Cognizant at Bank of America Conference: AI-Driven Transformation

Cognizant Technology Solutions Corp (NASDAQ:CTSH) took center stage at the Bank of America Global Technology Conference 2025 on Wednesday, 04 June 2025. The discussion highlighted Cognizant’s strategic focus on agility and AI integration amidst a challenging macroeconomic landscape. While the company faces hurdles such as healthcare caution and tariff turbulence, it remains optimistic about leveraging AI to drive client productivity and secure significant deals.

Key Takeaways

• Cognizant is focusing on agility and an entrepreneurial culture, emphasizing AI-powered solutions to address client needs.
• The company has increased its large deals from 17 to 29 year-over-year, with significant success in securing mega deals.
• Financial Services is showing signs of recovery, while Healthcare faces caution due to government spending discussions.
• Cognizant is proactively integrating AI into operations, with 20% of code now generated by AI tools.
• The company anticipates a shift towards outcome-based pricing models over the next year.

Financial Results

• Large Deals: Cognizant reported an increase in large deals (over $100 million) from 17 to 29 year-over-year.
• Mega Deals: The company secured three mega deals by the end of Q2, including a nearly $1 billion transformation deal in the health sciences sector.
• Financial Services: There are signs of recovery, with discretionary spending leveling out.
• Overall Outlook: Cognizant expects trends to align with their Q1 earnings outlook.

Operational Updates

• Pendulum Calibration: Cognizant is balancing agility with process, a move well-received by clients.
• AI Integration: The company is actively offering AI-powered solutions to enhance productivity, with AI generating 20% of code.
• Internal AI Adoption: AI is being used for recruitment, internal help desks, and the intranet.
• Mega Deal Approach: Cognizant is unlocking value in existing operations to fund AI-driven transformations.

Future Outlook

• AI Market Opportunity: Cognizant views the AI market as evolving through productivity, AI infusion, and agentification.
• Pricing Models: The company expects a shift towards outcome-based pricing within six months to a year.
• Vendor Consolidation: Clients are seeking cost optimization, leading to increased large deals for Cognizant.

Q&A Highlights

• Macro Environment: The current climate is marked by uncertainty and rapid technological change due to AI.
• Mega Deals: These deals involve renewal, expansion, and new business opportunities.
• Client Interactions: Cognizant is proactively engaging clients with AI-powered solutions.
• Pricing Environment: While competitive, the pricing environment is not irrational.
• Financial Services Recovery: Cognizant is focusing on sub-segment specialization and revamping its sales engine.

For a deeper understanding, readers are encouraged to refer to the full conference call transcript.

Full transcript - Bank of America Global Technology Conference 2025:

Jason Kupferberg, Payments Processors and IT Services Analyst, Bank of America: All right. I think we’re going go ahead and get started. Apologies. We’re running a few minutes behind here. I’m Jason Kupferberg, the payments processors and IT services analyst here at Bank of America.

And we’re really excited to have Sharia back with us at the conference again. Thank you very much for your reappearance here. Thank you, Jason. Thank you having Great to see you. Yeah, no, absolutely.

And it’s good timing. You guys had an Investor Day. Yes. A couple of months ago, there’s a very quiet on the macro front, right? Nothing to talk about there.

We’ll get to all of it, but I just wanted to start by having you give the group a little bit of historical perspective because you’ve been at Cognizant for twenty five years. Good. And you’ve seen a lot. And Ravi came in as CEO two and a half years ago. Right.

Now, just take us through like the main bullet points of change that you’ve really seen be affected into the organization. Yeah, you’re right. First, thank you.

Sri, Runs North America, Cognizant: Thank you again. Good afternoon, everyone. Apologies for coming in couple of minutes late. So this is my twenty fifth year at Cognizant, and I grew up with the firm in many ways. So from the beginning, the Cognizant is anchored on four key pillars, call it culture, call it DNA.

They are agility, entrepreneurial culture, empowerment, and these values have remained constant for many, many years. So in the initial years of hyper growth, Cognizant was going very fast for the first fifteen, twenty years and all these things really helped with the growth. When the growth started leveling out, we came across as a little process light. Then we knew we had to correct it to get to the right levels of agility, right levels of entrepreneurial mindset, right levels of empowerment and things like that. So and in process, we may have overcorrected it between 2015 and 2020.

