Cognizant's 3Cloud Buyout to Accelerate AI Transformation for Clients

Cognizant Technology Solutions CTSH has completed the previously announced acquisition of 3Cloud, a leading Microsoft MSFT Azure services provider. The deal strengthens CTSH’s Azure, data and AI capabilities, as well as its position as a strategic Microsoft partner.

Upon closing of the acquisition, 3Cloud will add more than 1000 Azure experts and engineers and more than 1500 Microsoft certifications to CTSH’s capabilities. 3Cloud’s nearly 1200 workforce will join CTSH’s roughly 20,000 Azure-certified associates globally.

The latest deal expands Cognizant’s Azure portfolio as well as clientele in banking and financial services, healthcare, technology and consumer sectors, currently served by 3Cloud. 3Cloud has achieved a 20% organic CAGR since 2020, and it is expected to expand more than 20% in 2025, supported by strong demand for Microsoft Azure–driven business transformation solutions.

CTSH Shares Outperform Industry & Sector

CTSH shares have rallied 19.9% in the past three months, outperforming the Zacks Computers IT Services industry’s decline of 6.7% and the broader Zacks Computer and Technology sector’s appreciation of 2.2%.

Cognizant’s outperformance can be attributed to its investments in AI, which are driving expansion across enterprises. In the third quarter of 2025, CTSH signed six large deals, each with a total contract value (TCV) of $100 million or more, bringing the cumulative year-to-date total to 16. Trailing 12-month bookings grew 5% year over year. The TCV of Cognizant’s large deals grew 40% year over year.

Cognizant’s focus lies on AI-led productivity, industrializing AI and agentifying the enterprise. AI-driven productivity is helping customers accelerate software development and lower costs. In the third quarter of 2025, AI generated roughly 30% of CTSH’s internal code, and expects it could reach 50% in the years ahead. The launch of Cognizant Enterprise Vibe Coding Blueprint is helping clients to develop AI fluency across their own teams.

CTSH has embedded AI across more than 150 use cases, ranging from finance and operations to sales enablement and contract pricing, streamlining decision-making, improving accuracy and accelerating cycle times. The Flowsource platform, which integrates generative and agentic AI across the full software development life cycle, was used by more than 70 clients, with an additional 120 in the pipeline.

CTSH Offers 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 constant currency (cc) basis.

The Zacks Consensus Estimate for revenues is currently pegged at $5.31 billion, suggesting 4.4% growth over the figure reported in the year-ago quarter.

The Zacks Consensus Estimate for Cognizant’s fourth-quarter 2025 earnings is pegged at $1.32 per share, unchanged over the past 30 days, indicating growth of 9.1% from the figure reported in the year-ago quarter. For 2025, revenues are expected to be in the range of $21.05-$21.10 billion, representing an increase of 6.6-6.9% on a reported basis and growth of 6-6.3% on a cc basis, including 250 bps from acquisitions. The Zacks Consensus Estimate for 2025 is currently pegged at $21.06 billion, suggesting 6.7% growth over the figure reported in 2024.

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

The consensus mark for Cognizant’s 2025 earnings is pegged at $5.25 per share, unchanged over the past 30 days, indicating growth of 10.5% from the figure reported in 2024.

Zacks Rank & Stocks to Consider

Cognizant currently carries a Zacks Rank #3 (Hold).

Some top-ranked stocks in the broader Zacks Computer & Technology sector are Ciena CIEN and Digital Turbine APPS, each of which currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rates for Ciena and Digital Turbine are currently pegged at 41.7% and 42.4%, respectively. Shares of Ciena have appreciated 60.6% while Digital Turbine shares have declined 26.9% over the past three months.

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

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