CTSH Expands Clientele With OMRON Deal: Buy, Sell or Hold the Stock?

Cognizant Technology Solutions CTSH is expanding its clientele through its partnership with Omron OMRNY, which aims to integrate Information Technology (IT) and Operational Technology (OT) in the manufacturing industry. 

As the engineering partner for Omron’s Industrial Automation Business (IAB), Cognizant will combine its expertise in cloud AI, IOT, and digital twin technologies with Omron’s advanced OT solutions, including sensors, controllers, and robotics.

The joint offering will also provide a comprehensive solution to improve operational efficiency, sustainability, and productivity across industries such as automotive, semiconductor, and life sciences. The partnership also aims to deliver continuous IT-OT improvements to optimize manufacturing processes and reduce environmental impact.

Cognizant’s Rich Partner Base to Drive Prospects

Cognizant shares have plunged 13.6% in the year-to-date period compared with the broader Zacks Computer & Technology sector’s decline of 20.8%. This is attributed to an expanding clientele and a strong partner base. A favorable mix of business renewals and expansions of new opportunities are major drivers for Cognizant in 2025.

Cognizant Technology Solutions Corporation Stock Price and Consensus

Cognizant Technology Solutions Corporation price-consensus-chart | Cognizant Technology Solutions Corporation Quote

The company’s expanding partner base, which includes Omron, NVIDIA NVDA,  ServiceNow NOW, Boehringer Ingelheim, CrowdStrike, Zscaler, IBM, Palo Alto Networks and Amazon, is expected to drive its prospects in 2025. In the fourth quarter of 2024, CTSH secured 10 large deals, up from seven in the previous year, bringing the total to 29 large deals for the year.

In March, Cognizant launched an AI-powered dispute management solution in partnership with ServiceNow. The solution leverages ServiceNow’s advanced dispute management technology to streamline dispute resolution for mid-market banks in North America.

Cognizant, in collaboration with NVIDIA, announced advancements in AI technology. It leverages NVIDIA’s advanced AI solutions across five key areas, including enterprise AI agents, industry-specific large language models, digital twins for smart manufacturing, AI infrastructure, and the integration of NVIDIA’s AI technology into Cognizant’s Neuro AI platform to drive business transformation.

CTSH Initiates Strong 2025 Guidance

Cognizant’s strong portfolio and expanding partner base reflect solid top-line growth potential over the long run. 

CTSH expects first-quarter 2025 revenues between $5 billion and $5.1 billion, indicating growth of 5.6-7.1% and an increase of 6.5-8% on a cc basis.

For 2025, revenues are expected to be $20.3-$20.8 billion, implying an increase of 2.6-5.1% on a reported basis and growth of 3.5-6% on a cc basis.

The adjusted operating margin for 2025 is expected to be 15.5-15.7% (an increase of 20-40 basis points).

Adjusted earnings for 2025 are expected to be between $4.90 and $5.06 per share.

CTSH Earnings Estimates Show Upward Movement

The Zacks Consensus Estimate for first-quarter 2025 revenues is pegged at $5.07 billion, indicating year-over-year growth of 6.47%.

The consensus mark for earnings is pegged at $1.19 per share, which remained unchanged over the past 30 days. The figure implies a year-over-year increase of 6.25%.

The Zacks Consensus Estimate for 2025 revenues is pegged at $20.56 billion, indicating year-over-year growth of 4.16%.

The consensus mark for earnings is pegged at $4.96 per share, which has declined by 0.4% over the past 30 days. The figure implies a year-over-year increase of 4.42%.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

What Should Investors Do With CTSH Stock?

Despite Cognizant’s expanding clientele, macroeconomic challenges and ongoing cost optimization pressures across some sectors have posed challenges. A broader market weakness in the tech sector and persistent fear over mounting tariffs by the current government have added to the pressure.

CTSH is also experiencing a negative impact from unfavorable foreign currency exchange rates, which is expected to reduce revenue growth and impact other financial metrics.

Cognizant also expects a slight margin decline in the first quarter of 2025 due to seasonality, which will impact the company’s near-term profitability.

Cognizant currently carries a Zacks Rank #4 (Sell), which implies that investors should stay away from the stock for the time being. 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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