So then, you know, when we were extremely agile, when we had this entrepreneurial culture from the beginning, associates loved it, our clients loved it, And our clients loved working with Cognizant. They thought Cognizant was easy to work with and things like that. But when we corrected it and rather probably unintentionally over corrected it, clients started seeing us as extremely rigid, hard to work with. Associates started feeling, you know, bit more congested. They thought they lost the entrepreneurial ability and they lost, you know, agility in the system.

So now in the last three years after Ravi came back, we started calibrating the pendulum towards the middle. We’re not going back to the initial days where we had extreme Yeah. Everything. But we are getting it to the right middle where we are having agility, we are having we are promoting the entrepreneurial mindset. And at the same time, you know, we are having the right checks and balances.

Now clients are liking it again. You know, they are saying that Cognizant is back. We are seeing the original Cognizant DNA resonate now. Yep. Associates are liking it.

So I think, you know, I have been across all these three of us. I can tell you that we are finding a right middle right now. That’s how you got back into the winner’s circle, right? Yes, we did. Yeah.

Jason Kupferberg, Payments Processors and IT Services Analyst, Bank of America: So let me get your perspective also on just So this macro backdrop is obviously super unique or so it seems. But again, you’ve seen a lot of very interesting points in time in the macro, right? There was post 09/11. There was the great financial crisis. There was like the beginning of COVID when COVID first hit.

How does the current macro compare and contrast to those periods in your I

Sri, Runs North America, Cognizant: would rather not compare one with the other because each of these instances that you just mentioned had their own nuances. And the macro dynamics were different for each of these crisis. But one thing that was uniform across all these crisis is the uncertainty that it in these crisis have induced. And that’s

Jason Kupferberg, Payments Processors and IT Services Analyst, Bank of America: the worst environment, it’s uncertainty, right?

Sri, Runs North America, Cognizant: Yeah. And, you know, but one thing that is different this time around, you know, to the past ones is that in the past ones, we were dealing with one dimensional element uncertainty. Now during this time, we are not only dealing with uncertainty, we are also dealing with change. AI is disrupting or AI or Gem AI is disrupting almost every single enterprise across the planet, almost all the value chain. So now we are having to deal with uncertainty and change at the same time.

Yeah. So like every adversity presents an opportunity. We see this as an opportunity.

Jason Kupferberg, Payments Processors and IT Services Analyst, Bank of America: So let’s so you run North America, you run 75% of the business. Right? And I think North America is where a lot of the macro controversy really sits right now. So maybe just take us through your four main verticals and what you guys are actually seeing on the ground right now in terms of customer demand patterns, discretionary spending appetite, So

Sri, Runs North America, Cognizant: we operate in four markets, financial services, health, communications, media, and tech and products and resources. Financial services, I know this segment has been under pressure for a long time, but we have started seeing, we started seeing green shoots in this segment in financial services. We started seeing discretionary spend come back. I won’t say that it has fully come back or it has, you know, there’s a trend here, but it has leveled out. So financial services is relatively positive than where it was many quarters ago.

Healthcare. Healthcare has health sciences as we call it has two dimensions, healthcare and life sciences. Within healthcare, we have payer and provider within life sciences, we have biopharma and medical devices. Healthcare, there’s as all of you are aware, there’s a lot of discussion on Dodge, the government efficiency and spending, particularly on the government funded programs like Medicare and Medicaid. So there is an element of caution in the healthcare segment of the business.

Now coming to life sciences, well, life sciences has a different dynamic with the tariffs and the uncertainty around tariffs. There is an element of anxiety and caution on the life sciences side. So the overall health care segment, I would characterize it as a caution cautious right now. Financial services relatively positive health care cautious Products and resources, which includes retail manufacturing, auto and things like that. This is a segment that is dealing with the turbulence of tariff uncertainty.

So now with all the retailers announcing what they are in with their prospect to their guidance and things like that. But that is cascading down to their IT projects, the IT spend. So I would characterize products and resources as dealing with the turbulence related to tariffs. Communications and media and tech, I would call it neutral. There is no significant departure, in the spending patterns in this segment from where it was a quarter or two ago.

Jason Kupferberg, Payments Processors and IT Services Analyst, Bank of America: Okay. Okay. So if we were going to sort of rank them right now, financial services best, maybe CMT and then healthcare and then products resources? Okay. Okay, understood.

Now I think when you guys were on the first quarter earnings call, you talked about some of these moving parts at the vertical level, right? And you accounted for that, I think in your outlook for the second quarter and for the full year. Would it be fair to say that things are basically trending as you expected at this point?

