2,231 million at the end of 2024, an increase of 4.9%[29] - Cash and unrestricted cash equivalents as of September 30, 2025, totaled $2,341 million, an increase from $2,231 million at the end of 2024[35] - Net cash for the company as of September 30, 2025, was $1,770 million, up from $1,335 million at the end of 2024[35] Operational Highlights - The company’s total headcount as of September 30, 2025, was 349,800, an increase of 6,000 from the previous quarter[8] - The Health Sciences segment generated $1,604 million in revenue for Q3 2025, accounting for 29.6% of total revenues, with a year-over-year growth of 5.9%[37] - North America contributed $4,028 million to total revenues in Q3 2025, representing 74.4% of total revenues, with a growth rate of 7.8%[37] Tax and Non-Cash Adjustments - The company recorded a one-time non-cash income tax expense of $390 million related to the enactment of the One Big Beautiful Bill Act (OBBBA) in July 2025[32] - Total adjustments for non-cash income and expenses were $600 million in Q3 2025, compared to $92 million in Q3 2024[40] Strategic Focus - The company is focusing on generative AI technologies to enhance its competitive position and client services[19] - Cognizant is actively managing its capital return strategy to shareholders, with anticipated amounts to be disclosed in future reports[19]

Core Insights - Cognizant reported a third quarter revenue of $5.42 billion, reflecting a year-over-year increase of 7.4% and a constant currency growth of 6.5%, marking the fifth consecutive quarter of organic revenue growth [2][9] - The company signed six large deals in the quarter, contributing to a total of 16 large deals year-to-date, with a 40% increase in total contract value (TCV) compared to the same period last year [2][5] - Cognizant's full-year revenue guidance has been raised to a growth range of 6.0% to 6.3% in constant currency, exceeding previous estimates [4][10] Financial Performance - Revenue for Q3 2025 was $5,415 million, compared to $5,044 million in Q3 2024, with a year-to-date revenue of $15,775 million versus $14,654 million in the previous year [3][9] - The GAAP operating margin improved to 16.0%, up 140 basis points year-over-year, while the adjusted operating margin also increased to 16.0%, reflecting a 70 basis point improvement [3][9] - GAAP diluted EPS for Q3 2025 was $0.56, down from $1.17 in Q3 2024, impacted by a one-time non-cash income tax charge of $0.80 [3][9] Bookings and Employee Metrics - Trailing twelve-month bookings rose 5% year-over-year to $27.5 billion, with a book-to-bill ratio of approximately 1.3x [5] - Voluntary attrition in tech services was reported at 14.5%, a decrease from 15.2% in the previous quarter [6] Shareholder Returns - Cognizant repurchased 6.3 million shares for $450 million in Q3 2025, with a total of 13.1 million shares repurchased year-to-date for $994 million [7][9] - A quarterly cash dividend of $0.31 per share was declared, payable on November 26, 2025 [7] Segment and Geographic Performance - Revenue by segment showed Health Sciences at $1,604 million (29.6% of total), Financial Services at $1,578 million (29.2%), Products and Resources at $1,383 million (25.5%), and Communications, Media and Technology at $850 million (15.7%) [38] - North America accounted for 74.4% of total revenues, with a year-over-year growth of 7.8% [38]

Core Insights - Cognizant's AI Lab has developed a novel method for fine-tuning large language models (LLMs) using evolution strategies (ES), which promises to reduce training costs and improve accuracy compared to traditional reinforcement learning (RL) methods [3][4]. - The lab has been granted two new U.S. patents, bringing its total to 61, reinforcing its leadership in AI innovations [5][6]. Group 1: AI Innovations - The new research titled "Evolution Strategies at Scale: LLM Fine-Tuning Beyond Reinforcement Learning" demonstrates the successful application of ES for fine-tuning LLMs with billions of parameters, marking a significant advancement over RL methods [3][4]. - The ES approach requires less training data and enhances the quality of AI outputs, addressing the limitations of RL, which can be expensive and difficult to scale [4][5]. Group 2: Patent Details - U.S. Patent No. 12,424,335 focuses on AI-based optimized decision-making for epidemiological modeling, utilizing neural networks to predict trends like COVID-19 by integrating LSTM models for case and intervention histories [6]. - U.S. Patent No. 12,406,188 describes a system for evolved data augmentation and selection, which employs population-based search to enhance model robustness and performance with limited datasets [6][7]. Group 3: Future Directions - The AI Lab aims to scale its ES fine-tuning method to optimize the largest available LLMs for various complex tasks, following a 10X speed-up achieved through infrastructure improvements [4][5]. - The lab's mission is to maximize human potential through Decision AI, which combines generative AI, multi-agent architecture, and deep learning to create advanced decision-making systems [8][9].