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Introduction & Market Context
Cognizant Technology Solutions Corp (NASDAQ:CTSH) presented its second quarter 2025 financial results on July 30, 2025, showcasing strong performance across key metrics. The IT services provider reported significant revenue growth and margin expansion, with notable contributions from its recent Belcan acquisition.
The company’s performance comes amid growing demand for digital transformation services and increased adoption of AI technologies across industries. Cognizant’s results reflect its strategic positioning in high-growth segments and successful integration of recent acquisitions.
Quarterly Performance Highlights
Cognizant reported Q2 2025 revenue of $5.25 billion, representing an 8.1% year-over-year increase (7.2% in constant currency). The company’s operating margins showed improvement, with GAAP operating margin rising to 15.6% from 14.6% in the year-ago quarter. Adjusted operating margin also increased to 15.6% from 15.2% in Q2 2024.
As shown in the following comprehensive financial summary:
Diluted earnings per share grew significantly, with GAAP EPS reaching $1.31, up from $1.14 in Q2 2024, while adjusted EPS increased to $1.31 from $1.17. The company also demonstrated strong cash generation, with operating cash flow of $398 million and free cash flow of $331 million, representing year-over-year increases of 52% and 81%, respectively.
The Belcan acquisition, which closed earlier in the year, contributed approximately 400 basis points to Cognizant’s year-over-year growth, underscoring the company’s successful inorganic growth strategy.
Segment Analysis
Cognizant’s performance varied across its four business segments, with Products & Resources showing the strongest growth at 16.0% year-over-year. The following breakdown illustrates the revenue distribution by segment and geography:
The Health Sciences segment generated $1.55 billion in revenue, growing 6.2% year-over-year (5.3% in constant currency). North America remained the largest geographic contributor at $1.30 billion, while Europe showed strong growth at 19.2% year-over-year.
Financial Services, Cognizant’s largest segment, posted revenue of $1.55 billion, up 6.9% year-over-year (6.0% in constant currency). All geographic regions showed growth, with Europe leading at 10.8% year-over-year.
The Products & Resources segment benefited significantly from the Belcan acquisition, which contributed approximately 16 percentage points to its year-over-year growth. Total segment revenue reached $1.31 billion, up 16.0% from the prior year:
Communications, Media & Technology, the company’s smallest segment, generated $841 million in revenue, growing 3.1% year-over-year (2.2% in constant currency). North American operations showed 5.6% growth, while European operations declined by 5.9%.
Bookings and Employee Metrics
Cognizant reported strong bookings momentum, with trailing twelve-month bookings of $27.8 billion, representing a 6% increase year-over-year and a book-to-bill ratio of 1.4x. Q2 2025 bookings alone grew by 18% compared to the same period last year.
The following chart illustrates the consistent growth in bookings over the past year:
On the workforce front, Cognizant’s headcount increased to 343,800 employees, up from 336,300 in Q2 2024. Voluntary attrition in technical services stood at 15.2%, slightly higher than the 13.6% reported in the year-ago quarter. The company maintained a high blended utilization rate of 85%, excluding trainees, indicating efficient resource management.
Capital Allocation and Balance Sheet
Cognizant continued its shareholder-friendly capital allocation strategy, with significant investments in share repurchases, acquisitions, and dividends. The company’s balance sheet remains strong, with $1.81 billion in cash and short-term investments as of June 30, 2025.
The following chart details Cognizant’s cash flow, balance sheet, and capital allocation:
In the trailing twelve months, Cognizant returned $1.58 billion to shareholders through $973 million in share repurchases and $607 million in dividends. The company also invested $1.19 billion in acquisitions during this period, highlighting its commitment to strategic growth initiatives.
Guidance and Outlook
Looking ahead, Cognizant provided optimistic guidance for both Q3 2025 and the full fiscal year, as shown in the following forecast:
For the full year 2025, Cognizant expects revenue between $20.7 billion and $21.1 billion, representing year-over-year growth of 4.7% to 6.7% (4.0% to 6.0% in constant currency). The company anticipates adjusted operating margin between 15.5% and 15.7%, and adjusted diluted EPS between $5.08 and $5.22.
For Q3 2025, Cognizant projects revenue between $5.27 billion and $5.35 billion, reflecting year-over-year growth of 4.6% to 6.1% (3.5% to 5.0% in constant currency).
Notably, based on the subsequent Q3 2025 earnings report, Cognizant exceeded these projections, posting revenue of $5.42 billion and EPS of $1.39, surpassing analyst expectations and driving a significant stock price increase.
Strategic Initiatives
The Belcan acquisition represents a key strategic move for Cognizant, particularly strengthening its Products & Resources segment. The acquisition contributed approximately 16 percentage points to this segment’s year-over-year growth, primarily in North America.
Cognizant’s continued investment in AI capabilities, as referenced in the forward-looking statements, aligns with CEO Ravi Kumar’s vision of transforming the company into an "AI builder" rather than just a traditional software implementer. This strategic pivot appears to be yielding results, as evidenced by the strong bookings growth and subsequent Q3 performance.
The company’s balanced approach to organic growth, strategic acquisitions, and shareholder returns positions it well in the competitive IT services landscape, where differentiation through specialized capabilities and scale advantages remains critical.
Full presentation:
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