Cognizant at Technology Conference 2025: AI and Mega Deals Drive Growth

Cognizant Technology Solutions Corp (NASDAQ:CTSH) participated in the Technology Conference 2025 on Wednesday, 11 June 2025, outlining its strategic growth initiatives. The company highlighted its recent success in securing mega deals and emphasized its strategic focus on artificial intelligence (AI). While the company remains optimistic about future growth, challenges such as tariff uncertainties and healthcare policy changes were also acknowledged.

Key Takeaways

• Cognizant secured three mega deals this year, with AI being central to these agreements.
• The company is investing heavily in AI, viewing it as a major growth driver for the IT services industry.
• Cognizant plans to adapt its revenue model to include pricing for both human and virtual agents.
• The BFSI sector shows increased spending, particularly on compliance and AI readiness.
• Cognizant is allocating a significant portion of cash flow to shareholder returns this year.

Financial Results

• Mega Deals: Cognizant won one mega deal in Q1 and two more recently, focusing on technology/communication and healthcare sectors.
• Margin Expansion: The company has guided for a 20-40 basis point expansion through 2025, with Q1 already seeing a 40 basis point expansion.
• Capital Allocation: Cognizant typically allocates 50% of cash flow for mergers and acquisitions (M&A), but this year, 75% is dedicated to shareholder returns.
• Revenue Model: The company expects to implement pricing for human and virtual agents within 3-5 years.

Operational Updates

• AI Focus: AI is a core component of Cognizant’s deal architecture, aimed at enhancing productivity and business processes.
• Large Deal Wins: A total of 17 large deals were won in 2023, with 29 more in 2024.
• Pipeline Management: While the pipeline decreases when large deals are won, Cognizant is confident in replenishing it.
• Small Deals: There is stability in small deals, with the BFSI sector showing positive momentum.

Future Outlook

• Large Deals: Cognizant is confident about continuing to secure large deals throughout the year.
• Discretionary Spending: The company expects discretionary projects to return as environmental stability improves.
• M&A Strategy: Cognizant continues to explore M&A opportunities to enhance market access, regional presence, and capabilities.
• AI Revenue Model: A shift in revenue profile is anticipated in 3-5 years, with pricing for both human and virtual engineers.

Q&A Highlights

• AI’s Impact: AI is expected to be a significant driver of growth, with clients initially trying to use AI internally.
• Competitive Advantage: Cognizant’s combination of domain knowledge and AI technology is seen as a key success factor.
• Pace of Change: The rapid pace of change in AI is considered exciting and faster than previous technological shifts.

In conclusion, Cognizant’s strategic focus on AI and its successful acquisition of mega deals position the company well for future growth. Readers are encouraged to refer to the full transcript for more detailed insights.

Full transcript - Technology Conference 2025:

Surinder Thind, Technology and Information Services Analyst, Jefferies: Everyone. So I’m Surinder Thind, the technology and information services analyst here at Jefferies. With me, I have Jatin Dalal, Chief Financial Officer of Cognizant. Welcome.

Jatin Dalal, Chief Financial Officer, Cognizant: Thank you. Thank you for having

Surinder Thind, Technology and Information Services Analyst, Jefferies: us here. It’s great having you. I’d like to maybe start with some discussion of recent news. In the past couple of weeks, you’ve announced two mega deals, right? These are contracts valued at over $500,000,000

Jatin Dalal, Chief Financial Officer, Cognizant: That’s correct.

Surinder Thind, Technology and Information Services Analyst, Jefferies: Yes. Could you maybe elaborate on the wins? Maybe are these new wins? Maybe the industries? And are you displacing anyone?

How should we think about what these deals mean?

Jatin Dalal, Chief Financial Officer, Cognizant: Sure. So if you recall, in Q1, when we announced the results, we spoke about one mega deal that we had signed in Q1. And now we have covered now we have won two more mega deals. So, so far, three mega deals during the course of the year. So it’s been it’s a good win or a good journey on large deals momentum.

