Cognizant(CTSH) - 2025 Q2 - Quarterly Results

Executive Summary & Financial Highlights Cognizant delivered strong Q2 2025 results with revenue exceeding guidance, organic growth, margin expansion, accelerated bookings, and increased shareholder returns Q2 2025 Performance Overview Cognizant reported strong second-quarter 2025 results, with revenue exceeding guidance and marking the fourth consecutive quarter of organic year-over-year revenue growth. The company also achieved margin expansion and accelerated bookings, including two significant deals Q2 2025 Financial Performance | Metric | Q2 2025 | Q2 2024 | Y/Y Change | Y/Y Change CC | | :--- | :--- | :--- | :--- | :--- | | Revenue | $5,245M | $4,850M | 8.1% | 7.2% | | GAAP Operating Margin | 15.6% | 14.6% | +100 bps | - | | Adjusted Operating Margin | 15.6% | 15.2% | +40 bps | - | | GAAP Diluted EPS | $1.31 | $1.14 | +15% | - | | Adjusted Diluted EPS | $1.31 | $1.17 | +12% | - | - Acquisitions contributed approximately 400 basis points to year-over-year revenue growth in Q2 2025[3] CEO & CFO Commentary CEO Ravi Kumar S highlighted the effectiveness of their strategy in the AI era, driven by investments in talent, platforms, and AI infrastructure, leading to organic revenue growth and margin expansion. CFO Jatin Dalal emphasized strong execution, year-to-date momentum, and increased commitment to shareholder returns - CEO Ravi Kumar S noted that investments in talent, platforms, and AI infrastructure drove the fourth-straight quarter of organic year-over-year revenue growth and margin expansion[3] - CFO Jatin Dalal stated that the company delivered 7.7% constant currency revenue growth and 40 basis points adjusted operating margin expansion in H1 2025, driving 11% adjusted EPS growth[6] - The company accelerated bookings, including two deals with a Total Contract Value (TCV) of over $1 billion each[3] Key Operational Metrics Bookings showed significant year-over-year growth in Q2, driven by large deals, and the company maintained a healthy book-to-bill ratio. Employee headcount increased, while voluntary attrition in Tech Services saw a slight decrease Bookings Performance | Metric | Q2 2025 | Y/Y Change | | :--- | :--- | :--- | | Trailing 12-month bookings | $27.8B | +6% | | Q2 bookings | - | +18% | | Book-to-bill (trailing 12-month) | ~1.4x | - | - Q2 bookings included six large deals (TCV ≥ $100M), with two exceeding $1 billion each[7] Employee Metrics | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Voluntary Attrition - Tech Services | 15.2% | 15.8% | 13.6% | | Total Headcount (as of June 30, 2025) | 343,800 | +7,500 from Q1 2025 and Q2 2024 | - | Return of Capital to Shareholders Cognizant continued its commitment to returning capital to shareholders through share repurchases and dividends, increasing its planned return for 2025 Share Repurchase Activity | Metric | Q2 2025 | YTD 2025 | | :--- | :--- | :--- | | Shares repurchased | 4.5M | 6.8M | | Value of shares repurchased | $354M | $544M | | Remaining share repurchase authorization (as of June 30, 2025) | $2.7B | - | - Declared a quarterly cash dividend of $0.31 per share in July 2025[9] - Increased planned return to shareholders for 2025 to $2.0 billion, up from $1.7 billion previously[5][6] Financial Guidance Cognizant provided its financial outlook for Q3 and full-year 2025, including revenue growth, operating margin, and diluted EPS expectations Third Quarter 2025 Guidance Cognizant provided specific revenue growth expectations for the third quarter of 2025 Q3 2025 Financial Guidance | Metric | Q3 2025 Guidance | | :--- | :--- | | Revenue | $5.27 - $5.35 billion | | Y/Y Growth | 4.6% to 6.1% | | Y/Y Growth (Constant Currency) | 3.5% to 5.0% | Full-Year 2025 Guidance The company narrowed its full-year 2025 constant currency revenue growth guidance and reaffirmed its adjusted operating margin and adjusted diluted EPS outlook Full-Year 2025 Financial Guidance | Metric | Full-Year 2025 Guidance | | :--- | :--- | | Revenue | $20.7 - $21.1 billion | | Y/Y Growth | 4.7% to 6.7% | | Y/Y Growth (Constant Currency) | 4.0% to 6.0% (narrowed) | | Adjusted Operating Margin | 15.5% to 15.7% (unchanged, 20-40 bps expansion) | | Adjusted Diluted EPS | $5.08 to $5.22 | Strategic Initiatives & Company Recognition Cognizant announced new client engagements, expanded its AI-driven platform offerings and strategic partnerships, and received various industry recognitions Client Announcements Cognizant secured several new and renewed client agreements, focusing on digital transformation, AI solutions, and IT modernization across various industries - Contract with Lineage, Inc. to advance customer service transformation using Agentic AI solutions[14] - Renewed multi-year agreement with Aker Solutions, including use of Cognizant Neuro® platform for IT operations modernization[14] - Agreement