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]