Cognizant Technology Solutions Corporation
CTSH · Nasdaq
Next quarter
Reports Nov 4, 2026.
Consensus is $1.47 EPS for Sep 2026 across 7 estimates, ranging $1.44 to $1.50.
CTSH Jun 2026
- 0.72%
- -3.71%
- $1.38
- $1.37
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Highlights
- Revenue growth: Second-quarter revenue was $5.481 billion, up 4.5% year over year and 4.1% in constant currency, versus $5.245 billion a year ago and $5.41 billion in Q1 2026.
- Financial Services: The largest segment grew 12.0% year over year, or 11.7% in constant currency, to $1.733 billion; the other three segments grew only 1.2%-1.5%.
- Earnings and margins: GAAP diluted EPS was $1.36 and adjusted EPS was $1.37, up from $1.31 a year ago but $0.01 below the $1.38 consensus; adjusted operating margin expanded 40 basis points to 16.0%.
- Bookings: Trailing-12-month bookings rose 5% to $29.1 billion, representing approximately 1.3x book-to-bill, although second-quarter bookings declined 6% year over year and included seven large deals.
- Capital returns: Cognizant repurchased 22.5 million shares for $1.153 billion in Q2 and $1.607 billion in the first half, leaving $2.338 billion under its authorization; the quarterly dividend was raised or maintained at $0.33 per share.
- AI-led repositioning: Cognizant completed the $634 million Astreya acquisition and spent $1.3 billion on acquisitions in the first half, while expanding partnerships with Anthropic, Google Cloud, OpenAI, ServiceNow, Snowflake and others.
- Project Leap: The company recorded $84 million of restructuring costs, including $56 million of employee separation costs, and expects total charges of $230 million-$320 million against targeted 2026 savings of $200 million-$300 million.
- Outlook: Constant-currency full-year revenue growth guidance is 4.0%-5.5%, while adjusted operating margin guidance remains 16.0%-16.2% and adjusted EPS guidance increases to $5.70-$5.82, or 8%-10% growth.
Analysis
Cognizant’s second quarter was a steady growth and margin-expansion print, with Financial Services carrying the business while most other verticals remained nearly flat. Revenue of $5.481 billion rose 4.5% year over year and 1.3% sequentially from $5.41 billion in Q1. GAAP operating income increased 7.0% year over year to $874 million and 3.7% sequentially from $843 million, while adjusted operating margin reached 16.0%. Adjusted EPS of $1.37 rose 4.6% from $1.31 a year ago but missed the $1.38 consensus by $0.01; GAAP EPS was $1.36. Net income of $636 million declined from $645 million a year ago and $662 million in Q1, reflecting higher taxes, lower other income and an equity-method loss.
The defining features were a second consecutive quarter of double-digit Financial Services growth, continued investment in an AI-focused portfolio and aggressive capital deployment. Third-party product sales contributed 170 basis points to revenue growth and acquisitions contributed roughly 100 basis points, limiting the quality of organic growth. Cognizant also began Project Leap, incurring $84 million of charges while targeting $200 million-$300 million of in-year savings. Full-year constant-currency revenue guidance was reset to 4.0%-5.5%, but EPS guidance increased to $5.70-$5.82, supported by margin discipline and share repurchases.
Financial Services growth
Financial Services was the clear engine of the quarter. Revenue increased $186 million, or 12.0% year over year and 11.7% in constant currency, to $1.733 billion. Management attributed the acceleration to the ramp of recently won large deals and demand for intuitive operations and automation, AI and analytics services. The segment represented 31.6% of company revenue and delivered $277 million of operating profit, up from $250 million a year ago.
- Other verticals: Health Sciences revenue rose 1.4% to $1.572 billion, Products and Resources rose 1.2% to $1.322 billion, and Communications, Media and Technology rose 1.5% to $854 million.
