Why Is Cognizant (CTSH) Down 14.4% Since Last Earnings Report?

It has been about a month since the last earnings report for Cognizant (CTSH). Shares have lost about 14.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Cognizant due for a breakout? Well, first let's take a quick look at its most recent earnings report in order to get a better handle on the recent catalysts for Cognizant Technology Solutions Corporation before we dive into how investors and analysts have reacted as of late.

Cognizant Q4 Earnings Beat Estimates, Revenues Up Y/Y

Cognizant Technology Solutions reported non-GAAP earnings of $1.35 per share in the fourth quarter of 2025, which beat the Zacks Consensus Estimate by 1.96% and increased 11.6% year over year.

Revenues of $5.33 billion beat the consensus mark by 0.50%. The top line increased 4.9% year over year and 3.8% at constant currency (cc). This growth was driven by strong performance in North America and organic growth across all segments. Acquisitions also contributed approximately 260 basis points to year-over-year revenue growth.

On a trailing 12-month basis, bookings increased 5% year over year to $28.4 billion, which represented a book-to-bill of approximately 1.3 times. Bookings in the fourth quarter increased 9% year over year. Fourth-quarter bookings included 12 large deals, with a total contract value of more than $100 million, of which two were mega deals, or deals with a total contract value of more than $500 million.

Cognizant had over 4,000 early Generative AI client engagements in the fourth quarter of 2025.

CTSH’s Top-Line Details

Financial services revenues (29.7% of revenues) increased 10.5% year over year (up 9.3% at cc) to $1.586 billion. Growth is primarily driven by improved discretionary spending and investments in cloud, data modernization and AI.

Health Sciences revenues (30.4% of revenues) increased 5.2% year over year (up 4.2% at cc) to $1.621 billion. Growth is driven by strong demand across payer, provider and life sciences, which offsets some discretionary spending pressures.

Products and Resources revenues (24.7% of revenues) increased 1.8% year over year (up 0.3% at cc) to $1.318 billion.

Communications, Media and Technology revenues (15.2% of revenues) were $808 million, which declined 0.4% from the year-ago quarter (down 1.2% at cc).

Region-wise, revenues from North America increased 4.3% year over year and 4.2% at cc and contributed 74.7% of total revenues.

Revenues from Europe increased 8.4% year over year (up 2% at cc) and contributed 19.1% to total revenues. Revenues from the U.K. increased 7.9% year over year (up 3.8% at cc). Continental Europe revenues increased 8.9% year over year (up 0.3% at cc).

The Rest of the World revenues increased 2.5% year over year (up 3.6% at cc) and contributed 6.2% to total revenues.

CTSH’s Operating Details

Selling, general & administrative expenses, as a percentage of revenues, contracted 150 bps year over year to 15.1%.

Total headcount at the end of the fourth quarter was 351,600 compared with 349,800 in the prior quarter.

Voluntary attrition - Tech Services on a trailing 12-month basis was 13.9% in the fourth quarter of 2025 compared with 14.5% and 15.9% for the periods ended Sept. 30, 2025, and Dec. 31, 2024, respectively.

Cognizant reported a GAAP operating margin of 16%, expanding 120 bps on a year-over-year basis.

Non-GAAP operating margin (adjusted for NextGen charges) of 16% expanded 30 bps year over year.

CTSH’s Balance Sheet

CTSH had cash and short-term investments of $1.91 billion as of Dec. 31, 2025, compared with $2.35 billion as of Sept. 30, 2025.

As of Dec. 31, 2025, the company had a total debt of $576 million, down from $584 billion reported as of Sept. 30, 2025.

The company generated $858 billion in cash from operations compared with $1.227 million in the previous quarter.

Free cash flow was $781 million compared with $1.16 million reported in the prior quarter.

CTSH Initiates Strong Q1 & 2026 Guidance

Cognizant expects first-quarter 2026 revenues between $5.36 billion and $5.44 billion, indicating growth of 4.8%-6.3% and an increase of 2.7%-4.2% on a cc basis.

For 2026, revenues are expected to be in the range of $22.14-$22.66 billion, an increase of 4.9-7.4% on a reported basis and growth of 4%-6.5% on a cc basis.

Adjusted operating margin for 2026 is expected to be approximately 15.9% to 16.1% (an increase of 10 to 30 basis points).

Adjusted earnings per share for 2026 are expected to be between $5.56 and $5.70.

How Have Estimates Been Moving Since Then?

Since the earnings release, investors have witnessed a downward trend in estimates review.

VGM Scores

At this time, Cognizant has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock has a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Interestingly, Cognizant has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Cognizant is part of the Zacks Computers - IT Services industry. Over the past month, Fair Isaac (FICO), a stock from the same industry, has gained 8.7%. The company reported its results for the quarter ended December 2025 more than a month ago.

Fair Isaac reported revenues of $511.96 million in the last reported quarter, representing a year-over-year change of +16.4%. EPS of $7.33 for the same period compares with $5.79 a year ago.

Fair Isaac is expected to post earnings of $10.91 per share for the current quarter, representing a year-over-year change of +39.7%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Fair Isaac. Also, the stock has a VGM Score of C.

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Cognizant Technology Solutions Corporation (CTSH): Free Stock Analysis Report

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