Sri, Runs North America, Cognizant: Yes. For the most part, yes. Okay. Yes. Okay.

And we in the earnings call, have characterized that we have said that, you know, there are isolated pockets Right. Of this. And we also said that, you know, there are no we don’t see large scale ramp downs. There is delay in decision making Right. Or longer sales cycles and things like that.

But yes, for most of the time.

Jason Kupferberg, Payments Processors and IT Services Analyst, Bank of America: Okay. Okay. Understood. And so I wanted to talk about mega deals. Yeah.

Because that’s been a big focus that Ravi’s had and you’ll give us the numbers. Clearly, they’re up a lot since he took And on the Q1 call, you talked about winning a mega deal in the healthcare space, And then I think a couple of weeks ago, you announced another one. So maybe just give us an update on how the mega deal pipeline is trending as we think about converting some of those into backlog. And then maybe give us a little just color and texture around these deals, their size, the kind of renewal versus new component? So let me start with large deals.

Sri, Runs North America, Cognizant: When I say large deals, these are hundred million dollar plus deals. And just to contextualize, we call when we say mega deals, these are $500,000,000 plus just to level set that. So last year we closed 29 large deals. These are a hundred million dollar plus deals. And the year before we closed 17.

So there is a significant increase in the number of large deals that we closed. And in the first quarter, we announced that we closed the mega deal in the healthcare space. Mega deal is this $500,000,000 plus deal. And two weeks ago at a different conference, you’re right. I mean, we announced that in the first quarter, actually in the first quarter earnings call, we did say that we were working on two mega deals.

Yep. Two mega deals, and we expected them to close in q two. And two weeks ago at a different conference, we did announce that we closed one of those two mega deals in the CMT space. And today, I’m glad to let you know that we closed the second mega deal as well. Congratulations.

Thank you. Thank you. And that is in the health sciences space. And I mean, this is a this is a transformation deal. The the deal that we closed is approximately, you know, around a billion dollars.

And so this has an element of renewal, the element of expansion, and new as well. So that new business. It has all three components. And the way we are approaching these mega deals is, you know, unlock the trapped value in the run component of the business and use that to fund transformation powered by AI, which is leverage AI to unlock productivity in a segment of business and use that unlocked value to fund transformation and innovation, again, by AI. And this is resonating extremely well with

Jason Kupferberg, Payments Processors and IT Services Analyst, Bank of America: our clients. Okay. So why don’t we probe that a little bit more? And I know in some meetings this morning, you were giving some really interesting examples of what you’re seeing on the ground where, you you might have an existing maintenance contract going on. And it sounds like Cognizant is proactively in some cases approaching these clients and saying, Hey, here’s what we can do with AI.

We’re willing to trade off some revenue in that historical revenue stream for, but you can tell it better than I. Yeah.

Sri, Runs North America, Cognizant: Thank you. I I was just giving him an example earlier, giving example earlier that let’s say in an existing client of ours or let’s say we have a 50,000,000 maintenance work. So we are proactively going and talking to clients with an AI powered solution saying that we can unlock just hypothetically 10,000,000 or $20,000,000 worth of productivity from that 50,000,000 base of maintenance work. And we are having conversations with the clients saying that, why don’t you fund this $20,000,000 to drive transformation, powered by AI in the change segment of your business, build something new powered by AI that you need for your business and clients are loving it. I mean, they’re saying that if I can get 20,000,000 from this existing base optimized, I can bring in another 10 or 20,000,000 so to drive the transformation.

So these are the kind of conversations that we are having with many of our clients. And that’s how we are constructing these large deals and mega deals. And by the way, both the mega deals that we spoke about, they were originated by us. They did not come from an RFP. They were originated by a solution with this construct.

We went to client with this construct. And obviously clients, you know, they do their own benchmarking. They get, you know, the other competitive bits if they need to, but the ideas originated from us. And that’s how we are approaching. And that’s how we almost increased from 17 large deals to 29 last year.

And by now, three mega deals by end of Q2. Right. And we will continue to have such conversations with our clients. And as you can imagine, these mega deals will have longer sales cycles to for sure the solution and construct, and we will continue to do so across. And the two that now with the second one you’ve

Jason Kupferberg, Payments Processors and IT Services Analyst, Bank of America: just announced here, those were in your guidance? That’s right. Yes.