- End-market mix: Products and Resources faced softer discretionary spending from retail, consumer goods, travel and hospitality customers, while Communications, Media and Technology continued to see weakness in communications and media.
- Growth quality: Third-party product sales contributed 170 basis points to company growth and recent acquisitions contributed approximately 100 basis points, with both effects concentrated in North America and the former particularly material in CMT and Financial Services.
Margins and Project Leap
Cognizant expanded profitability despite acquisition dilution, higher compensation costs and the lower-margin mix from third-party products. GAAP operating margin rose to 15.9% from 15.6% a year ago, while adjusted margin increased to 16.0%. Operational efficiencies and a weaker Indian rupee helped; net of hedges, currency movements benefited the year-over-year margin comparison by approximately 100 basis points.
- Unusual items: Project Leap reduced GAAP operating income by $84 million, while an $81 million partial reversal of the India Defined Contribution Obligation liability provided an offset. These items were excluded from adjusted results.
- Transformation costs: Project Leap is intended to reshape the workforce and delivery model around AI-led productivity, integrated offerings and upskilling. Total charges are expected at $230 million-$320 million, including $200 million-$270 million of personnel costs and $30 million-$50 million of other charges.
- Expected savings: Management targets $200 million-$300 million of in-year savings in 2026, primarily to fund AI and operating-model investments.
AI portfolio and acquisitions
The quarter advanced Cognizant’s repositioning as an AI builder, but the strategy required substantial investment. The company completed its $634 million acquisition of Astreya on June 22, adding AI-first IT managed-services capabilities and exposure to large technology companies. Together with the January acquisition of 3Cloud, first-half acquisition spending reached $1.3 billion.
- Partnership expansion: Cognizant became a Global Premier Partner in Anthropic’s Claude Partner Network and expanded work with Google Cloud on Gemini Enterprise, while also adding or broadening relationships with OpenAI, ServiceNow, Snowflake, CrowdStrike and Rubrik.
- Workforce buildout: The company plans to develop 5,000 Frontier Certified Engineers and 10,000 Frontier Business Operators, with the first cohort expected in Q4 2026.
- Execution consideration: Acquisitions contributed approximately 100 basis points to Q2 revenue growth but were dilutive to margins, and amortization expense increased 2.9% year over year.
Bookings and outlook
The contract pipeline remained constructive over the longer term but softened in the quarter. Trailing-12-month bookings increased 5% to $29.1 billion, equivalent to approximately 1.3x book-to-bill. Q2 bookings declined 6% year over year and included seven deals with total contract value of at least $100 million.
- Third quarter: Revenue guidance is $5.60 billion-$5.68 billion, implying 3.4%-4.9% reported growth or 3.8%-5.3% constant-currency growth.
- Full-year revenue: Guidance is $22.04 billion-$22.35 billion, or 4.0%-5.5% growth in constant currency, following the quarter’s 4.1% constant-currency growth.
- Full-year profitability: Adjusted operating margin remains guided to 16.0%-16.2%, while adjusted diluted EPS guidance rises to $5.70-$5.82 from the previously implied range, representing 8%-10% year-over-year growth.
Capital allocation
Cognizant deployed capital aggressively while using debt to support acquisitions and repurchases. It bought back 22.5 million shares during Q2 for $1.153 billion, including $500 million through an accelerated share repurchase, and repurchased $1.607 billion in the first half. The company also paid $316 million of dividends in the first half and declared a $0.33 quarterly dividend.
- Balance sheet: Cash and short-term investments totaled $1.051 billion at June 30, down from $1.914 billion at year-end, while long-term debt increased to $1.527 billion from $543 million.
- Funding: Cognizant borrowed $1.0 billion under its revolving credit facility to fund the acquisition and capital deployment, leaving $850 million of revolver capacity.
- Cash generation: First-half operating cash flow was $832 million, up from $798 million a year ago, while free cash flow was $657 million versus $724 million due largely to higher acquisition and capital spending.
