Cognizant Q4 Earnings Beat Estimates: Will Raised View Aid Shares?

Cognizant Technology Solutions CTSH 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.

Cognizant Technology Solutions Corporation Price, Consensus and EPS Surprise

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

CTSH’s shares have underperformed the Zacks Computer & Technology sector in the trailing 12-month period. The stock has gained 8.3%, underperforming the broader sector’s increase of 12.9%. We believe the raised guidance will help CTSH stock recover.

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.

CTSH’s Zacks Rank & Stocks to Consider

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

Some better-ranked stocks in the broader Zacks Computer and Technology sector include Arista Networks ANET, Advanced Energy AEIS, and Amkor Technology AMKR. While Amkor Technology sports a Zacks Rank #1 (Strong Buy), Arista Networks and Advanced Energy carry a Zacks Rank of 2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Arista Networks have gained 6.1% in the trailing six-month period. Arista Networks is set to report fourth-quarter 2025 results on Feb. 12

Shares of Advanced Energy have surged 82.1% in the trailing six-month period. Advanced Energy is slated to report fourth-quarter 2025 results on Feb. 10.

Amkor Technology shares have surged 97.6% in the trailing six-month period. Amkor Technology is set to report fourth-quarter 2025 results on Feb. 9.

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

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