filings.toolsItem 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
| Executive Summary |
Cognizant is one of the world’s leading professional services companies, engineering modern businesses and delivering strategic outcomes for our clients. We help clients modernize technology, reimagine processes and transform experiences so they can stay ahead in today's fast-changing world, where AI is beginning to reshape organizations in every field. We provide industry expertise and close client collaboration, combining critical perspective with a flexible engagement style. We tailor our services and solutions to specific industries with an integrated global delivery model that employs client service and delivery teams based at client locations and dedicated global and regional delivery centers. Our collaborative services include digital services and solutions, consulting, application development, systems integration, quality engineering and assurance, engineering research and development, application maintenance, infrastructure and security as well as business process services and automation. Digital, AI-enhanced services continue to be an important part of our portfolio, aligning with our clients' focus on becoming data-enabled, customer-centric and differentiated businesses.
Q3 2025 Financial Results****1
| Revenue |
| Income from Operations |
| Operating Margin |
| Diluted EPS |
| GAAP | Adjusted1 |
| GAAP | Adjusted1 |
| GAAP | Adjusted1 |
| Revenue up $371 million or 7.4% from Q3 2024; an increase of 6.5% in constant currency1 | Income from Operations up $128 million or 17.3% from Q3 2024 Adjusted Income from Operations1 up $95 million or 12.3% from Q3 2024 | Operating margin up 140 bps from Q3 2024 Adjusted Operating Margin1 up 70 bps from Q3 2024 | Diluted EPS down $0.61 or 52.1% from Q3 2024 Adjusted Diluted EPS1 up $0.14 or 11.2% from Q3 2024 | |||||||||||||||||||||||||||||||||||
During the quarter ended September 30, 2025, revenues increased by $371 million as compared to the quarter ended September 30, 2024, representing growth of 7.4%, or 6.5% on a constant currency1 basis. Revenue growth was broad-based, led by North America. Additionally, our recently completed acquisition of Belcan contributed approximately 250 basis points to revenue growth.
Our GAAP operating margin and Adjusted Operating Margin1 were both 16.0% for the quarter ended September 30, 2025, as there were no adjustments for unusual items to report in our calculation of Adjusted Operating Margin for that period. Our GAAP operating margin and Adjusted Operating Margin were 14.6% and 15.3%, respectively, for the quarter ended September 30, 2024. Our operating margin for the quarter ended September 30, 2025, as compared to the quarter ended September 30, 2024, was positively impacted by net savings generated from our NextGen program, operational efficiencies and the beneficial impact of foreign currency exchange rate movements, partially offset by the dilutive impact of the recently completed acquisition of Belcan. In addition, our GAAP operating margin for the quarter ended September 30, 2024 was negatively impacted by NextGen charges, which were excluded from our Adjusted Operating Margin.
1 Adjusted Income from Operations, Adjusted Operating Margin, Adjusted Diluted EPS and constant currency revenue growth are not measures of financial performance prepared in accordance with GAAP. See “Non-GAAP Financial Measures” for more information and reconciliations to the most directly comparable GAAP financial measures, as applicable.
| Cognizant Technology Solutions | 25 | September 30, 2025 Form 10-Q |
As a global professional services company, we compete on the basis of the knowledge, experience, insights, skills and talent of our employees and the value they can provide to our clients. We closely monitor attrition trends focusing on the metric that we believe is most relevant to our business. For the trailing twelve months ended September 30, 2025, our Voluntary Attrition - Tech Services was 14.5% as compared to 14.6% for the trailing twelve months ended September 30, 2024. We finished the third quarter of 2025 with approximately 349,800 employees as compared to 340,100 employees at the end of the third quarter of 2024.
In July 2025, the OBBBA was enacted in the United States, which, among other provisions, repealed the requirement to capitalize U.S. R&E costs. As a result, we do not believe it is more likely than not that we will realize our deferred tax asset of $390 million related to R&E costs capitalized outside the United States. These amounts would have otherwise been available to offset certain future U.S. taxes on our non-U.S. earnings, which, as a result of this repeal, we no longer project to be applicable to us. Therefore, in the third quarter of 2025, we recorded a one-time, non-cash income tax expense of $390 million. This impacted our GAAP diluted EPS by $0.80, which is added back for the calculation of Adjusted EPS. Other than this impact, we do not expect the OBBBA to significantly impact our effective income tax rate. Additionally, as a result of this repeal, our cash taxes during the third quarter of 2025 were reduced by approximately $150 million as compared to our initial cash tax projections prior to the repeal. An additional reduction of $50 million in cash taxes as compared to our initial cash tax projections prior to the repeal is expected during the fourth quarter of 2025. These assessments are based upon our current interpretation of the OBBBA, which may change as a result of future clarifications or guidance.
Business Outlook
We continue to expect our clients' focus to be on their transformation into AI-ready, technology-driven, data-enabled, customer-centric and differentiated businesses. To support this transformation and drive greater business resiliency, clients have demanded and may increasingly demand services and solutions that deliver productivity and cost savings. We believe clients will continue to contend with industry-specific changes driven by evolving digital technologies, uncertainty in the regulatory environment, industry consolidation and convergence as well as international trade policies, including tariffs, and other macroeconomic and geopolitical factors. This includes the uncertainty related to the global economy, which has affected and may continue to affect their demand for our services and discretionary work.
