Cognizant Technology Solutions NASDAQ: CTSH used its fourth-quarter and full-year 2025 earnings call to highlight what executives described as continued momentum in growth, profitability, and large-deal activity, while positioning the company’s strategy around “building” and scaling agentic AI for enterprise clients.
Fourth-quarter and full-year performance
CEO Ravi Kumar said fourth-quarter revenue grew 3.8% year-over-year in constant currency, “all organic,” and was driven by North America. CFO Jatin Dalal reported fourth-quarter revenue of $5.3 billion and full-year revenue of $21.1 billion, with the full-year figure representing 6.4% constant-currency growth, including 260 basis points from Belcan.
Profitability also improved. Cognizant posted a 16% adjusted operating margin in Q4, up 30 basis points year-over-year, and a 15.8% adjusted operating margin for the full year, up 50 basis points and above the company’s guidance, according to management.
Dalal said fourth-quarter adjusted diluted EPS was $1.35, up 12% year-over-year, and full-year adjusted EPS was $5.28, up 11%. Fourth-quarter free cash flow was approximately $800 million, bringing full-year free cash flow to $2.7 billion, which management said was more than 100% of net income.
Bookings and large deals underpinning growth expectations
Cognizant emphasized large-deal momentum as a key driver. Kumar said fourth-quarter bookings grew 9% year-over-year and delivered a record quarterly total contract value. The company signed 12 large deals with total contract value (TCV) of $100 million or greater, including one deal valued at more than $1 billion. Management said the value of large-deal wins in Q4 was 60% higher than a year ago.
For the full year, Kumar said Cognizant signed 28 deals with TCV above $100 million and that combined TCV was up nearly 50% versus the prior year, including five mega deals with TCV of $500 million or greater. Dalal added that on a trailing twelve-month basis, bookings grew 5% and book-to-bill was 1.3.
However, management noted that annual contract value (ACV) declined modestly year-over-year due to the mix of longer-duration deals and softness in smaller deals. Dalal said backlog visibility at year-end was similar to the prior year and supported confidence in the company’s guidance.
AI strategy: “AI builder,” context engineering, and three vectors
Kumar framed Cognizant’s 2026 strategy around closing what he called the “AI velocity gap”—the gap between heavy AI infrastructure spending and realized business value. He cited Cognizant research indicating AI could unlock $4.5 trillion in future U.S. labor value and said the company aims to bridge technology capabilities to measurable enterprise returns.
Executives described a “three vector strategy,” including applying AI to augment traditional software delivery (Vector One) while also building new agentic software cycles and “digital labor” (Vectors Two and Three). Kumar said Cognizant has more than 4,000 AI engagements, and that over 30% of developer effort in software development cycles is “AI-assisted and agentic.”
In Q&A, Kumar argued AI is expanding, rather than shrinking, the company’s addressable market—even in areas like ERP and packaged software implementation—because enterprises still need reinvention of processes, integration of deterministic and probabilistic systems, and governance grounded in “context engineering.”
He also outlined components of Cognizant’s approach, including its trademarked BASIS framework, a “science of context engineering,” and a broad partnership ecosystem that includes NVIDIA and Anthropic, among others. Kumar said the company has organized go-to-market around three units: market-facing AI teams, an integrated AI solutions unit, and a centralized AI platforms and products unit.
Segment and geographic commentary
Management highlighted financial services as a major contributor. Kumar said financial services led growth in the quarter, with 9% year-over-year constant-currency growth in Q4 and 7% for the year, which he called the highest annual level since 2016. Dalal said financial services strength was driven by North America and included steady improvements in discretionary spending and consistent large-deal signings.
Dalal described health sciences performance as resilient amid cost pressures and policy changes, with GenAI projects expanding in claims efficiency, clinical documentation, and customer experience. Kumar said health sciences grew 6%+ and emphasized TriZetto as a differentiator, citing its scale in transactions and membership while suggesting regulatory uncertainty could spur transformation around administrative costs.
In products and resources, Dalal said performance was stable, with tariff uncertainty weighing on discretionary spending, but he expects large-deal traction in the second half of 2025 to support better performance in 2026. In communications, media, and technology, he said technology customer growth was offset by weakness in comms and media, particularly in North America.
Geographically, Dalal said North America was the “standout” in Q4, growing more than 4% in constant currency. Europe grew 2%, while “Rest of World” grew in line with the company, driven by the Middle East.
Margins, labor items, capital return, and 2026 outlook
Dalal attributed fourth-quarter margin performance to next-gen program savings, higher utilization, and Indian rupee depreciation, offset by higher compensation costs. In response to questions about gross margin dynamics, he cited higher bonus funding and salary increases in the quarter. He also said the company is managing productivity expectations through internal levers such as pyramid mix, utilization, and offshoring, in addition to AI productivity.
Dalal noted India’s implementation of certain provisions of the Code on Social Security in November, saying it did not materially affect the P&L in Q4 but caused a one-time increase to defined benefit liability on the balance sheet. He said Cognizant expects a modest increase in defined benefit costs prospectively.
On capital allocation, management said Cognizant returned approximately $2 billion to shareholders in 2025 through dividends and share repurchases. The company ended Q4 with $1.9 billion in cash and short-term investments, or net cash of $1.3 billion, excluding roughly $730 million classified as restricted cash held in escrow ahead of the 3Cloud acquisition, which closed in January.
For 2026, Dalal guided for:
- Q1 revenue growth of 2.7% to 4.2% year-over-year in constant currency, including ~100 basis points from 3Cloud; the midpoint implies a modest sequential decline organically due in part to lower bill days.
- Full-year revenue growth of 4% to 6.5% in constant currency, including ~150 basis points of inorganic contribution, with about one-third expected from future M&A.
- Adjusted operating margin of 15.9% to 16.1%, implying 10 to 30 basis points of expansion.
- Adjusted diluted EPS of $5.56 to $5.70, representing 5% to 8% growth.
- Free cash flow conversion of 90% to 100% of net income and an adjusted effective tax rate of 25% to 26%.
Dalal also said Cognizant expects to return about $1.6 billion to shareholders in 2026, including approximately $1 billion of share repurchases, and reiterated the company’s intent to remain active in acquisitions aligned to its AI strategy.
Finally, management said it continues to evaluate a potential primary offering and secondary listing in India, noting engagement with advisors and regulators but stating no decision has been made.
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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