Cognizant (CTSH) Up 6.7% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Cognizant (CTSH). Shares have added about 6.7% in that time frame, outperforming the S&P 500.

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

Cognizant Q3 Earnings Beat Estimates, Revenues Up Y/Y

Cognizant Technology Solutions reported non-GAAP earnings of $1.39 per share in the third quarter of 2025, which beat the Zacks Consensus Estimate by 7.75% and increased 11.2% year over year. 

Revenues of $5.42 billion beat the consensus mark by 1.63%. The top line increased 7.4% year over year and 6.5% at constant currency (cc). This growth was driven by strong performance in North America and organic growth across all segments. Acquisitions also contributed approximately 250 basis points to year-over-year revenue growth.

On a trailing 12-month basis, bookings increased 5% year over year to $27.5 billion, which represented a book-to-bill of approximately 1.3 times. Bookings in the third quarter declined 5% year over year. Third-quarter bookings included six large deals, with a total contract value of more than $100 million.

Cognizant had over 3,500 early Generative AI client engagements in the third quarter of 2025. This represents a 40% jump sequentially.

CTSH’s Top-Line Details

Financial services revenues (29.1% of revenues) increased 6.2% year over year (up 5.4% at cc) to $1.578 billion. Growth is primarily driven by improved discretionary spending and investments in cloud, data modernization and AI.

Health Sciences revenues (29.6% of revenues) increased 5.9% year over year (up 5.1% at cc) to $1.604 billion. Growth is driven by strong demand across payer, provider and life sciences, which offsets some discretionary spending pressures.

Products and Resources revenues (25.5% of revenues) increased 12.6% year over year (up 11.4% at cc) to $1.383 billion.

Communications, Media and Technology revenues (15.7% of revenues) were $850 million, which increased 4.2% from the year-ago quarter (up 3.6% at cc). 

Region-wise, revenues from North America increased 7.8% year over year and at cc and contributed 74.4% of total revenues.

Revenues from Europe increased 7.8% year over year (up 2.7% at cc) and contributed 19.2% to total revenues. Revenues from the U.K. increased 4.4% year over year (up 0.7% at cc). Continental Europe revenues increased 11.1% year over year (up 4.6% at cc).

The Rest of the World revenues increased 0.9% year over year (up 2.6% at cc) and contributed 6.4% to total revenues.

CTSH’s Operating Details

Selling, general & administrative expenses, as a percentage of revenues, contracted 110 bps year over year to 15.4%.

Total headcount at the end of the third quarter was 349,800 compared with 343,800 in the prior quarter. 

Voluntary attrition - Tech Services on a trailing 12-month basis was 14.5% in the third quarter of 2025, compared with 15.2% and 14.6% for the periods ended June 30, 2025, and Sept. 30, 2024, respectively

Cognizant reported a GAAP operating margin of 16%, expanding 140 bps on a year-over-year basis.

Non-GAAP operating margin (adjusted for NextGen charges) of 16% expanded 70 bps year over year.

CTSH’s Balance Sheet

CTSH had cash and short-term investments of $2.35 billion as of Sept. 30, compared with $1.80 billion as of June 30, 2025. 

As of Sept. 30, 2025, the company had a total debt of $584 million, down from $592 billion reported as of June 30.

The company generated $1.227 billion in cash from operations compared with $398 million in the previous quarter.

Free cash flow was $1.16 billion compared with $331 million reported in the prior quarter.

CTSH Initiates Strong Q4 & 2025 Guidance  

Cognizant expects fourth-quarter 2025 revenues between $5.27 billion and $5.33 billion, indicating growth of 3.8%-4.8% and an increase of 2.5%-3.5% on a cc basis. 

For 2025, revenues are expected to be in the range of $21.05-$21.10 billion, an increase of 6.6-6.9% on a reported basis and growth of 6%-6.3% on a cc basis. 

Adjusted operating margin for 2025 is expected to be approximately 15.7% (an increase of 40 basis points).

Adjusted earnings per share for 2025 are expected to be between $5.22 and $5.26.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a upward trend in estimates review.

VGM Scores

Currently, Cognizant has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock has a grade of B on the value side, putting it in the second quintile for this investment strategy.

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

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Cognizant has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Cognizant belongs to the Zacks Computers - IT Services industry. Another stock from the same industry, Infosys (INFY), has gained 4.7% over the past month. More than a month has passed since the company reported results for the quarter ended September 2025.

Infosys reported revenues of $5.08 billion in the last reported quarter, representing a year-over-year change of +3.7%. EPS of $0.20 for the same period compares with $0.19 a year ago.

For the current quarter, Infosys is expected to post earnings of $0.20 per share, indicating a change of +5.3% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.

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

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

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