Cognizant Q3 Earnings Beat Estimates: Will Raised View Aid Shares?

Cognizant Technology Solutions CTSH reported non-GAAP earnings of $1.39 per share in the third quarter of 2025, which beat the Zacks Consensus Estimate by 7.75% and increased 11.2% year over year. Revenues of $5.42 billion beat the consensus mark by 1.63%. The top line increased 7.4% year over year and 6.5% at constant currency (cc). This growth was driven by strong performance in North America and organic growth across all segments. Acquisitions also contributed approximately 250 basis points to year-over-year revenue growth.On a trailing 12-month basis, bookings increased 5% year over year to $27.5 billion, which represented a book-to-bill of approximately 1.3 times. Bookings in the third quarter declined 5% year over year. Third-quarter bookings included six large deals, with a total contract value of more than $100 million.Cognizant had over 3,500 early Generative AI client engagements in the third quarter of 2025. This represents a 40% jump sequentially.Cognizant Technology Solutions Corporation Price, Consensus and EPS Surprise Cognizant Technology Solutions Corporation price-consensus-eps-surprise-chart | Cognizant Technology Solutions Corporation QuoteCTSH’s shares have underperformed the Zacks Computer & Technology sector in the year-to-date period. The stock has lost 6.8%, while the broader sector has surged 29.6%. We believe the raised guidance will help CTSH stock recover.CTSH’s Top-Line DetailsFinancial services revenues (29.1% of revenues) increased 6.2% year over year (up 5.4% at cc) to $1.578 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 5.9% year over year (up 5.1% at cc) to $1.604 billion. Growth is driven by strong demand across payer, provider and life sciences, which offsets some discretionary spending pressures.Products and Resources revenues (25.5% of revenues) increased 12.6% year over year (up 11.4% at cc) to $1.383 billion.Communications, Media and Technology revenues (15.7% of revenues) were $850 million, which increased 4.2% from the year-ago quarter (up 3.6% at cc). Region-wise, revenues from North America increased 7.8% year over year and at cc and contributed 74.4% of total revenues.Revenues from Europe increased 7.8% year over year (up 2.7% at cc) and contributed 19.2% to total revenues. Revenues from the U.K. increased 4.4% year over year (up 0.7% at cc). Continental Europe revenues increased 11.1% year over year (up 4.6% at cc).The Rest of the World revenues increased 0.9% year over year (up 2.6% at cc) and contributed 6.4% to total revenues.CTSH’s Operating DetailsSelling, general & administrative expenses, as a percentage of revenues, contracted 110 bps year over year to 15.4%.Total headcount at the end of the third quarter was 349,800 compared with 343,800 in the prior quarter. Voluntary attrition - Tech Services on a trailing 12-month basis was 14.5% in the third quarter of 2025, compared with 15.2% and 14.6% for the periods ended June 30, 2025, and Sept. 30, 2024, respectivelyCognizant reported a GAAP operating margin of 16%, expanding 140 bps on a year-over-year basis.Non-GAAP operating margin (adjusted for NextGen charges) of 16% expanded 70 bps year over year.CTSH’s Balance SheetCTSH had cash and short-term investments of $2.35 billion as of Sept. 30, compared with $1.80 billion as of June 30, 2025. As of Sept. 30, 2025, the company had a total debt of $584 million, down from $592 billion reported as of June 30.The company generated $1.227 billion in cash from operations compared with $398 million in the previous quarter.Free cash flow was $1.16 billion compared with $331 million reported in the prior quarter.CTSH Initiates Strong Q4 & 2025 Guidance  Cognizant expects fourth-quarter 2025 revenues between $5.27 billion and $5.33 billion, indicating growth of 3.8%-4.8% and an increase of 2.5%-3.5% on a cc basis. For 2025, revenues are expected to be in the range of $21.05-$21.10 billion, an increase of 6.6-6.9% on a reported basis and growth of 6%-6.3% on a cc basis. Adjusted operating margin for 2025 is expected to be approximately 15.7% (an increase of 40 basis points).Adjusted earnings per share for 2025 are expected to be between $5.22 and $5.26.CTSH’s Zacks Rank & Other Stocks to ConsiderCTSH currently carries a Zacks Rank #2 (Buy).BILL Holdings BILL and Advanced Energy AEIS, and Akamai Technologies AKAM are some other top-ranked stocks that investors can consider in the broader sector. Each stock carries a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Bill Holdings’ shares have plunged 42% in the year-to-date period. BILL is set to report its first-quarter fiscal 2026 results on Nov. 6.Advanced Energy is set to report third-quarter 2025 results on Nov. 4. Advanced Energy shares have surged 79.9% year to date.Akamai Technologies is set to report third-quarter 2025 results on Nov. 6. Akamai Technologies shares have plunged 23.7% year to date.Zacks' Research Chief Picks Stock Most Likely to "At Least Double"Our experts have revealed their Top 5 recommendations with money-doubling potential – and Director of Research Sheraz Mian believes one is superior to the others. Of course, all our picks aren’t winners but this one could far surpass earlier recommendations like Hims & Hers Health, which shot up +209%.See Our Top Stock to Double (Plus 4 Runners Up) >>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 Akamai Technologies, Inc. (AKAM): Free Stock Analysis Report Advanced Energy Industries, Inc. (AEIS): Free Stock Analysis Report BILL Holdings, Inc. (BILL): 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