We increasingly use AI-based technologies, including GenAI, in our client offerings and our own internal operations. AI technologies and services are part of a highly competitive and rapidly evolving market. We plan to continue to make significant investments in our AI capabilities to meet the needs of our clients and harness AI's value in a flexible, secure, scalable and responsible way. As AI-based technologies or other forms of automation evolve, demand for some services that we currently perform for our clients may be reduced, and our ability to obtain favorable pricing or other terms for some of our services may be diminished.
| Cognizant Technology Solutions | 26 | September 30, 2025 Form 10-Q |
| Results of Operations |
Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024
The following table sets forth, for the periods indicated, certain financial data for the three months ended September 30:
| % of | % of | Increase / Decrease | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions, except per share data) | 2025 | Revenues | 2024 | Revenues | $ | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenues | $ | 5,415 | 100.0 | $ | 5,044 | 100.0 | $ | 371 | 7.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of revenues(a) | 3,581 | 66.1 | 3,311 | 65.6 | 270 | 8.2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Selling, general and administrative expenses(a) | 833 | 15.4 | 833 | 16.5 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Restructuring charges | — | — | 33 | 0.7 | (33) | (100.0) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization expense | 135 | 2.5 | 129 | 2.6 | 6 | 4.7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income from operations and operating margin | 866 | 16.0 | 738 | 14.6 | 128 | 17.3 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other income (expense), net | 21 | 10 | 11 | 110.0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income before provision for income taxes | 887 | 16.4 | 748 | 14.8 | 139 | 18.6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Provision for income taxes | (613) | (170) | (443) | 260.6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income (loss) from equity method investments | — | 4 | (4) | (100.0) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | $ | 274 | 5.1 | $ | 582 | 11.5 | $ | (308) | (52.9) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Diluted EPS | $ | 0.56 | $ | 1.17 | $ | (0.61) | (52.1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other Financial Information**2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjusted Income from Operations and Adjusted Operating Margin | $ | 866 | 16.0 | $ | 771 | 15.3 | $ | 95 | 12.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjusted Diluted EPS | $ | 1.39 | $ | 1.25 | $ | 0.14 | 11.2 |
(a)Exclusive of depreciation and amortization expense.2
2 Adjusted Income from Operations, Adjusted Operating Margin and Adjusted Diluted EPS are not measures of financial performance prepared in accordance with GAAP. See “Non-GAAP Financial Measures” for more information and reconciliations to the most directly comparable GAAP financial measures, as applicable.
| Cognizant Technology Solutions | 27 | September 30, 2025 Form 10-Q |
| Revenues - Reportable Business Segments and Geographic Markets |
Revenues of $5,415 million across our business segments and geographies were as follows for the three months ended September 30, 2025:
| Q3 2025 as compared to Q3 2024 | Increase | ||||||||||||||||||||||||||||||||||
| (Dollars in millions) | $ | % | **CC %**3 | ||||||||||||||||||||||||||||||||
| Health Sciences | 90 | 5.9 | 5.1 | ||||||||||||||||||||||||||||||||
| Financial Services | 92 | 6.2 | 5.4 | ||||||||||||||||||||||||||||||||
| Products and Resources | 155 | 12.6 | 11.4 | ||||||||||||||||||||||||||||||||
| CMT | 34 | 4.2 | 3.6 | ||||||||||||||||||||||||||||||||
| Total revenues | $ | 371 | 7.4 | 6.5 |
| Q3 2025 as compared to Q3 2024 | Increase | ||||||||||||||||||||||||||||||||||
| (Dollars in millions) | $ | % | **CC %**3 | ||||||||||||||||||||||||||||||||
| North America | $ | 293 | 7.8 | 7.8 | |||||||||||||||||||||||||||||||
| United Kingdom | 21 | 4.4 | 0.7 | ||||||||||||||||||||||||||||||||
| Continental Europe | 54 | 11.1 | 4.6 | ||||||||||||||||||||||||||||||||
| Europe - Total | 75 | 7.8 | 2.7 | ||||||||||||||||||||||||||||||||
| Rest of World | 3 | 0.9 | 2.6 | ||||||||||||||||||||||||||||||||
| Total revenues | $ | 371 | 7.4 | 6.5 |
Revenue growth was driven by the following factors:3
-
Revenue growth across all geographies was driven by our Financial Services and Health Sciences segments, which were positively impacted by the ramp up of several recently won large deals. Revenue growth within our Communications, Media and Technology segment was driven by clients in the North America region;
-
Our acquisition of Belcan contributed approximately 250 basis points of growth to overall revenue growth, including approximately 900 basis points of growth to our Products and Resources segment, primarily in North America and to a lesser extent in the United Kingdom. The remaining growth in our Products and Resources segment was driven by the resale of third-party products, primarily in North America, in connection with our integrated offerings strategy.
3 Constant currency revenue growth is not a measure of financial performance prepared in accordance with GAAP. See “Non-GAAP Financial Measures” for more information and reconciliations to the most directly comparable GAAP financial measures, as applicable.
| Cognizant Technology Solutions | 28 | September 30, 2025 Form 10-Q |
| Cost of Revenues (Exclusive of Depreciation and Amortization Expense) |
| é | $270M | |||||||||||||
| é | 0.5% as a % of revenues | |||||||||||||
| ¡ | % of Revenues | |||||||||||||
Our cost of revenues consists primarily of salaries, incentive-based compensation, stock-based compensation expense, employee benefits, project-related immigration and travel for technical personnel, subcontracting and costs of third-party products and services relating to revenues. The increase, as a percentage of revenues, was primarily driven by the impact of the resale of third-party products in connection with our integrated offerings strategy and the dilutive impact of the recently completed acquisition of Belcan, partially offset by operational efficiencies and the beneficial impact of foreign currency exchange rate movements.
| SG&A Expenses (Exclusive of Depreciation and Amortization Expense) |
SG&A expenses consist primarily of salaries, incentive-based compensation, stock-based compensation expense, employee benefits, immigration, travel, marketing, communications, management, finance, administrative and occupancy costs. The decrease, as a percentage of revenues, was primarily driven by net savings generated from our NextGen program.
