Cognizant to Report Q1 Earnings: What's in Store for the Stock?

Cognizant Technology Solutions CTSH is scheduled to report its first-quarter 2025 results on Wednesday.

The Zacks Consensus Estimate for first-quarter 2025 earnings is pegged at $1.19 per share, which has remained unchanged in the past 30 days. This indicates an increase of 6.25% from the figure reported in the year-ago quarter. 

Cognizant expects first-quarter 2025 revenues between $5 billion and $5.1 billion, increasing 5.6%-7.1% and 6.5%-8% on a cc basis. 

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

Cognizant Technology Solutions Corporation Stock Price and EPS Surprise

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

Cognizant’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 5.76%. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Let’s see how things have shaped up for the upcoming announcement.

Factors to Note for Cognizant Stock

Cognizant’s first-quarter 2024 performance is likely to have benefited from an expanding clientele and a robust pipeline that includes a favorable mix of new opportunities. 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. This is likely to have contributed to the to-be-reported quarter’s performance as well.

Cognizant’s investment in artificial intelligence (AI), including platforms like Neuro IT Ops and Flowsource, is expected to have driven growth in the to-be-reported quarter as more clients adopt AI-driven automation, enhance operations, and improve productivity.

The growing demand for GenAI solutions across industries like financial services, healthcare, and manufacturing is expected to provide continued growth opportunities, particularly in areas like fraud detection, medical imaging, and predictive maintenance.

CTSH’s NextGen initiative is expected to have played a pivotal role in enhancing operational efficiency in the to-be-reported quarter.

Cognizant Benefits From Expanding Clientele

Cognizant’s robust network of partners, which includes Omron OMRNY, Docusign DOCU, ServiceNow NOW, NVIDIA, Boehringer Ingelheim, CrowdStrike, Zscaler, IBM, Palo Alto Networks and Amazon, is likely to have driven growth during the first quarter.

Cognizant recently expanded its partnership with Docusign to enhance customer support and drive digital transformation by providing comprehensive services, including real-time assistance, training, back-office support, and onboarding consultations for Docusign solutions. Benefits from this partnership are likely to have been reflected in the to-be-reported quarter’s performance.

CTSH also partnered with OMRON to integrate Information Technology (IT) and Operational Technology in manufacturing, combining OMRON’s automation products with Cognizant’s IT expertise to enable digital transformation and operational excellence.

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.

Conclusion

Despite Cognizant’s expanding clientele, macroeconomic challenges and ongoing cost optimization pressures across some sectors are expected to hurt the company’s top-line growth in the to-be-reported quarter. 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 has a Zacks Rank #3 (Hold). 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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