Particularly, the deal that we won in Q1 was new business, big transformative outcome that we will achieve for our customer. Compared to that, both of these deals are more consolidation type mega deals where we are winning a greater wallet share from an existing customer where whom we are already servicing. And to that extent, there is a large renewal component as part of these two mega deals. Of course, it has an addition, but that addition will come through over a period of time as the existing contracts with others sort of taper off and then we take off. So that’s the nature of the two mega deals that we have signed.

One is in sort of a technology and communication space and other is in the health space.

Surinder Thind, Technology and Information Services Analyst, Jefferies: That’s helpful. And then as you start to sign some of these deals and these contracts, do we think about them or is there like an AI element to them? Or is there something that we’re starting to change versus how maybe these contracts were structured a while back?

Jatin Dalal, Chief Financial Officer, Cognizant: Yes, absolutely. I think the component of AI and the productivity that we are able to demonstrate to customers by making AI as a core component of our architectural principles for this large deal is, I think, a degree of differentiation that we are able to present to our customers. So AI is front and center of some of these mega deals that we are signing. In our definition of the impact that we can make with AI, we have defined three vectors. And this is really the vector one, which is the productivity vector that we can leverage to deliver far more with AI with with lesser resources.

Surinder Thind, Technology and Information Services Analyst, Jefferies: And and nobody hands you a mega deal. Right? You have to go out. You have to compete. What allowed you to win in this situation?

Was there a differentiating factor? Was price a consideration here where you came in as maybe on a lower price? How should we think about your ability to win?

Jatin Dalal, Chief Financial Officer, Cognizant: Sure. So I would say the there are a few factors at play here. is the architecture that I spoke about. I think compelling deal architecture of a mega deal is probably front and center of our ability to win it. The is having executed some of our deals.

You know we won 17 such deals in ’twenty three and we won 29 such deals in ’twenty four. So you must be executing those well because none of these deals get awarded without a reference call back to at least four or five customers with whom you won the deal. The factor is also price, meaning nobody hands over a mega deal compared to a small piece of work at a same sort of commercial rate. So you do have to sort of invest upfront in terms of what you can achieve in terms of outcome during the course of the deals and therefore the margins are a little muted in the beginning of the such large deals and then we tend to recover it over the life of the deal.

Surinder Thind, Technology and Information Services Analyst, Jefferies: And then specifically, given that these are dealer announcements that came after your last quarter’s results, were they already, to some extent, incorporated in guidance? Or what does that mean for revenue margin guidance for this year?

Jatin Dalal, Chief Financial Officer, Cognizant: Well, I would say on the revenue side, we do have a point of view of pipeline and we factor it in. The fact that we spoke about these two deals in our earnings call of quarter one, we had a high probability of winning that, so that was already sort of a high probability large wins. To that extent, it was part of our guidance range that we provided. Even from a margin standpoint, as I mentioned, some of these deals come with a slightly lower margin. And we have guided for 20 to 40 basis point expansion through 2025.

And in quarter one, we were already a 40 basis point expansion. So there is some of this factored in as part of the year’s margin expansion or margin trajectory. And therefore, there would be quarterly variation to margins. But overall, the range that we shared is what we think we can deliver to.

Surinder Thind, Technology and Information Services Analyst, Jefferies: That’s helpful. And then more broadly, you’ve been focused on kind of winning these large deals the past couple of years. Given all of the success you’ve had, how should we think about the pipeline at this point? Are you depleting some of the pipeline? Is there just as much?

How should we think about that?

Jatin Dalal, Chief Financial Officer, Cognizant: I mean, when you win a large deal, that extent, the pipeline certainly comes down. But we see a healthy set of opportunities led by what we have executed in past. So to that extent, I foresee a deceleration of any sort from here on large deals. I think we’ll continue to win large deals even during the course of the year. We had quarter one, we had announced four large deals.

And whole of last year, we had 29 such large deals. So yes, we win large deals, but we have demonstrated in past, and I feel confident that we will replenish the pipeline with new opportunities.

