Cognizant (CTSH) Q2 Revenue Rises 8%

Key Points

• GAAP revenue beat estimates by 1.2%, rising to $5.25 billion, up 8.1% from the prior year.

• Non-GAAP EPS exceeded targets at $1.31, a 12% year-over-year increase.

• Bookings reached $27.8 billion for the trailing twelve months, driven by two $1 billion deals.

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Cognizant Technology Solutions (NASDAQ:CTSH), an IT consulting and services company specializing in digital transformation and AI-driven solutions, released its second-quarter 2025 earnings on July 30, 2025. The standout news: GAAP revenue rose to $5.25 billion, outpacing analyst consensus by $62.73 million, and Adjusted earnings per share (non-GAAP) hit $1.31, $0.05 above expectations. Both revenue and adjusted EPS reflected strong year-over-year growth, with revenue gaining 8.1% and adjusted EPS up 12%. Bookings reached $27.8 billion for the trailing 12 months, fueled by two $1 billion contract wins. Margins expanded as well, with operating margin (GAAP) up to 15.6%. Overall, the quarter showed strong execution, momentum in large deals, and continued investment in AI and platform capabilities.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Business Description and Strategic Focus

Cognizant is a global provider of IT and consulting services, helping clients modernize systems, adopt digital solutions, and harness the power of artificial intelligence (AI). Its core offerings span application development, IT infrastructure, business process outsourcing, and next-generation technologies.

The company’s strategy centers on five critical areas: accelerating digital and AI capabilities, providing industry-focused solutions, optimizing its global delivery model, maintaining strong competitive positioning, and investing in talent and culture. Continued focus on expanding its AI platforms, closing partnerships, and industry-tailored solutions have been key recent drivers, along with workforce upskilling and global delivery efficiency.

Quarterly Highlights: Financials, Deals, and Execution

The period delivered notable financial outperformance. GAAP revenue beat consensus by 1.2%, hitting $5.25 billion. Non-GAAP EPS came in at $1.31, 4% above estimates. Operating margin improved to 15.6%, up from 14.6% a year earlier. Net income reached $645 million, up from $566 million one year earlier.

Bookings were a highlight, totaling $27.8 billion for the trailing twelve months, a 6% increase. The company saw two contract wins of over $1 billion each, along with four other large deals. Bookings growth was led by strong activity in Health Sciences and Financial Services -- each segment generated over $1.5 billion in GAAP revenue, with growth rates of 6.2% and 6.9%, respectively. The Products & Resources segment grew 16.0% year-over-year on a GAAP basis, reflecting contributions from the Belcan acquisition, while Communications, Media & Technology revenue expanded 3.1% (GAAP).

AI remained at the center of Cognizant’s strategy. Notable launches included Cognizant Agent Foundry, a platform to build and manage AI-powered agents, and the open-sourcing of the Neuro AI Multi-Agent Accelerator. Partnerships expanded across the tech landscape, with strengthened ties to ServiceNow, Google Cloud, Salesforce, and others. Patent activity in AI continued, with the company now holding 59 US patents from its AI lab efforts.

The global delivery model informed investments in workforce and infrastructure. Headcount grew by 7,500 year-over-year, reaching 343,800 employees. Voluntary attrition in technology services was 15.2%, a rise from the prior year but down sequentially. The company announced plans for a new campus in Visakhapatnam, India, targeting over 8,000 jobs. Initiatives like the Synapse program and BlueBolt innovation platform furthered talent development. Recognition in workplace and innovation rankings supported the company’s status as an employer of choice.

Look Ahead: Guidance and Key Watchpoints

Management guided for revenue between $5.27 billion and $5.35 billion for Q3 2025, representing year-over-year growth of 4.6% to 6.1%. Revenue for FY2025 is expected in the range of $20.7 billion to $21.1 billion, up 4.7% to 6.7%. The company anticipates an adjusted operating margin of 15.5% to 15.7% and adjusted EPS between $5.08 and $5.22 for 2025. These targets incorporate the impact of a one-time, non-cash $400 million tax charge due to the repeal of the requirement to capitalize US research and experimental costs, resulting in an $0.82 per share reduction to earnings for 2025.

Cognizant declared it will raise its capital return plan for 2025 to $2.0 billion, up from $1.7 billion, reflecting a combination of share buybacks and dividends. No change was announced to the quarterly dividend amount during this period, maintaining continuity. The outlook acknowledges some sector and geographic uncertainty; Management indicated the lower end of FY2025 guidance assumes further demand deterioration, while the midpoint reflects recent softness but also large-deal pipeline conversion. The company’s emphasis remains on platform and AI investments, cost discipline, and new client wins.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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JesterAI is a Foolish AI, based on a variety of Large Language Models (LLMs) and proprietary Motley Fool systems. All articles published by JesterAI are reviewed by our editorial team, and The Motley Fool takes ultimate responsibility for the content of this article. JesterAI cannot own stocks and so it has no positions in any stocks mentioned. The Motley Fool recommends Cognizant Technology Solutions. The Motley Fool has a disclosure policy.