Nasdaq-listed information technology firm Cognizant beats the Street estimates for its Q2 revenue, growing 8.1 percent on a year-on-year basis to $5.25 billion, driven by strong deal bookings through the quarter. This was the fourth straight quarter of on-year revenue growth.
The New Jersey-based company’s revenues rose 7.2 percent in constant currency — which came in much higher than its guidance band for the second quarter of 5 to 6.5% in constant currency.
Net profit for the quarter grew 14 percent on-year to $645 million, an increase from $566 million during the same quarter last year. The company follows the calendar year for reporting its financials.
The company raised its 2025 constant currency revenue growth guidance, narrowing it to 4 percent to 6 percent on the lower end, from its previous full year guidance of 3.5-6 percent for 2025.
The firm’s 2025 adjusted operating margin guidance is unchanged at 15.5 percent to 15.7 percent, expanding 20 to 40 basis points year-over-year.
CEO Ravi Kumar S said, “Our second quarter revenue performance exceeded the high end of our guidance range, underscoring the effectiveness of our strategy to build a resilient and durable portfolio that positions us to win in the AI era."
"In today’s dynamic and competitive environment, we are differentiating ourselves by moving with agility and building IP at the edge, leveraging our interdisciplinary capabilities across domain, technology and operations to address new client growth priorities and deliver agentification at scale,” he said.
Speaking to the analysts during the company's earnings call, Ravi Kumar said that the growth in Q2 was led by financial services and health services, and benefited from the slew of large deals signed recently. Tech services vertical particularly saw a decline sequentially.
Bookings for the quarter stood at a record $27.8 billion on a trailing-twelve-month basis, growing by 6 percent YoY and represented a book-to-bill ratio of 1.4X. As of Q2 alone, bookings rose by 18 percent YoY, driven by two mega deals with TCV (total contract value) of over $1 billion each.
Apart from that, the company bagged six large deals of $100 million or more each.
"In the second quarter, we delivered a healthy combination wins in both AI efficiency led deal wins and innovation lead deal wins. Agentic AI is unlocking new opportunities of revenue generation. AI projects in experimentation projects in the past few quarters have started to build momentum in downstream opportunities," Ravi Kumar said.
The IT major, once a barometer of growth for the IT industry, continues to struggle on the operating margin front. Its adjusted operating margin rose 40 bps year-on-year to 15.6 percent in Q2.
In the same period of last year, Cognizant kicked off a cost-cutting programme called NextGen, as part of which it planned to cut 3,500 jobs as well as give up 11 million sq ft in office space primarily in large Indian cities and moving to smaller cities, incurring a cost of $350 million as part of this, $150 million in employee separation costs, and $200 million in facility exit and other costs.
Guidance update
For the next quarter, it expects revenues to be $5.27 - $5.35 billion, growth of 4.6 percent to 6.1 percent, or 3.5 percent to 5 percent in constant currency. The company’s revenue guidance for the full year of 2025 stands at $20.7 - $21.1 billion, growth of 4.7 percent to 6.7 percent, that translates to 4 percent to 6 percent growth in constant currency.
Full-year 2025 Adjusted Diluted earnings per share (EPS) is expected to be in the range of $5.08 to $5.22.
Jatin Dalal, Chief Financial Officer, Cognizant said, "Our increased revenue guidance midpoint and reaffirmed adjusted operating margin outlook reflect strong execution and momentum year-to-date. We now expect to return approximately $2.0 billion to shareholders this year, reinforcing our commitment to returning excess capital and confidence in our long-term strategy."
Employee metrics
The company saw its headcount increase by 7,500 sequentially, after a rise in the previous quarter, ending with 343,800 employees in Q2. Attrition for the last twelve-month basis, decreased to 15.2 percent, plunging 60 bps sequentially.
"Headcount grew by 2% sequentially led by the hiring of recent college graduates. We continue prepare our workforce for a AI-led future. We are deepening our talent in emerging technologies…We are setting up a 21-acre learning site in Chennai that is expected to train freshers and experienced hires in advanced AI skills," Ravi Kumar said.
Growth in Gen AI pipeline
Cognizant reported 2,500 early Gen AI client engagements in Q2, compared to 1,400 in Q1.
Nearly 30% of the company's code was generated through AI in Q2, significantly improving the productivity of its developers.
As of Q2, within a subset of our clients with nearly 360 accounts, 97 percent of them have adopted AI of which 56 percent are scaling Gen AI, out of this 78 percent are demonstrating benefits from AI.
"In the current economic environment, clients are prioritising productivity value, what we have characterised as vector 1. Our ability to crack AI driven technologies to deliver innovations and cost efficiencies has helped bag several large deals including the mega deals," Ravi Kumar said.
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