Surinder Thind, Technology and Information Services Analyst, Jefferies: Got it. And then maybe switching from large deals to maybe the smaller deals. I think the definition is less than $50,000,000 They could be $5,000,000 or $10,000,000 deals as well. Can you talk about demand that we’re seeing on the lower end of that spectrum, maybe in the $10,000,000 range? Because that’s where a lot of the discretionary spend seems to be.

So are we kind of at a cyclical low here where it’s been challenged for a while? Any signs of a rebound?

Jatin Dalal, Chief Financial Officer, Cognizant: So the smaller deals have gone, I think, three phases now. In ’23, we saw significant decline in smaller deals, and that was a sort of manifestation of of of discretionary spend being going away from the industry. ’24 was more stable year and it remained in range bound and it was not declining as fast. I think quarter four was time that we saw some sort of momentum back into smaller deals, but quarter one has been just back to more status quo except BFSI. BFSI is, as an industry, been handing out more discretionary projects than what they were doing four quarters back.

So to that extent, we definitely see momentum in the BFSI sector. But across the board, I would say it’s more status quo.

Surinder Thind, Technology and Information Services Analyst, Jefferies: And then I guess at this point in time, what are the challenges here from the client perspective that’s kind of holding them back? Like maybe what would a client be looking for to kind of get back on that, hey, I do need to spend on some of these more discretionary type projects? Because there’s been such a big focus on some of these bigger cost takeout or transformation type deals.

Jatin Dalal, Chief Financial Officer, Cognizant: Sure. I would say, I mean, discretionary projects come back when there is a certain amount of environmental stability and economic horizon looks far more stable to companies. The reason they come back is if you have not spent on the change for a long time, at some point in time the environment is changing so much and so fast that your IT systems must catch up with it. I think we are at a point, at least on side, question, where ’twenty three and ’twenty four both have been relatively very slow years on discretionary spend, as you know. So we seem to be at a cusp where some of this should come back, but there is an overhang of macro, which is holding it back is our assessment.

Hopefully, once macro is better, we should see some of that back.

Surinder Thind, Technology and Information Services Analyst, Jefferies: Got it. And then when we think about the near term here, there’s been other considerations, right? We think about the tariff volatility, we think about maybe order effects. Just any evolution in demand or maybe a better question would be in client behavior over, let’s say, the last ninety days. Just any color that you can provide there?

Jatin Dalal, Chief Financial Officer, Cognizant: Since I mean, what we have seen since our earnings call is relatively more of the same. BFSI continues to be to drive discretionary spend and most of the other sectors have remained range bound where they were. We haven’t seen a significant uptick or adverse outcome or adverse behavior in any of the sectors. So I think last ninety days have been more or less similar if you count end March, beginning April as a sort of a turning point from some of the macro standpoint.

Surinder Thind, Technology and Information Services Analyst, Jefferies: And then any perhaps geographic differences to think about, meaning that when we think about it from a tariff perspective, whether it’s Mexico or Latin America, we’ve seen some companies there get hit pretty hard in terms of the the revisions that they’ve had to make. Whereas, you know, you guys much more US, you’ve got more Europe, like, are there considerations there that we should be thinking about?

Jatin Dalal, Chief Financial Officer, Cognizant: I I wouldn’t think so. I think the the consideration from tariffs standpoint are more sector driven than geography driven. Geographically, we see very similar sort of reactions by our customers because these are some of the global factors and not just local factors. From a sector standpoint, we see BFSI pretty much unimpacted by any of the current uncertainties. We see communication media technology also relatively unimpacted, although there is no discretionary back there, but there is no direct impact that we see.

The one which is most impacted with discussions around changing tariffs etc. Is manufacturing, retail and consumer. And the one which is for different reasons slightly impacted is health, which is the new priority of the new administration, which is impacting some of the health customers in U. S.