| Flat YoY | ||||||||||||||
| ê | 1.1% as a % of revenues | |||||||||||||
| ¡ | % of Revenues | |||||||||||||
| Depreciation and Amortization Expense |
Depreciation and amortization expense increased by 4.7% and decreased 0.1% as a percentage of revenues during the third quarter of 2025 as compared to the third quarter of 2024. The increase was driven by amortization expense from intangible assets related to our recently completed acquisition of Belcan.
| Operating Margin and Adjusted Operating Margin****4 - Overall |
Our GAAP and Adjusted Operating Margins4 for the quarter ended September 30, 2025, as compared to the quarter ended September 30, 2024, were positively impacted by net savings generated from our NextGen program, operational efficiencies and the beneficial impact of foreign currency exchange rate movements, partially offset by the dilutive impact of the recently completed acquisition of Belcan. In addition, our GAAP operating margin for the quarter ended September 30, 2024 was negatively impacted by NextGen charges, which were excluded from our Adjusted Operating Margin.
A predominant portion of our costs in India are denominated in the Indian rupee, representing approximately 23% of our global operating costs during the three months ended September 30, 2025. These costs are subject to foreign currency exchange rate fluctuations, which have an impact on our results of operations. We enter into foreign exchange derivative contracts to hedge certain Indian rupee denominated payments in India. These hedges are intended to mitigate the volatility of the changes in the exchange rate between the U.S. dollar and the Indian rupee. Net of the impact of the hedges, the depreciation of the Indian rupee positively impacted our operating margin for the three months ended September 30, 2025 by 40 basis points as compared to the three months ended September 30, 2024.
Excluding the impact of applicable designated cash flow hedges, the depreciation of the Indian rupee against the U.S. dollar positively impacted our operating margin by 70 basis points during the three months ended September 30, 2025. Each additional 1.0% change in exchange rate between the Indian rupee and the U.S. dollar will have the effect of moving our operating margin by 18 basis points (excluding the impact of the hedges). The settlement of our cash flow hedges had a negative impact of 20 basis points on our operating margin during the three months ended September 30, 2025, compared to a positive impact of 10 basis points during the three months ended September 30, 2024.
4 Adjusted Income from Operations and Adjusted Operating Margin are not measures of financial performance prepared in accordance with GAAP. See “Non-GAAP Financial Measures” for more information and reconciliations to the most directly comparable GAAP financial measures, as applicable.
| Cognizant Technology Solutions | 29 | September 30, 2025 Form 10-Q |
| Segment Operating Profit |
In the first quarter of 2025, we made certain changes to the internal measurement of segment operating profit for the purpose of evaluating segment performance and resource allocation. The primary reason for the change was to reflect a more complete cost of delivery. Specifically, segment operating profit now includes an allocation of corporate costs, which were previously included in "unallocated costs." We have reported 2025 segment operating profits using the new allocation methodology and have recast the 2024 results to conform to the new methodology.
Segment operating profit and operating margin percentage were as follows:
| Segment operating profit | % | Segment operating margin |
In the third quarter of 2025, segment operating margins across all our segments were positively impacted by net savings generated from our NextGen program, operational efficiencies and the beneficial impact of foreign currency exchange rate movements. Health Sciences segment operating profit in the third quarter of 2025 was positively impacted by reduced resales of third-party products in connection with our integrated offerings strategy. Financial Services segment operating profit in the third quarter of 2025 was negatively impacted by higher costs typical to the initial phases of several recently won large deals. Products and Resources segment operating profit in the third quarter of 2025 was negatively impacted by the dilutive impact of the Belcan acquisition and by resales of third-party products in connection with our integrated offerings strategy.
Total segment operating profit and operating margin were as follows for the three months ended September 30:
| (Dollars in millions) | 2025 | % of Revenues | 2024 | % of Revenues | Increase/(Decrease) | |||||||||||||||||||||||||||
| Total segment operating profit | $ | 882 | 16.3 | $ | 807 | 16.0 | $ | 75 | ||||||||||||||||||||||||
| Less: unallocated costs | 16 | 0.3 | 69 | 1.4 | (53) | |||||||||||||||||||||||||||
| Income from operations | $ | 866 | 16.0 | $ | 738 | 14.6 | $ | 128 | ||||||||||||||||||||||||
The decrease in unallocated costs for three months ended September 30, 2025 as compared to September 30, 2024 was primarily driven by the absence of NextGen charges in 2025.
| Other Income (Expense), Net |
The following table sets forth total other income (expense), net for the three months ended September 30:
| (in millions) | 2025 | 2024 | Increase/ Decrease | ||||||||||||||||||||
| Foreign currency exchange (losses) | $ | (1) | $ | (22) | $ | 21 | |||||||||||||||||
| Gains on foreign exchange forward contracts not designated as hedging instruments | 5 | 14 | (9) | ||||||||||||||||||||
| Foreign currency exchange gains (losses), net | 4 | (8) | 12 | ||||||||||||||||||||
| Interest income | 25 | 31 | (6) | ||||||||||||||||||||
| Interest expense | (8) | (14) | 6 | ||||||||||||||||||||
| Other, net | — | 1 | (1) | ||||||||||||||||||||
| Total other income (expense), net | $ | 21 | $ | 10 | $ | 11 |
The foreign currency exchange losses were attributed to the remeasurement of net monetary assets and liabilities denominated in currencies other than the functional currencies of our subsidiaries. The gains on foreign exchange forward contracts not designated as hedging instruments related to the realized and unrealized gains and losses on contracts entered into to offset our foreign currency exposures. As of September 30, 2025, the notional value of our undesignated hedges was $770 million. Interest income declined for the three months ended September 30, 2025, primarily driven by lower yields as compared
| Cognizant Technology Solutions | 30 | September 30, 2025 Form 10-Q |
to the three months ended September 30, 2024. Higher interest expense during the three months ended September 30, 2024 was driven by the borrowing of $600 million under our revolving credit facility to partially fund the acquisition of Belcan in that period. The borrowing was subsequently repaid in the fourth quarter of 2024 and first quarter of 2025.