with Ipswich City Council and Workday, Inc. to implement Workday HCM for a five-year technology transformation[14] - Agreement with SmartestEnergy to transform employee support services and enable scalable growth[14] - Contract with Kramp to transform its IT platform and implement a new ERP solution[14] Platform Enhancements and Partnerships Cognizant launched new AI-driven offerings and expanded strategic collaborations to enhance its platform capabilities and deliver advanced solutions to clients - Launched Cognizant Agent Foundry, an offering to help enterprises design, deploy, and orchestrate autonomous AI agents at scale, integrating with existing enterprise systems and leading AI platforms[14] - Open-sourced its Neuro® AI Multi-Agent Accelerator for research and academic use to promote collaboration in building multi-agent systems[14] - Partnered with Google Cloud to launch Cognizant® Autonomous Customer Engagement, an AI-led contact center solution for hyper-personalized customer experiences[16] - Expanded strategic collaboration with Pegasystems Inc. to augment agentic AI services with Pega Blueprint™ for cloud transformations[16] - Expanded partnership with Salesforce, introducing new customer and operations transformation services for Salesforce's Agentforce to accelerate AI-augmented workforce shifts[16] Company Recognition, Announcements, and Analyst Ratings Cognizant received multiple industry recognitions, expanded its global footprint, and continued its focus on responsible AI and sustainability - Cognizant's AI Lab was granted two new U.S. patents in H1 2025, bringing its total to 59[16] - Recognized as one of the first organizations to sign the White House's Pledge to America's Youth: Investing in Artificial Intelligence (AI) Education[16] - Named one of America's Greatest Workplaces 2025 and America's Greatest Workplaces in Tech 2025 by Newsweek for the third consecutive year[16] - Announced a major expansion of its India operations with plans for a state-of-the-art campus in Visakhapatnam, creating over 8,000 employment opportunities[16] - Published 2024 Sustainability and Corporate Citizenship Report, highlighting focus on skilling through Synapse initiative (1M people by 2026) and advancing responsible AI frameworks[16] - Recognized as a Leader by Everest Group® in multiple PEAK Matrix® Assessments, including Talent Readiness for Next-generation Application Services, Intelligent Process Automation, and Healthcare Data, Analytics, and AI Services[17] - Named Global Data Cloud Services Implementation Partner of the Year by Snowflake and Partner of the Year by Pegasystems[16] Financial Statements The financial statements detail the company's Q2 2025 operational performance, financial position, cash flow activities, revenue segmentation, and non-GAAP measure reconciliations Consolidated Statements of Operations The consolidated statements of operations show an increase in revenue and net income for both the three and six months ended June 30, 2025, compared to the prior year periods Consolidated Statements of Operations | (in millions, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $5,245 | $4,850 | $10,360 | $9,610 | | Income from operations | $817 | $708 | $1,670 | $1,403 | | Net income | $645 | $566 | $1,308 | $1,112 | | Diluted earnings per share | $1.31 | $1.14 | $2.65 | $2.23 | Consolidated Statements of Financial Position The balance sheet indicates an increase in total assets and stockholders' equity as of June 30, 2025, compared to December 31, 2024, while total liabilities decreased Consolidated Statements of Financial Position | (in millions) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total assets | $20,164 | $19,966 | | Total liabilities | $4,876 | $5,558 | | Total stockholders' equity | $15,288 | $14,408 | | Cash and cash equivalents | $1,796 | $2,231 | | Trade accounts receivable, net | $4,402 | $4,059 | | Goodwill | $7,120 | $6,953 | Consolidated Statements of Cash Flows Cash flows from operating activities significantly increased for both the three and six months ended June 30, 2025, compared to the prior year periods. The company also provided details on share repurchases and free cash flow Consolidated Statements of Cash Flows | (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $398 | $262 | $798 | $357 | | Net cash (used in) investing activities | $(82) | $(79) | $(317) | $(89) | | Net cash (used in) financing activities | $(516) | $(221) | $(1,173) | $(525) | | Cash, cash equivalents and restricted cash and cash equivalents, end of period | $1,796 | $2,193 | $1,796 | $2,193 | Free Cash Flow | (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Free cash flow | $331 | $183 | $724 | $199 | - Repurchased 4.5 million shares for $354 million in Q2 2025, with $2.693 billion remaining under authorization as of