Sri, Runs North America, Cognizant: They were factored. That’s why we said in the earnings call

Jason Kupferberg, Payments Processors and IT Services Analyst, Bank of America: Right. That they were they were. They were kind of right. You were and they closed on schedule, which is which is good to hear. So so coming back to some of the the AI dynamics here, it sounds like the way you guys are portraying it, because I know Ravi’s on record is saying, hey, 20% of our codes being done by AI tools today.

And I think numbers have been thrown out. Maybe it’s 50% a few years from now. But it sounds like, I mean, Cognizant is kind of embracing that change, right, and finding ways to offset some of what in isolation could be deflationary. Right. Is that fair?

Is fair. And how and and I guess how are the clients responding to how many to that? It because you’re sharing the productivity back. Right?

Sri, Runs North America, Cognizant: So how does it all net out? It goes back to the construct that I explained Yeah. You know, a minute ago. So clients are receiving it in a very positive way, you know, and different clients are at different levels of maturity to adapt. Not every client is, you know, has the same risk appetite or appetite to deploy all of it to reap the entire 20 benefit.

Okay. Depending on their, you know, constraints and, you know, level of this thing, risk appetite. But overall, I think you’re right. So we have, you know, proven that 20% of code can be generated by machines. Mhmm.

And in fact, at at Cognizant, we are doing that. Yeah. We’re not only doing that for our clients. We are doing it our for our own internal systems too. We are leveraging AI for our recruitment function.

We are leveraging AI for our internal associates, you know, help desk. And we by the way, we have identified our intranet. Oh, is that right? Yes. Oh, you showed that at

Jason Kupferberg, Payments Processors and IT Services Analyst, Bank of America: the Investor Day. I think I

Sri, Runs North America, Cognizant: went yeah. Yeah. So we have identified that. We eat our own dog food too. So yeah.

Jason Kupferberg, Payments Processors and IT Services Analyst, Bank of America: Okay. Okay. Great. Great. So let’s talk a little bit about pricing models because one of our hypotheses has been that as Gen AI gets integrated more into deals, companies in this space are going to have to get a little bit more, I don’t if creative is the right word, right, but flexible with their pricing models.

I mean, we’ve all been accustomed to time and materials forever. I know you guys have always had an ample amount of kind of fixed price as you call it in your mix. But how are those conversations going with the clients that are kind

Sri, Runs North America, Cognizant: of ready for Gen AI adoption? So the pricing environment is competitive, but not irrational right now. Stable? Yeah, I would call it. It’s a bit competitive than where we were a year ago.

Okay. But it’s not irrational, but stable for now.

Jason Kupferberg, Payments Processors and IT Services Analyst, Bank of America: Versus the last quarter, let’s say. Yeah. Okay.

Sri, Runs North America, Cognizant: So I think, as we start working on this, as we start infusing AI and Gen AI into these projects and the productivity is baked in, I think we are adjusting the pricing models from that format to deliver some of to pass on these benefits back to clients. Right. So that is critical. Okay.

Jason Kupferberg, Payments Processors and IT Services Analyst, Bank of America: And then what about, I guess, thinking about outcome based pricing, for example, I mean, are you seeing more of that? Is that challenging?

Sri, Runs North America, Cognizant: I really no, go ahead. I wouldn’t call it challenging. Okay. It is an increased element or an acceleration in clients pivoting towards outcome based pricing, but it is not significant yet. So the clients are still trying to, you know, figure out where this productivity will level out, what would be the benefits of AI Right.

And where would AI, you know, end up in a year from now or two years from now kind of a conversations. Mhmm. Right now, the pricing models are evolving, I think, you know, and I would expect them to evolve over the next, you know, six months to one year, even further. But right now, they’re heavily hinged on productivity and the gains Mhmm. And then slowly pivoting towards outcomes.

Jason Kupferberg, Payments Processors and IT Services Analyst, Bank of America: Can we probe into the the mega deals a little bit? Just maybe give us a sense of, like, the the real, like, type of work that you’re doing there. Right? I mean, is it falling a little bit more into what we might call BPO in the TriZetto world or is it falling more into kind of application services? Maybe

Sri, Runs North America, Cognizant: So I think, you know, before that, I would say that, you know, at Cognizant, we view the AI market opportunity in three steps or three vectors. Okay. The first one is the productivity, unlocking the productivity in the existing enterprise apps, leveraging AI. That’s the first step. The second step would be infusing AI across the tech stack of the enterprise or redoing the plumb line across the tech stack, across data applications and process layer.