Surinder Thind, Technology and Information Services Analyst, Jefferies: Okay. And then maybe thinking about it from you pointed out, a verticals perspective. Obviously, BFSI seems to be doing well. It’s the status quo. They’ve started to spend after a couple of tough years.

What are they actually spending it on at this point? Are are they just accelerating some of the maybe the proof of concept projects that they were doing? Are they looking at, like, bigger changes at this point? What what are you kinda seeing within the BFSI vertical?

Jatin Dalal, Chief Financial Officer, Cognizant: I think BFSI vertical is is really on discretionary side are the changes which were led by compliance related changes which were not caught up. They were time sensitive and they are being executed. I don’t think there is one specific regulation or compliance standard, but it’s just that BFSI was really not spending on change for a long time and they had to catch up for all the changes around themselves. So that’s one change. Other is there is definitely some amount of discretionary spend going on in what we call the vector two of AI spend, which is making organizations ready for AI.

And what I mean by that is, forever our data structures have been built for a very specific query, very traditional way of keeping data. Data has been very tightly protected for all the right reasons and there has been a layer of encryption at risk, there is a layer of encryption in motion. Now, all that have its own challenges when you conceptualize an AI led answer to a company’s question because AI needs to sort of access data in a very transparent manner. So there definitely a lot of work happening on making the organization ready for a new AI project and for which you have to step back and take work and do work on your data structures which you’re building with different purpose and objectives in mind versus leveraging it for AI.

Surinder Thind, Technology and Information Services Analyst, Jefferies: So I’ve got a lot of questions on AI here, but just to finalize the thought of the other couple verticals. It sounds like there may be some policy uncertainty that might drive demand in health care. You’ve got some big wins there. I assume that will continue to probably grow at a healthy pace, but we think about products and resources and we get into the some auto, those kinds of things. Do we kind of need to see some of the policy uncertainty go away?

Is that what kind of then maybe starts to drive demand back there? Or are the are the clients kind of stuck in this paralysis mode until we kind of figure out what the tariff situation is going look like.

Jatin Dalal, Chief Financial Officer, Cognizant: That’s right. I think right now most manufacturing retail consumer customers we talk with are deciding their sort of approach to the final regulation. And until that gets decided, I think they will probably remain on sidelines on IT spend.

Surinder Thind, Technology and Information Services Analyst, Jefferies: Okay. And then switching to AI, I think the implications for kind of the broader business and the strategy. You’ve been one of the most aggressive investors in AI. So how is that changing the products and services or your view of what you want to provide to the end markets?

Jatin Dalal, Chief Financial Officer, Cognizant: Sure. I think it’s a great next frontier of opportunity for IT services company. I mean, I’ve been in the industry for more than two decades. Every I mean, our business model is fairly fairly simple. It is we have an excellent distribution channel in Fortune 1,000 customers.

And every few years, there is a new value driver which drives the growth in the industry. For example, in 2008 was infrastructure related spend, 2014 was digital, twenty sixteen-seventeen was cloud. And then we have not had another value driver for the industry, and we think Gen AI or AI is that next driver which will drive which will create the momentum for the sector. So we remain very bullish on JN AI or AI as an opportunity. And we have invested ahead of time in terms of conceptualizing where our opportunity is and how we are positioning ourselves for that opportunity and how we remain ahead of the curve in terms application of this powerful technology for, of course, for the productivity benefits for our customer, but more importantly, to help them reimagine how they conduct their business, how they take care of their customer experience, how do they take care of their corporate functions and so on and so So we remain very bullish on this.

Surinder Thind, Technology and Information Services Analyst, Jefferies: And so with all of this spend, obviously, you you know, you’re you wanna be a thought leader. You want your seat at the table here. What determines who wins in this game as we kinda look forward? Like, who wins and who loses and and why? Or what would be the factors that that determine?

Jatin Dalal, Chief Financial Officer, Cognizant: I think in our industry what matters is that you have an early mover advantage is important. The is your ability to successfully bring domain and technology together. And I think Cognizant is very well placed on that cross junction of domain and technology. I know this is very common for people to say, so let me just double click it a little bit more. Cognizant had a $20,000,000,000 revenue side.