| Provision for Income Taxes |
| é | $443M | |||||||||||||
| ¡ Effective Income Tax Rate é 46.4% | ||||||||||||||
The effective income tax rate for Q3 2025 was negatively impacted by the one-time, non-cash income tax expense of $390 million related to the enactment of the OBBBA. The effective income tax rate for Q3 2024 reflects the benefit of the recognition of a $40 million deferred tax asset related to foreign tax credits.
| Net Income |
The decrease in net income was primarily driven by the one-time, non-cash income tax expense of $390 million related to the enactment of the OBBBA, partially offset by an increase in income from operations.
| ê | $308M | |||||||||||||
| ¡ ê 6.4% of Revenues | ||||||||||||||
Non-GAAP Financial Measures
Portions of our disclosure include non-GAAP financial measures. These non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles and should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and may be different from non-GAAP financial measures used by other companies. In addition, these non-GAAP financial measures should be read in conjunction with our financial statements prepared in accordance with GAAP. The reconciliations of non-GAAP financial measures to the corresponding GAAP measures set forth below should be carefully evaluated.
Our non-GAAP financial measures Adjusted Operating Margin and Adjusted Income from Operations exclude unusual items, such as the gain on sale of property and equipment in the first quarter of 2025 and NextGen charges in 2024. Our non-GAAP financial measure Adjusted Diluted EPS excludes unusual items, such as the one-time income tax expense related to the enactment of the OBBBA, the gain on sale of property and equipment and NextGen charges, and net non-operating foreign currency exchange gains or losses and the tax impact of all the applicable adjustments. For further detail on the one-time income tax expense related to the enactment of the OBBBA, the gain on sale of property and equipment and NextGen charges, see Note 6, Note 1 and Note 3, respectively, to our unaudited consolidated financial statements. The income tax impact of each item excluded from Adjusted Diluted EPS is calculated by applying the statutory rate and local tax regulations in the jurisdiction in which the item was incurred. Constant currency revenue growth is defined as revenues for a given period restated at the comparative period’s foreign currency exchange rates measured against the comparative period's reported revenues.
We believe providing investors with an operating view consistent with how we manage the Company provides enhanced transparency into our operating results. For internal management reporting and budgeting purposes, we use various GAAP and non-GAAP financial measures for financial and operational decision-making, to evaluate period-to-period comparisons, to determine portions of the compensation for executive officers and for making comparisons of our operating results to those of our competitors. We believe that the presentation of non-GAAP financial measures, which exclude certain costs, read in conjunction with our reported GAAP results and reconciliations to the most comparable GAAP measure, as applicable, can provide useful supplemental information to our management and investors regarding financial and business trends relating to our financial condition and results of operations.
A limitation of using non-GAAP financial measures versus financial measures calculated in accordance with GAAP is that non-GAAP financial measures may exclude costs that are recurring such as net non-operating foreign currency exchange gains or losses. In addition, other companies may calculate non-GAAP financial measures differently than us, thereby limiting the usefulness of these non-GAAP financial measures as a comparative tool. We compensate for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP financial measures to allow investors to evaluate such non-GAAP financial measures.
| Cognizant Technology Solutions | 31 | September 30, 2025 Form 10-Q |
The following table presents a reconciliation of each non-GAAP financial measure to the most comparable GAAP measure for the three months ended September 30:
| 2025 | % of Revenues | 2024 | % of Revenues | ||||||||||||||||||||
| GAAP income from operations and operating margin | $ | 866 | 16.0 | $ | 738 | 14.6 | |||||||||||||||||
| NextGen charges(1) | — | — | 33 | 0.7 | |||||||||||||||||||
| Adjusted Income from Operations and Adjusted Operating Margin | $ | 866 | 16.0 | $ | 771 | 15.3 | |||||||||||||||||
| GAAP diluted EPS | $ | 0.56 | $ | 1.17 | |||||||||||||||||||
| Effect of above adjustments, pre-tax | — | 0.07 | |||||||||||||||||||||
| Non-operating foreign currency exchange (gains) losses, pre-tax (2) | (0.01) | 0.02 | |||||||||||||||||||||
| Tax effect of above adjustments(3) | 0.04 | (0.01) | |||||||||||||||||||||
| One-time income tax expense related to the enactment of the OBBBA (4) | 0.80 | — | |||||||||||||||||||||
| Adjusted Diluted EPS | $ | 1.39 | $ | 1.25 | |||||||||||||||||||
(1)Consists of employee separation, facility exit and other costs incurred in connection with the NextGen program. See Note 3 to our unaudited consolidated financial statements for additional information.
(2)Non-operating foreign currency exchange gains and losses, inclusive of gains and losses on related foreign exchange forward contracts not designated as hedging instruments for accounting purposes, are reported in "Foreign currency exchange gains (losses), net" in our unaudited consolidated statements of operations.
(3)Presented below are the tax impacts of our non-GAAP adjustments to pre-tax income:
| Three Months Ended September 30, | |||||||||||
| (in millions) | 2025 | 2024 | |||||||||
| Non-GAAP income tax benefit (expense) related to: | |||||||||||
| NextGen charges | $ | — | $ | 8 | |||||||
| Foreign currency exchange gains and losses | (15) | (3) |
The effective tax rate related to non-operating foreign currency exchange gains and losses varies depending on the jurisdictions in which such income and expenses are generated and the statutory rates applicable in those jurisdictions. As such, the income tax effect of non-operating foreign currency exchange gains and losses shown in the above table may not appear proportionate to the net pre-tax foreign currency exchange gains and losses reported in our unaudited consolidated statements of operations.
