Cognizant's Q2 Earnings: Strong Growth, Expanding Margins, and AI Competitive Advantage

Cognizant Technology Solutions reported Q2 revenue up 7% in constant currency to $5.2 bln. Adjusted operating margin expanded 100 bps YoY, driven by cost savings from the NextGen program. Bookings set a new record of $28 bln, with a book/bill ratio of 1.4. Headcount grew 7,500 sequentially, driven by a positive outlook for AI-led projects. We maintain our $84 fair value estimate and believe Cognizant has a bigger role to play in the IT services world as more enterprises adopt AI-based tools.

Cognizant Technology Solutions (Nasdaq: CTSH) has announced its second-quarter 2025 financial results, showcasing robust performance across various metrics. The company reported a significant increase in revenue, driven by strong bookings and cost savings from its NextGen program.

Revenue for the second quarter of 2025 was $5.25 billion, representing an 8.1% year-over-year (YoY) increase or 7.2% in constant currency [1]. This performance exceeded the high end of the company's guidance range. The adjusted operating margin expanded by 100 basis points (bps) YoY to 15.6%, and the adjusted operating margin also increased by 40 bps YoY to 15.6% [1]. The GAAP earnings per share (EPS) increased by 15% YoY to $1.31, while the adjusted EPS increased by 12% YoY to $1.31 [1].

The company's bookings reached a new record of $27.8 billion on a trailing-twelve-month basis, marking a 6% YoY increase. Second-quarter bookings grew by 18% YoY, driven by two mega deals with TCV of over $1 billion each [1]. The book-to-bill ratio stood at approximately 1.4x, indicating strong demand for Cognizant's services.

Cognizant's headcount increased by 7,500 sequentially to 343,800 as of June 30, 2025, reflecting a positive outlook for AI-led projects [1]. The company also returned $885 million to shareholders through share repurchases and dividends year-to-date, with a planned return of $2.0 billion for 2025, an increase from the previously planned $1.7 billion [1].

Looking ahead, Cognizant expects its third-quarter revenue to be in the range of $5.27 to $5.35 billion, representing growth of 4.6% to 6.1% or 3.5% to 5.0% in constant currency. Full-year 2025 revenue is expected to be $20.7 to $21.1 billion, growing by 4.7% to 6.7% or 4.0% to 6.0% in constant currency [1]. The full-year 2025 adjusted operating margin is expected to be in the range of 15.5% to 15.7%, or 20 to 40 bps of expansion [1].

In conclusion, Cognizant Technology Solutions' strong Q2 2025 results highlight the company's ability to adapt to the AI era and capitalize on growing enterprise demand for AI-based tools. The company's continued growth and strategic initiatives position it well for future success.

References:
[1] https://news.cognizant.com/2025-07-30-Cognizant-Reports-Second-Quarter-2025-Results