June 30, 2025[46] Revenue by Business Segment and Geography Revenue growth was observed across all business segments and geographies in Q2 2025, with Products and Resources showing the highest growth, significantly boosted by the Belcan acquisition Revenues by Segment (Q2 2025) | Revenues by Segment (Q2 2025) | $ (millions) | % of total | Y/Y % Change | Constant Currency % Change | | :--- | :--- | :--- | :--- | :--- | | Health Sciences | $1,551 | 29.6% | 6.2% | 5.3% | | Financial Services | $1,547 | 29.5% | 6.9% | 6.0% | | Products and Resources | $1,306 | 24.9% | 16.0% | 14.7% | | Communications, Media and Technology | $841 | 16.0% | 3.1% | 2.2% | | Total Revenues | $5,245 | - | 8.1% | 7.2% | Revenues by Geography (Q2 2025) | Revenues by Geography (Q2 2025) | $ (millions) | % of total | Y/Y % Change | Constant Currency % Change | | :--- | :--- | :--- | :--- | :--- | | North America | $3,912 | 74.6% | 8.1% | 8.1% | | United Kingdom | $482 | 9.2% | 8.6% | 3.2% | | Continental Europe | $520 | 9.9% | 10.6% | 4.7% | | Europe - Total | $1,002 | 19.1% | 9.6% | 4.0% | | Rest of World | $331 | 6.3% | 4.7% | 6.0% | | Total Revenues | $5,245 | - | 8.1% | 7.2% | - The acquisition of Belcan contributed approximately 400 basis points to overall revenue growth in Q2 2025, primarily in North America and the United Kingdom, and significantly boosted the Products and Resources segment (1,600 bps)[42] Reconciliations of Non-GAAP Financial Measures The company provided reconciliations for Adjusted Income From Operations, Adjusted Operating Margin, and Adjusted Diluted EPS, detailing adjustments for items like gain on sale of property and equipment, NextGen charges, and non-operating foreign currency exchange gains/losses Non-GAAP Reconciliations (Q2 2025 & YTD Q2 2025) | (dollars in millions, except per share amounts) | Q2 2025 GAAP | Q2 2025 Adjusted | YTD Q2 2025 GAAP | YTD Q2 2025 Adjusted | | :--- | :--- | :--- | :--- | :--- | | Income from operations | $817 | $817 | $1,670 | $1,608 | | Operating margin | 15.6% | 15.6% | 16.1% | 15.5% | | Diluted earnings per share | $1.31 | $1.31 | $2.65 | $2.55 | - Adjustments for Q2 2024 included NextGen charges of $29 million ($0.06 per diluted share)[32][35] - Anticipates a one-time, non-cash tax expense of approximately $400 million in Q3 2025 (approx. $0.82 per diluted share) due to the enactment of the One Big Beautiful Bill Act (OBBBA) repealing R&E cost capitalization[36] Net Cash Reconciliation | (in millions) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Net cash | $1,216 | $1,335 | | Cash and unrestricted cash equivalents | $1,796 | $2,231 | | Short-term debt | $33 | $33 | | Long-term debt | $559 | $875 | Supplemental Information This section provides details on the Q2 2025 conference call, an overview of Cognizant, important forward-looking statement disclaimers, and definitions of non-GAAP financial measures Conference Call Details Details for accessing the conference call and replay discussing the second quarter 2025 results were provided - Conference call held on July 30, 2025, at 5:00 p.m. (Eastern) with dial-in and webcast options[18] - Replay available until August 13, 2025, via dial-in and for 60 days on Cognizant's website[18] About Cognizant Cognizant is a leading professional services company focused on modernizing businesses through technology, process reimagination, and experience transformation - Cognizant (Nasdaq: CTSH) engineers modern businesses, helping clients modernize technology, reimagine processes, and transform experiences[19] Forward-Looking Statements The press release contains forward-looking statements subject to risks and uncertainties, and investors are cautioned not to place undue reliance on them - Statements regarding strategy, partnerships, competitive position, AI impact, talent efforts, capital returns, and anticipated financial performance are forward-looking[20] - Risks include general economic conditions, competitive markets, ability to use AI, talent competition, regulatory changes, and cybersecurity[20] About Non-GAAP Financial Measures and Performance Metrics This section defines non-GAAP financial measures and performance metrics used in the report, explains their purpose, and outlines their limitations - Non-GAAP measures include Adjusted Operating Margin, Adjusted Diluted EPS, free cash flow, net cash, and constant currency revenue growth[21] - Adjusted Operating Margin and Adjusted Diluted EPS exclude unusual items like gain on sale of property and equipment and NextGen charges[22] - Bookings are defined as total contract value (TCV) of new contracts, renewals, and expansions, serving as a key indicator of potential future revenues[25] - Management uses non-GAAP measures for internal reporting, budgeting, evaluating performance, and compensation, believing they provide enhanced transparency[23]