(4)In the third quarter of 2025, we recorded a one-time, non-cash income tax expense of $390 million related to the enactment of the OBBBA. See Note 6 to our unaudited consolidated financial statements for additional information.
| Cognizant Technology Solutions | 32 | September 30, 2025 Form 10-Q |
Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024
The following table sets forth, for the periods indicated, certain financial data for the nine months ended September 30:
| % of | % of | Increase / Decrease | |||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions, except per share data) | 2025 | Revenues | 2024 | Revenues | $ | % | |||||||||||||||||||||||||||||||||||||||||
| Revenues | $ | 15,775 | 100.0 | $ | 14,654 | 100.0 | $ | 1,121 | 7.6 | ||||||||||||||||||||||||||||||||||||||
| Cost of revenues(a) | 10,457 | 66.3 | 9,661 | 65.9 | 796 | 8.2 | |||||||||||||||||||||||||||||||||||||||||
| Selling, general and administrative expenses(a) | 2,434 | 15.4 | 2,379 | 16.2 | 55 | 2.3 | |||||||||||||||||||||||||||||||||||||||||
| Restructuring charges | — | — | 85 | 0.6 | (85) | (100.0) | |||||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization expense | 410 | 2.6 | 388 | 2.6 | 22 | 5.7 | |||||||||||||||||||||||||||||||||||||||||
| (Gain) on sale of property and equipment | (62) | (0.4) | — | — | (62) | NA | |||||||||||||||||||||||||||||||||||||||||
| Income from operations and operating margin | 2,536 | 16.1 | 2,141 | 14.6 | 395 | 18.4 | |||||||||||||||||||||||||||||||||||||||||
| Other income (expense), net | 65 | 57 | 8 | 14.0 | |||||||||||||||||||||||||||||||||||||||||||
| Income before provision for income taxes | 2,601 | 16.5 | 2,198 | 15.0 | 403 | 18.3 | |||||||||||||||||||||||||||||||||||||||||
| Provision for income taxes | (1,023) | (514) | (509) | 99.0 | |||||||||||||||||||||||||||||||||||||||||||
| Income (loss) from equity method investments | 4 | 10 | (6) | (60.0) | |||||||||||||||||||||||||||||||||||||||||||
| Net income | $ | 1,582 | 10.0 | $ | 1,694 | 11.6 | $ | (112) | (6.6) | ||||||||||||||||||||||||||||||||||||||
| Diluted EPS | $ | 3.22 | $ | 3.41 | $ | (0.19) | (5.6) | ||||||||||||||||||||||||||||||||||||||||
| Other Financial Information**5 | |||||||||||||||||||||||||||||||||||||||||||||||
| Adjusted Income From Operations and Adjusted Operating Margin | $ | 2,474 | 15.7 | $ | 2,226 | 15.2 | $ | 248 | 11.1 | ||||||||||||||||||||||||||||||||||||||
| Adjusted Diluted EPS | $ | 3.93 | $ | 3.55 | $ | 0.38 | 10.7 |
(a)Exclusive of depreciation and amortization expense.
NA Not Applicable
| Revenues |
During the nine months ended September 30, 2025, revenues increased by $1,121 million as compared to the nine months ended September 30, 2024, representing growth of 7.6%, or 7.3% on a constant currency basis5. Revenue growth was broad-based, led by North America. Our recently completed acquisitions contributed approximately 350 basis points to revenue growth.
5 Adjusted Income from Operations, Adjusted Operating Margin, Adjusted Diluted EPS and constant currency revenue growth are not measures of financial performance prepared in accordance with GAAP. See “Non-GAAP Financial Measures” for more information and reconciliations to the most directly comparable GAAP financial measures.
| Cognizant Technology Solutions | 33 | September 30, 2025 Form 10-Q |
| Revenues - Reportable Business Segments and Geographic Markets |
Revenues of $15,775 million across our business segments and geographies were as follows for the nine months ended September 30, 2025:
| YTD 2025 as compared to YTD 2024 | Increase | |||||||||||||||||||||||||||||||
| (Dollars in millions) | $ | % | **CC %**6 | |||||||||||||||||||||||||||||
| Health Sciences | 335 | 7.6 | 7.2 | |||||||||||||||||||||||||||||
| Financial Services | 269 | 6.2 | 5.9 | |||||||||||||||||||||||||||||
| Products and Resources | 480 | 13.8 | 13.2 | |||||||||||||||||||||||||||||
| CMT | 37 | 1.5 | 1.3 | |||||||||||||||||||||||||||||
| Total revenues | $ | 1,121 | 7.6 | 7.3 |
| YTD 2025 as compared to YTD 2024 | Increase | |||||||||||||||||||||||||||||||
| (Dollars in millions) | $ | % | **CC %**6 | |||||||||||||||||||||||||||||
| North America | $ | 918 | 8.4 | 8.5 | ||||||||||||||||||||||||||||
| United Kingdom | 60 | 4.3 | 1.6 | |||||||||||||||||||||||||||||
| Continental Europe | 114 | 7.9 | 4.8 | |||||||||||||||||||||||||||||
| Europe - Total | 174 | 6.2 | 3.2 | |||||||||||||||||||||||||||||
| Rest of World | 29 | 3.0 | 5.1 | |||||||||||||||||||||||||||||
| Total revenues | $ | 1,121 | 7.6 | 7.3 |
Revenue growth was driven by the following factors:6
*•*Revenue growth across all geographies was driven by our Financial Services and Health Sciences segments, which were positively impacted by the ramp up of several recently won large deals. Revenue growth within our Communications, Media and Technology segment was driven by clients in the North America region;
- Recently completed acquisitions contributed 350 basis points of growth to the overall revenue growth, including approximately 1,300 basis points of growth to our Products and Resources segment, primarily in North America and to a lesser extent the United Kingdom.
