Cognizant Technology Solutions Corporation Q3 FY2025 earnings call

Ravi Kumar highlighted the company's industry-leading performance with revenue growth and adjusted operating margin outpacing expectations. The firm has built momentum over 2.5 years, with investments in platforms, IP, partnerships, and upskilling driving evolution into an AI builder. They signed 6 large deals with TCV of $100M or more, trailing 12 months bookings up 5% year-over-year. AI-led productivity: ~30% of internal code was AI generated, digital engineering business ~$2B annual run rate grew ~8% organically. Industrializing AI: leading consulting frameworks, over 1,500 agents in production, AI data training services with 10,000+ specialists. Agentifying the enterprise: early launch partner for Google Gemini Enterprise, BPO revenue grew 10% in last 2 quarters and on track for $3B annualized revenue.

In the third quarter of 2025, revenue grew 6.5% year-over-year in constant currency to $5.4 billion. All 4 operating segments experienced year-over-year organic revenue growth. Financial Services led growth driven by healthy discretionary spending in areas like digital engineering, legacy modernization, and generative AI initiatives. Health Sciences was in line with expectations despite uncertainty around government funding and trade policies. Products and Resources revenue growth improved, and Communication, Media and Technology grew organically with large deal wins offsetting pockets of discretionary spending weakness. Year-to-date, revenue grew 7.3% in constant currency including 350 basis points of inorganic growth from Belcan.

For the fourth quarter, Cognizant expects revenue to grow 2.5% - 3.5% year-over-year in constant currency (all organic). Full year revenue is now projected to grow 6% - 6.3% in constant currency, above prior guidance. Adjusted operating margin is increased to approximately 15.7%. EPS guidance is raised to $5.22 - $5.26, representing 10% - 11% year-over-year growth. Free cash flow conversion is expected to be ~100% of adjusted net income.

Clients face elevated uncertainty around trade policy, leading to lower discretionary spending in certain areas like products and resources. Geopolitical uncertainty also impacts demand and client evaluation of technology investments.

Q: Jim Schneider with Goldman Sachs asked about new business pipeline for smaller deals and pull-in/extension of large deal commencement dates.

A: Ravi Kumar S responded that there's a combination of productivity-led and innovation-led deals, with discretionary small projects starting to come back in financial services and healthcare due to AI-led spend, and large deals have tail velocity with momentum in Europe and Asia Pacific.

Q: Tien-Tsin Huang with JPMorgan asked about near-term gross margin performance.

A: Jatin Dalal said gross margins have been maintained on an organic basis despite the ramp of large deals, with AI-led productivity and pyramid investments helping maintain margins.

Q: Margaret Nolan with William Blair asked about upskilling success and large deal impact on revenue cadence.

A: Ravi Kumar S stated they're pioneering upskilling with high numbers of new college graduates, and large deals have momentum with continued growth in regions like Europe and Asia Pacific.

Q: Surinder Thind with Jefferies asked about partnership strategy and IP building.

A: Ravi Kumar S explained that partnerships include frontier model companies and start-ups, with IP built around platforms to make AI enterprise-grade and agents contributing to the revenue model.

Q: Darrin Peller with Wolfe Research asked about fourth quarter guide and competitive dynamics.

A: Jatin Dalal said the quarter 4 guidance reflects momentum, and Ravi Kumar S added that AI-led innovation use cases are triggering well and pricing is productivity-led.

Q: Yogesh Aggarwal with HSBC Bank asked about secondary listing in India.

A: Jatin Dalal said the company is assessing a potential primary offering and secondary listing in India in an early phase.

Q: Rod Bourgeois with DeepDive Equity Research asked about Financial Services spending and healthcare outlook.

A: Ravi Kumar S said Financial Services spend is moving from cost takeout to innovation, and healthcare has opportunities in BPaaS with TriZetto being a key asset.

Q: Yu Lee with Guggenheim Partners asked about bridging gap in exit rate.

A: Jatin Dalal said continued momentum in large deals and execution will determine the 2026 outlook