Our largest businesses are application and BPO. And application is where the customer’s organization’s workflow are captured, be it in package implementation experience service like Oracle, SAP, Salesforce, any of them or any of the SaaS platforms or customers. So there is a deep knowledge of customers’ workflow here. And we are the large players on BPO side, which means we know how to react in a specific customer situation. So we know responses.

We understand responses for specification. We understand decision making for what the type of work that we do. So all of that we can if we are investing ahead of the curve on JN AI solutions and we marry that with our contextual knowledge of customers’ business, I think we have a formidable proposition for our customer, and that’s what we think makes us well placed. And that’s our belief as we look at this large opportunity in front of us.

Surinder Thind, Technology and Information Services Analyst, Jefferies: Got it. And then when we think about just the pace of change here, right? I mean it’s unprecedented of how things are moving, advancing in terms of the technology. Lots of improvements made faster than people are anticipating. How are you managing through this?

And is the pace of change itself a risk?

Jatin Dalal, Chief Financial Officer, Cognizant: I think pace of change is exciting. I mean, a lot of times, you see a technology and it takes a while for it to become mainstream. I mean, those who are in the room and can go back fifteen years, time we talked about cloud was maybe in 2011. It took like five years before it really became mainstream. The good thing is probably collectively as a value change, billions of dollars of investment is happening on each stage of value chain on AI.

And hence, the pace of change that you see is far faster than we ever saw in any of the other technological shifts. For example, an agentic framework or multi agentic framework seemed like a buzzword and whether when it will be real, maybe six months back. Now I don’t think any one of us sitting in the room can consider multi agentic framework as a thing of future. I think it’s, I mean, you will find companies which are implementing it in September. So I think it’s exciting.

We feel very energized that the pace of adoption is significantly faster than any other technology, and therefore, the opportunity for early movers is gigantic for us to leverage on.

Surinder Thind, Technology and Information Services Analyst, Jefferies: So it’s quite interesting because when I think about it, the agentic framework, I think, is what you call vector three. So vector one is productivity. Vector two of AI is getting the enterprise ready that’s architecturally changing the structure of that enterprise. And then the is the eugenic framework. So it sounds like we’re quickly moving into that framework because it it seems like everybody’s focused on productivity right now, but we don’t even have the infrastructure in place.

So how do we get past all of the excitement or buzz around the Agendaq framework if firms aren’t ready yet?

Jatin Dalal, Chief Financial Officer, Cognizant: I think it will happen still sequentially, Twintu, because I don’t think any enterprise can change last thirty, forty years of investment in the way the IT estates have been created over the years for different purposes and objectives, including the fact that they should be secure from every angle possible. The change is going to be over a period of time and wherever that change happens, I think AI led transformation will follow quickly and that would assuming that’s a success, it will give impetus to the next level of change. You are right, I don’t think every function is going to have a multi agentic framework in next one year in any large organization. But at the same time, I’m sure there is at least one or two such success stories which would be there in next six to nine months in every organization that will provide the impetus for fast followers within those organizations. Yes.

Surinder Thind, Technology and Information Services Analyst, Jefferies: And then maybe can you touch on your partnerships and how that’s maybe changing your go to market strategy here? It seems that it’s more discussion about making sure that you have the right partnerships in place and what you guys are doing there.

Jatin Dalal, Chief Financial Officer, Cognizant: Absolutely. And I shared before that every part of the AI value change is investing their dollars on their part, be Nvidia or be it Microsoft or Google. Large SIs like us who are investing our own dollars We spoke about a billion dollar investment maybe eighteen months before now. So, right, we were thinking about it even then. And the success will come when everything comes together for the end customer.

So it is imperative for the eventual success that each partner in the value chain is working very, very closely to create something which is magical for the customer eventually. And hence, yes, I think it’s a big driver for collective success and therefore you would see Cognizant really remaining at the forefront of that partnership.