6 Constant currency revenue growth is not a measure of financial performance prepared in accordance with GAAP. See “Non-GAAP Financial Measures” for more information and reconciliations to the most directly comparable GAAP financial measures, as applicable.
| Cognizant Technology Solutions | 34 | September 30, 2025 Form 10-Q |
| Cost of Revenues (Exclusive of Depreciation and Amortization Expense) |
| é | $796M | |||||||||||||
| é | 0.4% as a % of revenues | |||||||||||||
| ¡ | % of Revenues | |||||||||||||
Our cost of revenues consists primarily of salaries, incentive-based compensation, stock-based compensation expense, employee benefits, project-related immigration and travel for technical personnel, subcontracting and costs of third-party products and services relating to revenues. The increase, as a percentage of revenues, was driven by increased compensation costs and the dilutive impact of the recently completed acquisition of Belcan, partially offset by operational efficiencies and the beneficial impact of foreign currency exchange rate movements.
| SG&A Expenses (Exclusive of Depreciation and Amortization Expense) |
SG&A expenses consist primarily of salaries, incentive-based compensation, stock-based compensation expense, employee benefits, immigration, travel, marketing, communications, management, finance, administrative and occupancy costs. The decrease, as a percentage of revenues, was primarily driven by net savings generated from our NextGen program.
| é | $55M | |||||||||||||
| ê | 0.8% as a % of revenues | |||||||||||||
| ¡ | % of Revenues | |||||||||||||
| Depreciation and Amortization Expense |
Depreciation and amortization expense increased by 5.7%, but remained flat as a percentage of revenues, during the nine months ended September 30, 2025 as compared to the 2024 period. The increase was driven by amortization expense from intangible assets related to our recently completed acquisitions.
| Gain on Sale of Property and Equipment |
During the nine months ended September 30, 2025, we realized a gain of $62 million on the sale of an office complex in India. For further detail see Note 1 to our unaudited consolidated financial statements.
| Operating Margin and Adjusted Operating Margin7- Overall |
The increase in our 2025 GAAP operating margin and Adjusted Operating Margin7 was primarily driven by net savings generated from our NextGen program, operational efficiencies and the beneficial impact of foreign currency exchange rate movements, partially offset by the increased compensation costs and the dilutive impact of the recently completed acquisition of Belcan. In addition, our GAAP operating margin for 2025 was positively impacted by 40 basis points, or $62 million, from the gain on sale of property and equipment, and our GAAP operating margin for 2024 was negatively impacted by NextGen charges, both of which were excluded from our Adjusted Operating Margin.
Net of the impact of applicable designated cash flow hedges, the depreciation of the Indian rupee positively impacted our operating margin for the nine months ended September 30, 2025 by 45 basis points as compared to the nine months ended September 30, 2024. Excluding the impact of such hedges, the depreciation of the Indian rupee against the U.S. dollar positively impacted our operating margin by 65 basis points for the nine months ended September 30, 2025. The settlement of our cash flow hedges had a negative impact of 10 basis points on our operating margin during the nine months ended September 30, 2025, compared to a positive impact of 10 basis points during the 2024 period.
7 Adjusted Income from Operations and Adjusted Operating Margin are not measures of financial performance prepared in accordance with GAAP. See “Non-GAAP Financial Measures” for more information and reconciliations to the most directly comparable GAAP financial measures, as applicable.
| Cognizant Technology Solutions | 35 | September 30, 2025 Form 10-Q |
| Segment Operating Profit |
In the first quarter of 2025, we made certain changes to the internal measurement of segment operating profit for the purpose of evaluating segment performance and resource allocation. The primary reason for the change was to reflect a more complete cost of delivery. Specifically, segment operating profit now includes an allocation of corporate costs, which were previously included in "unallocated costs." We have reported 2025 segment operating profits using the new allocation methodology and have recast the 2024 results to conform to the new methodology.
Segment operating profit and operating margin percentage were as follows:
| Segment operating profit | % | Segment operating margin |
In 2025, segment operating margins across all our segments were positively impacted by net savings generated from our NextGen program, operational efficiencies and the beneficial impact of foreign currency exchange rate movements, partially offset by increased compensation costs. In 2025, segment operating profit in the Products and Resources segment was negatively impacted by the dilutive impact of the Belcan acquisition and by resales of third-party products in connection with our integrated offerings strategy.
Total segment operating profit and margin were as follows for the nine months ended September 30:
| (Dollars in millions) | 2025 | % of Revenues | 2024 | % of Revenues | Increase/(Decrease) | ||||||||||||||||||||||||
| Total segment operating profit | $ | 2,598 | 16.5 | $ | 2,298 | 15.7 | $ | 300 | |||||||||||||||||||||
| Less: unallocated costs | 62 | 0.4 | 157 | 1.1 | (95) | ||||||||||||||||||||||||
| Income from operations | $ | 2,536 | 16.1 | $ | 2,141 | 14.6 | $ | 395 | |||||||||||||||||||||
The decrease in unallocated costs for nine months ended September 30, 2025 as compared to September 30, 2024 was driven by the 2025 gain on sale of property and equipment and the absence of NextGen charges, partially offset by higher amortization of intangible assets and certain corporate costs.