The third step would be the agentification. All these mega deals have the component of productivity for sure, right? And some of these mega deals involve infusing AI across the tech stack. What I mean by that is application modernization and infusing AI, leveraging AI across the tech stack. And that could be TriZetot two for one of the large deals that we mentioned, announced in the q one in the earnings call.

That involved the modernization, cloud lift and infusing AI in the tech stack. So, and we are beginning to see glimpses of agentification that is step three as well included as part of these large deals. So primarily right now in the deals that we have closed so far, it is heavily step one, which is productivity and step two, which is infusing AI across the tech stack, which involves and to your question or whether it is IT versus BPO, it’s combination. Okay. There are certain deals which are heavily IT.

There are certain deals which are BPO. It’s not Right. And what’s

Jason Kupferberg, Payments Processors and IT Services Analyst, Bank of America: the general duration on these mega deals that you’ve

Sri, Runs North America, Cognizant: been average tenure is roughly is around five years.

Jason Kupferberg, Payments Processors and IT Services Analyst, Bank of America: Five years. Okay. So five years, a billion dollars, not bad. Average tenure. Right.

Right. Okay. Okay. All right. That’s helpful.

I wanted to circle back on financial services for a minute and maybe see if we can talk a little bit more about like the piece parts there because you’ve got banking. Guys are big players in insurance as well. And I think putting aside kind of the macro and the cyclical drivers of financial services, there’s been kind of a structural recovery for Cognizant in that vertical, right? It was always your biggest one historically. Now it’s kind of neck and neck with healthcare.

But I mean, maybe talk about the building blocks that have been put in place to enable you to kind of recover some lost market share and how you see the way forward in that very important vertical. You’re right.

Sri, Runs North America, Cognizant: I mean, financial services has been our largest business unit for many, many years. Now it is neck and neck with healthcare. And financial services has three or four components, like you said, banking and capital markets, fintech, insurance, cards and payments. So historically, I mean, this has underperformed for us for many years until the last few quarters, while there were macro pressures, but we had our own internal set of structural issues. We have fixed those structural issues by doing three or four things.

We brought in focus at sub segment level. Earlier financial services was lumped as one single BU and there was not specific focus on sub segments. The first change we did is we brought focus at sub segment level and we created each sub segment as a BU under one leader and brought in focus. That’s first thing. Second thing we did is we revamped a sales engine with industry experts for that sub segment.

That’s the second thing. And then third is we started coming up with new sub segment level tailored solutions for that market. We were very focused at sub segment level and we started crafting solutions either powered by AI for that segment. A combination of all of these started yielding results in the market and we started winning client confidence back.

And there was also some a little bit of a client issue in the market for us that Cognizant wanted to play in the segment, did not want to play in the segment. And as you all know, historically, by banking and financial services clients are heavily on PMM side versus fixed base side. Yeah. So there was a little bit of confusion whether Cognizant wants to play in both PMM and fixed bid or one versus the other kind of thing. We cleared that that we want to play on both sides.

We want to play on both. And a combination of these four fixed our structural issues internally and as market started leveling out, the discretionary started coming back, we got ahead. I’m glad to let you know that we are winning our fair share or rather unfair share of the unlocked dollars and discretionary.

Jason Kupferberg, Payments Processors and IT Services Analyst, Bank of America: So that kind of dovetails to maybe, I guess, the time kind of the last topic I want to get into, which is wallet share and thinking about vendor consolidation. How are particularly larger clients behaving right now? Are they interested in vendor consolidation? Are they interested in kind of skinning down the number of providers, at least in terms of the largest providers that they use? Are you have you been a beneficiary of that to

Sri, Runs North America, Cognizant: clients are not necessarily solving for vendor consolidation, but they’re solving for cost optimization. To accomplish that cost optimization, they’re trying to break the silos across multiple vendors and they’re trying to consolidate players to a few who can deliver maximum value and provide end to end solutions. And yes, since we play in that space and we are able to provide with our deep domain expertise, you know, end to end solutions across the value chain, we we are getting benefited, in that segment. And that’s part of the reason why we had 29 large deals and three mega deals so far. 29 large deals last year and three mega deals now.

Right.

Jason Kupferberg, Payments Processors and IT Services Analyst, Bank of America: Right. Right. Okay. Well, that’s great. Thank you so much, Sri.

I really appreciate you being here.

Sri, Runs North America, Cognizant: Thank you. Thank Thank you, John. Thank you.

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