Surinder Thind, Technology and Information Services Analyst, Jefferies: And then maybe kind of one more question on AI here. Does that change your revenue model at this point or maybe your margin profile as you start to look three years, five years into the future?

Jatin Dalal, Chief Financial Officer, Cognizant: Yes. I think three to five years, certainly, the revenue profile will change. I think we would have a pricing for human agents or human engineers and we will have pricing for virtual agents or virtual engineers that work for customers because it’s imperative the way the world is going that we will have a combination of both that would be serving our customers. So yes, five years from now, we would be slightly different profile than what we have been in last two decades. It’s a good thing.

I mean, many of you, many of our investors have always asked, is the non linear revenue growth for you? And here is the great opportunity for non linear revenue growth for us.

Surinder Thind, Technology and Information Services Analyst, Jefferies: That’s helpful. And then when we think about how you’re fitting into the client picture, we also get a question around this idea that as AI advanced, what about a client’s willingness to internally just use the technology themselves to try and maybe disintermediate you or do that work and only then that they come to you? Can you talk a little bit how you would respond to that? Because one of the arguments that’s being made is demand is muted right now because a lot of people are trying to do more of the work internally.

Jatin Dalal, Chief Financial Officer, Cognizant: So you are right. I think in beginning of every technological shift, you would see that customer would want to familiarize the organization themselves before implementing it. So therefore there is high propensity for some of the internal projects to also take place in parallel to experimenting with the party service providers like us. But eventually and my answer is not specific to AI. My answer is specific to the large sort of technological shifts that we have seen in past.

Eventually, the benefit that a company like Cognizant brings to any of our customer is a collective learning and best practice. The benefit that we have is that every time we work with our customer, we become better. And I may have X capability today, but if I meet you after a week, I would be X plus And that ability to bring the best practices across industry makes us is where our value add is and that’s why customers buy from us. And I don’t think that’s going to go away in an AI world where we would learn, and AI is all about learning as we know, a better way of getting to outcomes. And therefore, I do think, yes, initially there could be different parts.

But eventually, I do think there is a real value play for a company like Cognizant.

Surinder Thind, Technology and Information Services Analyst, Jefferies: Got it. It sounds like it’s hard for clients to have the expertise in house because at the end of the day, you see it across all clients. So you build the best practices. Is that kind of the messaging here?

Jatin Dalal, Chief Financial Officer, Cognizant: Yes. I think, yes, we bring the best of the world or best of the best, what I would say.

Surinder Thind, Technology and Information Services Analyst, Jefferies: Okay. And then we have just a couple of minutes left. Talked a lot about organic growth and strategy. Can we talk a little bit about just M and A at this point? How important is that to your growth in this type of environment?

Last year, you made an important acquisition with Belkin. Maybe just discuss about where you guys are within your broader M and A cycle.

Jatin Dalal, Chief Financial Officer, Cognizant: Sure. So as a capital allocation and as a strategic framework, we keep 50% of our cash flow for M and A. This year, particularly, we have allocated a larger chunk for shareholder return, and therefore, nearly 75% of cash of free cash flow will be returned to shareholders. But normally, we keep 50 for M and A 25 for buyback 25 for dividend. And the reason we keep that is there are still many pockets where we think that we have white spaces and could potentially add a market access like oil and gas or add regional access like, let’s say, Nordics or add to our capability.

AI is a big play, but even many others like digital engineering, analytics, SAP, some of this could be very good bolt on opportunities for us, which could help us, of course, add inorganic revenue in that year, but help us grow organically eventually better. That’s the fulcrum of the why we do M and A. So yes, these some of our top of the mind thoughts on the M and A.

Surinder Thind, Technology and Information Services Analyst, Jefferies: Okay. Sounds like there’s a healthy pipeline that you’re looking at. That’s correct. Okay. Well, that actually takes us to time.

So I really appreciate the time here and coming all the way to London.

Jatin Dalal, Chief Financial Officer, Cognizant: So thank you. Thank you very much for your time. Thank you.

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