| Other Income (Expense), Net |
The following table sets forth total other income (expense), net for the nine months ended September 30:
| (in millions) | 2025 | 2024 | Increase/ Decrease | ||||||||||||||||||||
| Foreign currency exchange gains (losses) | $ | 16 | $ | (43) | $ | 59 | |||||||||||||||||
| (Losses) gains on foreign exchange forward contracts not designated as hedging instruments | (3) | 42 | (45) | ||||||||||||||||||||
| Foreign currency exchange gains (losses), net | 13 | (1) | 14 | ||||||||||||||||||||
| Interest income | 78 | 91 | (13) | ||||||||||||||||||||
| Interest expense | (29) | (35) | 6 | ||||||||||||||||||||
| Other, net | 3 | 2 | 1 | ||||||||||||||||||||
| Total other income (expense), net | $ | 65 | $ | 57 | $ | 8 |
The foreign currency exchange gains and losses were attributed to the remeasurement of net monetary assets and liabilities denominated in currencies other than the functional currencies of our subsidiaries. The gains and losses on foreign exchange forward contracts not designated as hedging instruments related to the realized and unrealized gains and losses on contracts entered into to offset our foreign currency exposures. Interest income declined in 2025 as compared to 2024, driven
| Cognizant Technology Solutions | 36 | September 30, 2025 Form 10-Q |
by a mix of lower invested balances and lower yields. Higher interest expense during 2024 was driven by the borrowing of $600 million under our revolving credit facility to partially fund the acquisition of Belcan during the third quarter of 2024. The borrowing was subsequently repaid in the fourth quarter of 2024 and first quarter of 2025.
| Provision for Income Taxes |
| é | $509M | |||||||||||||
| ¡ Effective Income Tax Rate é 15.9% | ||||||||||||||
The effective income tax rate for Q3 2025 was negatively impacted by the one-time, non-cash income tax expense of $390 million related to the enactment of the OBBBA. The effective income tax rate for 2024 reflects the benefits of the recognition of a $40 million deferred tax asset related to foreign tax credits as well as discrete items related to U.S. state income taxes.
| Net Income |
The decrease in net income was primarily driven by the one-time, non-cash income tax expense of $390 million related to the enactment of the OBBBA, partially offset by an increase in income from operations, including the $62 million gain on sale of property and equipment.
| ê | $112M | ||||||||||||||||
| ¡ ê 1.6% of Revenues | |||||||||||||||||
Non-GAAP Financial Measures
See “Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024 – Non-GAAP Financial Measures” above for additional information about our use of non-GAAP financial measures.
The following table presents a reconciliation of each non-GAAP financial measure to the most comparable GAAP measure for the nine months ended September 30:
| (Dollars in millions, except per share amounts) | 2025 | % of Revenues | 2024 | % of Revenues | |||||||||||||||||||
| GAAP income from operations and operating margin | $ | 2,536 | 16.1 | $ | 2,141 | 14.6 | |||||||||||||||||
| (Gain) on sale of property and equipment(1) | (62) | (0.4) | — | — | |||||||||||||||||||
| NextGen charges (2) | — | — | 85 | 0.6 | |||||||||||||||||||
| Adjusted Income from Operations and Adjusted Operating Margin | $ | 2,474 | 15.7 | $ | 2,226 | 15.2 | |||||||||||||||||
| GAAP diluted EPS | $ | 3.22 | $ | 3.41 | |||||||||||||||||||
| Effect of above adjustments, pre-tax | (0.13) | 0.17 | |||||||||||||||||||||
| Non-operating foreign currency exchange (gains) losses, pre-tax (3) | (0.03) | — | |||||||||||||||||||||
| Tax effect of above adjustments (4) | 0.08 | (0.03) | |||||||||||||||||||||
| One-time income tax expense related to the enactment of the OBBBA (5) | 0.79 | — | |||||||||||||||||||||
| Adjusted Diluted EPS | $ | 3.93 | $ | 3.55 | |||||||||||||||||||
(1)During the nine months ended September 30, 2025, we realized a gain of $62 million on the sale of an office complex in India. See Note 1 to our unaudited consolidated financial statements for additional information.
(2)Consists of employee separation, facility exit and other costs incurred in connection with the NextGen program. See Note 3 to our unaudited consolidated financial statements for additional information.
(3)Non-operating foreign currency exchange gains and losses, inclusive of gains and losses on related foreign exchange forward contracts not designated as hedging instruments for accounting purposes, are reported in "Foreign currency exchange gains (losses), net" in our unaudited consolidated statements of operations.
| Cognizant Technology Solutions | 37 | September 30, 2025 Form 10-Q |
(4)Presented below are the tax impacts of each of our non-GAAP adjustments to pre-tax income:
| (in millions) | Nine Months Ended September 30, | ||||||||||
| 2025 | 2024 | ||||||||||
| Non-GAAP income tax benefit (expense) related to: | |||||||||||
| Gain on sale of property and equipment | $ | (9) | $ | — | |||||||
| NextGen charges | — | 21 | |||||||||
| Foreign currency exchange gains and losses | (25) | (3) |
The effective tax rate related to non-operating foreign currency exchange gains and losses varies depending on the jurisdictions in which such income and expenses are generated and the statutory rates applicable in those jurisdictions. As such, the income tax effect of non-operating foreign currency exchange gains and losses shown in the above table may not appear proportionate to the net pre-tax foreign currency exchange gains and losses reported in our unaudited consolidated statements of operations.
(5)In the third quarter of 2025, we recorded a one-time, non-cash income tax expense of $390 million related to the enactment of the OBBBA. See Note 6 to our unaudited consolidated financial statements for additional information.
| Liquidity and Capital Resources |
Our cash generated from operations has historically been the primary source of liquidity to fund operations and investments to grow our business. As of September 30, 2025, we had cash, cash equivalents and short-term investments of $2,354 million and available capacity under our credit facility of $1.85 billion.
