Cognizant Technology Solutions Corporation Q2 FY2025 earnings call

Ravi noted momentum continued in Q2 with revenue growth and adjusted operating margin ahead of expectations, and bookings growth. AI opportunities performed well with large deals won. Adjusted operating margin was 15.6%, up 40 basis points year-over-year. Progress in amplifying talent, scaling innovation, and accelerating growth was made, such as launching Cognizant Agent Foundry and Cognizant Autonomous Customer Engagement, and forming partnerships. Jatin mentioned Q2 revenue exceeded guidance range, strong operational rigor, margin expansion, and EPS growth outpacing revenue growth, with details on segment and region performance, bookings, and margins.

Second quarter revenue grew 7.2% year-over-year in constant currency to $5.2 billion. Organic revenue growth was led by Financial Services and Health Sciences, with Belcan contributing approximately 400 basis points of inorganic growth. Financial Services grew 6% year-over-year with broad-based demand across sub-industries. Health Sciences grew 5% year-over-year driven by organic growth across payers, providers and Life Sciences customers. Products and Resources growth was primarily attributable to Belcan. Communication, Media and Technology returned to organic growth this quarter, led by the technology sector. By geography, revenue grew across all major regions, with North America leading with 8% growth, Europe growing 4%, and Rest of the world increasing by about 6%.

Third quarter 2025 revenue is expected to grow 3.5% to 5% year-over-year in constant currency. Full year 2025 revenue is expected to grow 4% to 6% in constant currency. Adjusted operating margin guidance range remains 15.5% to 15.7%. Plan to return $2 billion to shareholders for the full year, increasing EPS guidance range to $5.08 to $5.22.

Q: Really, really strong bookings here. So I'll ask on that if that's okay. I think I heard a pretty balanced mix of renewals and new deals. So I just wanted to clarify that. And it sounds like you're seeing early renewals with clients looking to implement AI efficiencies. So I just wanted to clarify that because we're all looking ahead and thinking about the pipeline. So I'm curious if you can replenish the pipeline and what's your outlook for bookings in the second half of the year?

A: Ravi and Jatin answered about bookings mix, renewal and new business, and pipeline outlook.

Q: I want to probably touch on kind of the work that you've been doing, I'm intrigued by, as you characterize it, Vector 1, Vector 2, Vector 3. We've noticed a number of patents that you've been awarded. You talked about on today's call about having 100 agents or so available. Can you just talk about how you're pricing those and incorporating those into deals and putting together that structure. That's a question we get a lot from investors is, how to think about some of this IP Cognizant developing that unique to it and how to think about its impact on the business, both from a pricing as well as business opportunity standpoint?

A: Ravi answered about IP pricing and business opportunity.

Q: You laid out the range of assumptions embedded in your full year outlook. But can you help frame how we should think about that as it relates to your 4Q exit rate. Are you assuming any sort of change in velocity in the business given some of the embedded deceleration in that back half?

A: Jatin answered about full year outlook and 4Q exit rate.

Q: Ravi, if you go back to the 3-Vector approach that you've articulated enabling hyper-productivity was one, industrializing AI was 2; agentifying the enterprise is 3 and I know you just recently made these at the Analyst Day, but I'd just be curious if you could update us your perspective as to which of those because the chronology that you described was that it's now for all of them. Are any of those ahead of the others?

A: Ravi answered about Vector progress.

Q: I wanted to ask on the health care headwinds versus potential offsets here. So is there any way to frame how much the BBB may be incrementally weighing on growth in that segment versus what you thought 90 days ago? Any commentary on how you see health care moving through the second half of this year? And then where are the offsets in the business if there are incremental headwinds?

A: Ravi answered about health care related.

Q: I guess maybe to start with your headcount, I think it was up on a year-over-year basis for the first time in about 8 quarters. As you look into the back half of the year, can you just talk about -- how should we think about headcount growth? And can the utilization rates, actually, sustain [Technical Difficuly] range? Or is there a potential for that to dip down?

A: Jatin and Ravi answered about headcount growth.

Q: When I think about all of the commentary on innovation spend, I guess, is that code for seeing that clients are getting more comfortable with the discretionary spend component? And then I guess as part of that, what is allowing them to make those decisions, given what I would argue is the pace of technological change, right? Like it seems like every month, every few weeks, every quarter, we're seeing pretty big advances in the frontier models. And so I just want to understand that the decision-making and the conversations that you're having and how we should think about what I would call these green shoots here of spend.

A: Ravi answered about innovation spend and related.