Cognizant Technology Solutions Q1 Earnings Call Highlights

Key Points

• Cognizant reported Q1 revenue of $5.4 billion (up 3.9% CC), adjusted operating margin of 15.6% (+10 bps) and adjusted EPS of $1.40 (+14%), while bookings jumped 21% YoY including seven large deals and one “mega” deal above $500 million (trailing 12‑month bookings +11%, book‑to‑bill 1.4).
• Management launched Project Leap, targeting $200–300 million of 2026 savings (with $230–320 million of one‑time costs) and raised 2026 adjusted operating margin guidance to 16%–16.2%; Q2 revenue growth is guided to 3.2%–4.7% CC with full‑year revenue growth unchanged at 4%–6.5% CC.
• Cognizant is accelerating its shift to an “AI builder” model—reporting >5,000 AI engagements and ~40% of code AI‑assisted—and is acquiring Astreya to bolster AI infrastructure capabilities, with a partial Q2 contribution and full contribution assumed in H2.

Cognizant Technology Solutions NASDAQ: CTSH reported first-quarter 2026 results that management said landed in the upper half of its revenue guidance range, alongside year-over-year adjusted operating margin expansion and a sharp increase in bookings, even as executives described a “softening demand environment” and heightened macroeconomic uncertainty.

Quarterly performance: revenue, margins, and bookings

Chief Executive Officer Ravi Kumar said the company delivered “a solid first quarter” with revenue growth in the upper half of guidance, expanded adjusted operating margin, and strong bookings growth. CFO Jatin Dalal reported revenue of $5.4 billion, up 3.9% year-over-year in constant currency, which he attributed to the ramp of large deals in North America, strength in financial services, and a “strong performance in the U.K.”

Dalal said demand increased for the company’s “IOA and AI and analytics services,” driven by “AI readiness and innovation budgets.” He also noted that growth benefited from revenue tied to third-party products within Cognizant’s “integrated offering strategy” and from the contribution of the 3Cloud acquisition.

Bookings were a central theme throughout the call. Kumar said first-quarter bookings grew 21% year-over-year and included seven large deals with total contract value (TCV) of at least $100 million, including one “mega deal” above $500 million. Dalal added that trailing 12-month bookings grew 11% and represented a 1.4 book-to-bill. He said annual contract value was flat because deal duration increased, reflecting a large-deal mix and “continued softness in smaller discretionary projects.”

On profitability, Dalal reported first-quarter adjusted operating margin of 15.6%, up 10 basis points year-over-year. However, he said gross margin declined 80 basis points year-over-year, citing three primary factors: increased investment in bench and utilization related to headcount growth and hiring “fresh college graduates,” higher costs tied to integrated offerings that include third-party products, and a one-month impact from salary increases that took effect on Nov. 1.

Adjusted EPS was $1.40, up 14% year-over-year, which Kumar highlighted as outpacing revenue growth.

Segment and geographic commentary

Kumar said constant-currency growth was “led by strong performance in North America” and that financial services revenue grew “more than 10%” year-over-year in constant currency, driven by demand across banking and insurance clients. Dalal said financial services growth was balanced across banking, financial services, and insurance customers, with “healthy discretionary spending” and sustained large-deal momentum in North America.

Dalal characterized health sciences as “resilient,” but said growth was negatively impacted by approximately 300 basis points due to lower revenue from third-party products associated with the integrated offering strategy. Excluding that effect, he said health sciences services grew at a similar level to the overall company.

In products and resources, Dalal said performance was stable despite macro, geopolitical, and trade policy uncertainty and supply chain disruption. He pointed to emerging demand in “predictive supply chains, agentic commerce, and hyper-personalization,” and called Physical AI “an early stage but fast-moving category.”

For communications, media and technology, Dalal said revenue with technology customers continued to grow as AI adoption drives demand for engineering, modernization, and platform services, while communications and media were “more measured” due to client-specific dynamics tied to strategic shifts at a large customer. He also said third-party products contributed roughly 10 percentage points of growth for the segment in the quarter.

AI builder strategy, platforms, and evolving commercial models

Kumar framed Cognizant’s strategy as a transition “from a system integrator to an AI builder,” describing four “first principles” shifts: owning the full AI stack, moving from a traditional talent pyramid to interdisciplinary teams, shifting economics from labor-based to outcome-based models, and moving from project delivery to underwriting operational results.