The following table provides a summary of cash flows for the nine months ended September 30:
| (in millions) | 2025 | 2024 | Increase / Decrease | ||||||||||||||||||||||||||
| Net cash provided by (used in): | |||||||||||||||||||||||||||||
| Operating activities | $ | 2,025 | $ | 1,204 | $ | 821 | |||||||||||||||||||||||
| Investing activities | (155) | (1,567) | 1,412 | ||||||||||||||||||||||||||
| Financing activities | (1,785) | (313) | (1,472) | ||||||||||||||||||||||||||
Operating activities
The increase in cash provided by operating activities for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024, was primarily driven by the increase in net income, excluding the one-time, non-cash income tax expense of $390 million we recorded as a result of the enactment of the OBBBA, as well as the $360 million payment we made in January 2024 in relation to our dispute with the ITD (see Note 6 to our unaudited consolidated financial statements), which reduced cash from operating activities in 2024.
We monitor turnover, aging and the collection of accounts receivable by client. Our DSO calculation includes receivables, net of allowance for doubtful accounts, and contract assets, reduced by the uncollected portion of deferred revenue. Our DSO was 82 days as of September 30, 2025, an increase of 4 days from 78 days as of December 31, 2024. Our DSO was 81 days as of September 30, 2024, an increase of 4 days from 77 days as of December 31, 2023.
Investing activities
The decrease in cash used in investing activities for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024, was driven by payments for business acquisitions in 2024 and the proceeds from the sale of an office complex in India in 2025, partially offset by net maturities of investments in 2024.
Financing activities
The increase in cash used in financing activities for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024, was primarily driven by increased repurchases of common stock during 2025, and the repayment of the outstanding balance under the revolving credit facility in 2025 in contrast to borrowing under the revolving credit facility to finance the Belcan acquisition in 2024.
We have a Credit Agreement providing for a $650 million Term Loan and a $1,850 million unsecured revolving credit facility, which are each due to mature in October 2027. During the nine months ended September 30, 2025, we repaid the $300 million balance that was outstanding under the revolving credit facility, and had no outstanding balance as of
| Cognizant Technology Solutions | 38 | September 30, 2025 Form 10-Q |
September 30, 2025. We are required under the Credit Agreement to make scheduled quarterly principal payments on the Term Loan. We believe that we currently meet all conditions set forth in the Credit Agreement to borrow thereunder, and we are not aware of any conditions that would prevent us from borrowing part or all of the remaining available capacity under the revolving credit facility as of September 30, 2025 and through the date of this filing. See Note 5 to our unaudited consolidated financial statements.
In July 2025, the OBBBA was enacted in the United States, which, among other provisions, repealed the requirement to capitalize U.S. R&E costs. As a result of this repeal, our cash taxes during the third quarter of 2025 were reduced by approximately $150 million as compared to our initial cash tax projections prior to the repeal. An additional reduction of $50 million in cash taxes as compared to our initial cash tax projections prior to the repeal is expected during the fourth quarter of 2025. See Note 6 to our unaudited consolidated financial statements.
Capital Allocation
| Acquisitions | |||||
| Share Repurchases | |||||
| Dividend payments | |||||
We review our capital allocation on an ongoing basis, considering our financial performance and liquidity position, investments required to execute our strategic plans and initiatives, acquisition opportunities, the economic outlook, regulatory changes and other relevant factors. As these factors may change over time, the actual amounts expended on stock repurchase activity, dividends, and acquisitions, if any, during any particular period cannot be predicted and may fluctuate from time to time.
Other Liquidity and Capital Resources Information
We seek to ensure that our cash is available to us in the locations in which it is needed. As part of our ongoing liquidity assessments, we regularly monitor the mix of our domestic and international cash flows and cash balances. We evaluate on an ongoing basis what portion of the non-U.S. cash, cash equivalents and short-term investments is needed locally to execute our strategic plans and what amount is available for repatriation back to the United States.
We expect operating cash flows, cash and short-term investment balances, together with the available capacity under our revolving credit facilities, to be sufficient to meet our operating requirements, including purchase commitments, tax payments and servicing our debt for the next twelve months. The ability to expand and grow our business in accordance with current plans, make acquisitions, meet long-term capital requirements beyond a twelve-month period and execute our capital return plan will depend on many factors, including the rate, if any, at which cash flow increases, our ability and willingness to pay for acquisitions with capital stock and the availability of public and private debt, including the ability to extend the maturity of or refinance our existing debt, and equity financing. We cannot be certain that additional financing, if required, will be available on terms and conditions acceptable to us, if at all.
| Commitments and Contingencies |
See Note 10 to our unaudited consolidated financial statements.
| Critical Accounting Estimates |
Management’s discussion and analysis of our financial condition and results of operations is based on our unaudited consolidated financial statements that have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the amounts reported for assets and liabilities, including the recoverability of tangible and intangible assets, disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. On an ongoing basis, we evaluate our estimates. The most significant estimates relate to the recognition of revenue, including the application of the cost-to-cost method of measuring progress to completion for certain fixed-price contracts, income taxes, business combinations and valuation of goodwill and other long-lived assets. We base our estimates on historical experience, current trends and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The actual amounts may differ from the estimates used in the preparation of the accompanying unaudited consolidated financial statements. For a discussion of our critical accounting estimates, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2024.
| Cognizant Technology Solutions | 39 | September 30, 2025 Form 10-Q |
Our significant accounting policies are described in Note 1 to the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024.
| Recently Adopted and New Accounting Pronouncements |
See Note 1 to our unaudited consolidated financial statements.
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