Cognizant Q1 2025 slides: Revenue growth accelerates to 7.5%, cash flow surges

Introduction & Market Context

Cognizant Technology Solutions Corp. (NASDAQ:CTSH) released its first quarter 2025 financial results on April 30, showing accelerating revenue growth and significant improvements in cash flow generation. The IT services provider reported solid performance across most business segments, with particularly strong results in Health Sciences and Financial Services.

The company’s presentation revealed a continued positive trajectory from its previous quarters, building on the momentum reported in late 2024. Cognizant’s strategic acquisitions of Belcan and Thirdera have contributed to its revenue growth, while operational improvements have enhanced margins and cash flow.

Quarterly Performance Highlights

Cognizant reported Q1 2025 revenue of $5.115 billion, representing a 7.5% year-over-year increase. This marks a significant acceleration from the negative growth rates experienced in early 2024 and continues the positive trend seen in recent quarters.

As shown in the following chart of Cognizant’s quarterly performance trends:

The company’s profitability metrics also showed improvement. GAAP operating margin expanded to 16.7% in Q1 2025 from 14.6% in the same period last year, while adjusted operating margin rose to 15.5% from 15.1%. GAAP diluted earnings per share increased to $1.34 from $1.10 year-over-year, and adjusted diluted EPS grew to $1.23 from $1.12.

Perhaps most impressive was Cognizant’s cash flow performance. Operating cash flow surged to $400 million in Q1 2025, more than quadrupling from $95 million in Q1 2024. Free cash flow showed an even more dramatic improvement, reaching $393 million compared to just $16 million a year earlier.

The following summary highlights these key financial metrics:

Detailed Financial Analysis

Cognizant’s revenue performance varied across its business segments. Health Sciences remained the largest contributor at $1.571 billion (30.7% of total revenue), followed by Financial Services at $1.462 billion (28.6%), Products & Resources at $1.278 billion (25.0%), and Communications, Media & Technology at $804 million (15.7%).

The company’s revenue distribution by segment and geography is illustrated in the following chart:

Geographically, North America continued to dominate Cognizant’s revenue mix, accounting for $3.854 billion or 75.3% of total revenue. Europe contributed $950 million (18.6%), while the Rest of World generated $311 million (6.1%).

The Health Sciences segment showed the strongest performance with 11.0% year-over-year growth, maintaining a consistent upward trajectory over the past five quarters. Financial Services grew by 5.6% year-over-year, while Products & Resources increased by 12.8%. The Communications, Media & Technology segment was the only one to decline, falling by 2.7% compared to Q1 2024.

Strategic Initiatives

Cognizant’s bookings performance indicates a healthy pipeline for future growth. Trailing twelve-month bookings reached $26.7 billion, representing a 3% increase year-over-year and a book-to-bill ratio of 1.3x. However, Q1 2025 bookings decreased by 7% compared to the same period last year.

The following chart illustrates the company’s bookings trend over the past five quarters:

On the operational front, Cognizant’s total headcount stood at 336,300 at the end of Q1 2025, down from 344,400 a year earlier. The trailing 12-month voluntary attrition rate for technical services increased to 15.8% from 13.1% in Q1 2024, suggesting potential challenges in talent retention.

The company continues to focus on shareholder returns through its capital allocation strategy. As illustrated in the following breakdown of cash flow and capital allocation:

Cognizant maintained a strong balance sheet with $2.4 billion in cash and short-term investments and $2.1 billion in total debt as of March 31, 2025. The company has been actively returning capital to shareholders through share repurchases and dividends.

Forward-Looking Statements

Cognizant provided an optimistic outlook for the remainder of 2025. For the full year, the company expects revenue to range between $20.5 billion and $21.0 billion, representing year-over-year growth of 3.9% to 6.4% (or 3.5% to 6.0% in constant currency).

The company projects adjusted operating margin to be between 15.5% and 15.7% for the full year, with adjusted diluted EPS forecasted between $4.98 and $5.14. For the second quarter of 2025, Cognizant anticipates revenue of $5.14 billion to $5.21 billion, representing year-over-year growth of 5.9% to 7.4%.

The detailed guidance is presented in the following table:

The reconciliation between GAAP and non-GAAP financial measures provides additional context for understanding Cognizant’s performance metrics:

Conclusion

Cognizant’s Q1 2025 financial results demonstrate a company that has successfully navigated recent challenges to establish a pattern of accelerating growth. The significant improvements in revenue growth, operating margins, and especially cash flow generation suggest that the company’s strategic initiatives are bearing fruit.

While the Communications, Media & Technology segment remains an area of concern, the strong performance in Health Sciences and the recovery in Financial Services provide offsetting strength. With a solid book-to-bill ratio and positive guidance for the remainder of 2025, Cognizant appears well-positioned to maintain its growth momentum, though rising attrition rates may present a challenge in the competitive talent market for IT services.

Full presentation:

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