He said Cognizant’s “AI builder stack” combines proprietary methodologies, “context engineering,” strategic partners, and the company’s platforms and IP. Kumar said Cognizant has “well over 5,000 AI engagements” across its three “vectors” (AI-led productivity, industrializing AI, and “agentifying the enterprise”), up from approximately 4,000 exiting December.

Kumar also said nearly 40% of the company’s code is AI-assisted, citing partnerships including Anthropic Claude, Google Gemini, Microsoft GitHub and Copilot, Devin, and OpenAI Codex. He described token metering “at a project or a individual level” to understand usage patterns, model management, and inference cost optimization.

In response to analyst questions on pricing and productivity pass-through, Kumar said Cognizant has “infused AI into our rate cards,” and argued that the competitive “race now is about the number of units” delivered for a given outcome. He also described an emerging “tokenized rate card” concept spanning a continuum from fully human-led work to autonomous digital labor, and said clients are increasingly asking service providers to manage both human and digital effort.

M&A, Project Leap, and guidance updates

Management highlighted a newly announced definitive agreement to acquire Astreya, which Kumar described as an IT managed services provider specializing in AI infrastructure build-out and managing data center infrastructure, enterprise networks, and digital workplace technology. Kumar said Astreya will add “a critical layer” to Cognizant’s AI builder technology stack. Dalal said second-quarter guidance includes “a partial quarter contribution from Astreya,” while the full-year outlook assumes two full quarters of contribution in the second half.

Dalal also discussed the company’s new transformation initiative, Project Leap. He said the program is expected to generate $200 million to $300 million of savings in 2026, with a full-year benefit in 2027. Dalal said Cognizant expects to reinvest approximately two-thirds of the savings into growth priorities (integrated offerings, AI capabilities and partnerships) and about one-third toward workforce upskilling. He said the company expects to record $230 million to $320 million of associated costs, with “substantially all” incurred in 2026, primarily employee severance and personnel-related expenses, and that these costs will be adjusted out of non-GAAP measures.

As a result of Project Leap savings net of investments, Dalal said Cognizant raised its 2026 adjusted operating margin guidance range to 16% to 16.2%, implying 20 to 40 basis points of year-over-year expansion.

On revenue guidance, Dalal said the company expects second-quarter constant-currency revenue growth of 3.2% to 4.7%, reflecting a “more cautious near-term view of discretionary spending based on recent global events and trends.” Full-year constant-currency revenue growth guidance was unchanged at 4% to 6.5%. Dalal said confidence in the second half is supported by large-deal ramps from the fourth quarter and first quarter and incremental acquisition contribution, while the midpoint assumes some improvement in discretionary spending in the second half compared to second-quarter assumptions.

For capital allocation, Dalal said first-quarter free cash flow was approximately $200 million, impacted by a larger bonus payout and typical first-quarter seasonality. Cognizant returned about $600 million to shareholders through repurchases and dividends in the quarter and ended with $1.5 billion in cash and short-term investments, or net cash of $949 million. He reaffirmed the company’s expectation to return approximately $1.6 billion of capital to shareholders in 2026, including $1 billion of share repurchases and the remainder via dividends.

Dalal also said Cognizant continues evaluating “a potential primary offering and secondary listing in India,” and would provide updates as appropriate.

In closing remarks, Kumar said management remains focused on “winner’s circle” performance, emphasizing bookings momentum and the company’s intent to drive margin expansion and EPS growth outpacing revenue growth while moving faster toward its AI builder operating model through Project Leap.

About Cognizant Technology Solutions NASDAQ: CTSH

Cognizant Technology Solutions NASDAQ: CTSH is a global professional services company that provides information technology, consulting and business process services to large enterprises. Its core offerings include digital engineering, application development and maintenance, cloud migration and managed services, data analytics and artificial intelligence, cybersecurity, and industry-specific solutions. Cognizant works with clients to design and implement technology-enabled transformations that address customer experience, operational efficiency and new product and service delivery.

Founded in the 1990s and headquartered in Teaneck, New Jersey, Cognizant has grown into a multinational organization with delivery centers and operations across the Americas, Europe, and Asia.

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