Cognizant Q2 Earnings Beat Estimates: Will Raised View Aid Shares?

Cognizant Technology Solutions CTSH reported non-GAAP earnings of $1.31 per share in the second quarter of 2025, which beat the Zacks Consensus Estimate by 3.97% and increased 12% year over year. Revenues of $5.25 billion beat the consensus mark by 1.01%. The top line increased 8.1% year over year and 7.2% at constant currency (cc). This was driven by the Belcan acquisition and strong organic growth, particularly in Health Sciences and Financial Services.The Belcan acquisition significantly contributed to revenue growth, with approximately 400 basis points of inorganic contribution to the overall results.On a trailing 12-month basis, bookings increased 6% year over year to $27.8 billion, which represented a book-to-bill of approximately 1.4 times. Second-quarter bookings included six large deals, including two mega deals valued at around $1 billion each, doubling the total contract value (TCV) of large deals year over year.Cognizant Technology Solutions Corporation Price, Consensus and EPS Surprise Cognizant Technology Solutions Corporation price-consensus-eps-surprise-chart | Cognizant Technology Solutions Corporation QuoteCognizant had over 2,500 early Generative AI client engagements in the second quarter of 2025.CTSH’s shares have underperformed the Zacks Computer & Technology sector in the year-to-date period. The stock has lost 4.4%, while the broader sector has surged 11.1%. We believe the raised guidance will help CTSH stock recover.CTSH’s Top-Line DetailsFinancial services revenues (29.5% of revenues) increased 6.9% year over year (up 6% at cc) to $1.547 billion. Growth is primarily driven by improved discretionary spending and investments in cloud, data modernization, and AI.Health Sciences revenues (29.6% of revenues) increased 6.2% year over year (up 5.3% at cc) to $1.551 billion. Growth is driven by strong demand across payer, provider, and life sciences, which offsets some discretionary spending pressures.Products and Resources revenues (24.9% of revenues) increased 16% year over year (up 14.7% at cc) to $1.306 billion.Communications, Media and Technology revenues (16% of revenues) were $841 million, which increased 3.1% from the year-ago quarter (up 2.2% at cc). Region-wise, revenues from North America increased 8.1% year over year and at constant currency and contributed 74.6% to total revenues.Revenues from Europe increased 9.6% year over year (up 4% at cc) and contributed 19.1% to total revenues. Revenues from the U.K. increased 8.6% year over year (up 3.2% at cc). Continental Europe revenues increased 10.6% year over year (up 4.7% at cc).The Rest of the World revenues increased 4.7% year over year (up 6% at cc) and contributed 6.3% to total revenues.CTSH’s Operating DetailsSelling, general & administrative expenses, as a percentage of revenues, contracted 70 bps year over year to 15.4%.Total headcount at the end of the second quarter was 343,800 compared with 336,300 in the previous quarter. Voluntary attrition - Tech Services on a trailing 12-month basis was 15.2% in the second quarter of 2025 compared with 15.8% and 13.6% in the first and second quarters of 2024, respectively.Cognizant reported a GAAP operating margin of 15.6%, expanding 100 bps on a year-over-year basis.Non-GAAP operating margin (adjusted for NextGen charges) of 15.6% expanded 40 bps year over year.CTSH’s Balance SheetCTSH had cash and short-term investments of $1.80 billion as of June 30, 2025, compared with $1.99 billion as of March 31, 2025. As of June 30, 2025, the company had a total debt of $592 million, down from $600 billion reported as of March 31, 2025.The company generated $398 million in cash from operations compared with $400 million in the previous quarter.Free cash flow was $331 million compared with $393 million reported in the prior quarter.CTSH Initiates Strong Q3 & 2025 GuidanceCognizant expects third-quarter 2025 revenues between $5.27 billion and $5.35 billion, indicating growth of 4.6%-6.1% and an increase of 3.5%-5% on a cc basis. For 2025, revenues are expected to be in the range of $20.7-$21.1 billion, an increase of 4.7-6.7% on a reported basis and growth of 4%-6% on a cc basis. Adjusted operating margin for 2025 is expected to be approximately 15.5% to 15.7% (an increase of 20 to 40 basis points).Adjusted earnings per share for 2025 are expected to be between $5.08 and $5.22.CTSH’s Zacks Rank & Stocks to ConsiderCTSH currently carries a Zacks Rank #3 (Hold).CommScope COMM, Arista Networks ANET and Bumble  BMBL are some better-ranked stocks that investors can consider in the broader Computer and Technology sector.CommScope, Arista Networks and Bumble each sport a Zacks Rank of 1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.CommScope shares have gained 55.8% year to date. COMM is scheduled to release second-quarter 2025 results on Aug. 7.Arista Networks shares have risen 10.4% year to date. ANET is set to report its second-quarter 2025 results on Aug. 5.Bumble shares have lost 7% year to date. Bumble is scheduled to release second-quarter 2025 results on Aug. 6.One Big Gain, Every Trading DayTo help you take full advantage of this market, you’re invited to access every stock recommendation in all our private portfolios - for just $1.Zacks private portfolio services that closed 256 double and triple-digit winners in 2024 alone. That’s about one big gain every day the market was open. Of course, not all our picks are winners, but members have seen recent gains as high as +627% +1,340%, and +1,708%.Imagine how much you could profit with a steady stream of real-time picks from all our services that cover a number of strategies to suit a variety of investing and trading styles.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Cognizant Technology Solutions Corporation (CTSH): Free Stock Analysis Report CommScope Holding Company, Inc. (COMM): Free Stock Analysis Report Arista Networks, Inc. (ANET): Free Stock Analysis Report Bumble Inc. (BMBL): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks