Cognizant(US:CTSH)2026-02-12 13:31Revenue and Business Segments - Cognizant's revenue for the year ended December 31, 2025, was distributed across four reportable business segments: Health Sciences, Financial Services, Products and Resources, and Communications, Media and Technology[33]. - The Health Sciences segment is driven by trends such as consumerism and digital health, leading to increased demand for services in clinical development and patient engagement[28]. - The Financial Services segment focuses on modernizing legacy technology and adopting AI capabilities, with clients expanding enterprise AI adoption to enhance customer experience and improve risk management[29]. - The Products and Resources segment emphasizes efficiency and sustainability, with clients adopting AI and IoT technologies to enhance customer experiences and manage supply chains[30]. - The Communications, Media and Technology segment is driven by AI adoption and operational modernization, focusing on enhancing user experiences and driving operational efficiency[31]. - Revenues increased by $1,372 million or 7.0% from 2024, with a 6.4% increase in constant currency; the acquisition of Belcan contributed 260 basis points to revenue growth[151]. - Revenues for the year ended December 31, 2025, were $21,108 million, representing a 7.0% increase from $19,736 million in 2024[161]. - The Health Sciences segment saw revenue growth of $415 million, or 7.0%, while Financial Services grew by $420 million, or 7.3%[164]. Employee and Workforce Management - As of December 31, 2025, Cognizant had approximately 351,600 employees, with 256,900 in India, 41,600 in North America, and 14,600 in Continental Europe[51]. - From July 2023 to the end of 2025, Cognizant upskilled more than 330,000 associates on GenAI through over 1,000 learning programs[51]. - The voluntary attrition rate for Tech Services was 13.9% in 2025, down from 15.9% in 2024[54]. - Cognizant aims to upskill 2 million future workers by 2030 as part of its Synapse program commitment[51]. - Cognizant's annual engagement survey scores are above industry benchmarks, reflecting high employee satisfaction[51]. - The company has a comprehensive rewards portfolio that includes compensation, healthcare benefits, and mental health support initiatives[54]. Strategic Initiatives and Investments - Cognizant is investing in digital and AI capabilities, including extensive training and reskilling of technical teams, to drive organic growth and expand local workforces[22]. - The company is pursuing strategic acquisitions to enhance talent and capabilities in key technologies and specific geographies[22]. - The company aims for significant organic and inorganic growth, particularly in AI and digital sectors, which increases operational complexity[89]. - Strategic acquisitions are pursued to enhance service offerings, but successful integration and realization of desired results are uncertain[90]. - The company plans to allocate approximately 50% of free cash flow for acquisitions and 50% for share repurchases and dividends[207]. Financial Performance and Metrics - Operating margin increased to 16.1% and Adjusted Operating Margin to 15.8%, up from 14.7% and 15.3% in 2024, respectively[151]. - Adjusted Diluted EPS rose by $0.53 or 11.2% from 2024, while GAAP Diluted EPS increased by $0.05 or 1.1%[149]. - Net income for 2025 was $2,230 million, slightly down from $2,240 million in 2024, resulting in diluted EPS of $4.56, an increase of 1.1% from $4.51[161]. - Free cash flow increased to $2,665 million in 2025, up from $1,827 million in 2024, marking an increase of $838 million[199]. - Cash generated from operating activities rose to $2,883 million in 2025, compared to $2,124 million in 2024, an increase of $759 million[200]. - Cash dividends paid in 2025 totaled $1.24 per share, with a new dividend of $0.33 per share approved for February 2026[138]. - The stock repurchase program has a remaining balance of $1,918 million as of December 31, 2025, with $325 million repurchased in Q4 2025[139]. Risks and Challenges - The company faces significant risks from macroeconomic and geopolitical conditions, which could adversely affect client spending and overall business performance[69]. - Revenues are highly dependent on clients in the United States and Europe, making the company vulnerable to economic downturns in these regions[70]. - Intense competition in the market requires the company to continuously innovate and differentiate its services to maintain market share[72]. - The company faces risks related to meeting specified service levels in client contracts, which could lead to reduced fees, penalties, or reputational harm[86]. - The evolving legal and regulatory landscape surrounding AI may impose significant operational costs and compliance challenges for the company[80]. - Attracting and retaining skilled employees, particularly in AI and digital areas, is essential for meeting client demand and achieving business objectives[82]. - Competition for skilled labor is intense, and changes in immigration laws may limit the availability of qualified personnel[83]. - The company must adapt to rapid technological changes to avoid losing business and maintain profitability[74]. - Economic conditions in India, where a significant portion of operations is located, could impact operational costs and business performance[70]. - Many client contracts are short-term and can be terminated on short notice, which may adversely affect the company's revenues and operating margins[84]. Corporate Governance and Compliance - The company has a strong focus on corporate governance and financial stability, which supports its competitive position[52]. - The company is subject to numerous legal and regulatory requirements across various jurisdictions, and any violations or unfavorable changes could harm its business operations and financial condition[111]. - The company has identified material weaknesses in its internal control over financial reporting, which may lead to increased remediation costs[113]. - The company may incur significant costs related to compliance with evolving data security and privacy laws, which are subject to change and interpretation across jurisdictions[111]. - The company has faced ongoing disputes with tax authorities, which could lead to increased tax exposure and financial liabilities[117]. Technology and Innovation - Cognizant's services include AI and technology solutions, consulting, application development, and business process services, with a focus on continuous transformation through investment in new technologies[35]. - The company operates an integrated global delivery model, leveraging AI and automation to optimize service delivery and enhance collaboration across locations[45]. - Cognizant's competitive strategy relies on its proprietary innovations and intellectual property, which differentiate it from competitors in the professional services market[48]. - Investment in AI technologies is critical for competitive positioning, but the company faces challenges in developing and implementing effective AI solutions[75]. - The company relies on third-party alliance partners for technology, and any disruption in these relationships could impair service delivery and revenue[73]. Market and Economic Conditions - Climate-related risks may disrupt supply chains and increase costs, impacting the company's financial performance[101]. - Pandemics and other outbreaks can materially affect business operations, liquidity, and financial condition due to reduced client demand and operational disruptions[99]. - Fluctuations in foreign currency exchange rates can adversely impact profitability and financial condition, particularly with exposure to the Indian rupee[98]. - The depreciation of the Indian rupee positively impacted operating margin by approximately 70 basis points in 2025[178].