01—Abstract
Summary
Summary of the 10-K filed February 12, 2026. Cited figures are marked; the original filing is the authoritative source.
Cognizant (CTSH) closed 2025 with revenue of $21.1 billiona, up 7.0% from $19.7 billion in 2024 (6.4% in constant currency), with Belcan contributing about 260 basis points of that growth.
GAAP operating margin rose 140 basis points to 16.1%, and Adjusted Operating Margin rose 50 basis points to 15.8%, helped by NextGen program savings, operational efficiencies and favorable FX, partly offset by higher compensation costs and Belcan dilution. Net income was essentially flat at $2.23 billionb, and GAAP diluted EPS rose only $0.05 to $4.56 because of a one-time, non-cash $390 million tax charge from the OBBBA's repeal of the R&E capitalization requirement. Adjusted Diluted EPS rose 11.2% to $5.28.
Cash generation was strong. Operating cash flow reached $2.88 billionc and free cash flow was $2.67 billion, up from $1.83 billion. The company returned capital through $1.38 billion of buybacks and $610 million of dividends, repaid the $300 million revolver balance, and carries a $1.92 billion remaining repurchase authorization.
Management plans to deploy about 50% of free cash flow toward acquisitions and 50% toward shareholder returns. Subsequent events include the January 2026 acquisition of 3Cloud, an Azure and AI services provider, for $733 milliond in escrow, and a quarterly dividend increase to $0.33 per share. Key risks for investors include AI-driven pressure on traditional services demand and pricing, as well as the company's exposure to large legal and tax matters.
A Central District of California class action over bench terminations could yield significant individual damages, though the company has not accrued for it. The ITD tax dispute totals roughly $367 million on the 2016 transaction plus the 2013 matter, and the company has recorded no reserve for either.
The India Defined Contribution Obligation remains uncertain. Voluntary attrition improved to 13.9% from 15.9%, and headcount rose to about 351,600.
02—Key points
Key Highlights
- Revenue grew 7.0% to $21.1 billion (6.4% constant currency), with Health Sciences and Financial Services leading and Belcan adding 260 basis points.
- GAAP operating margin expanded 140 basis points to 16.1%; Adjusted Operating Margin reached 15.8%, up 50 basis points, driven by NextGen savings and efficiencies.
- GAAP diluted EPS was $4.56 (up 1.1%), depressed by a one-time $390M non-cash tax charge tied to OBBBA; Adjusted Diluted EPS grew 11.2% to $5.28.
- Free cash flow rose to $2.67 billion from $1.83 billion, supported by higher operating cash flow and lower cash taxes after the OBBBA change.
- Capital returns totaled roughly $2.0 billion in 2025 (buybacks $1.38B plus dividends $0.61B), with $1.92B left on the repurchase authorization.
- The 3Cloud acquisition closed January 1, 2026, adding Azure and AI enablement capabilities; the quarterly dividend was raised to $0.33 per share.
- Ongoing legal and tax exposures include a bench-termination discrimination class action (no accrual) and the ITD tax disputes (no reserve recorded).
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2025filed February 12, 2026Financial Statements
FY2025 against FY2024
| Line item | FY2025FY2024 | Change |
|---|---|---|
| Revenue | $21.11B$19.74B | +7.0% |
| SG&A Expenses | $3.24B$3.22B | +0.5% |
| Operating Income | $3.39B$2.89B | +17.2% |
| Net Income | $2.23B$2.24B | −0.4% |
| EPS (Basic) | $4.57$4.52 | +1.1% |
| EPS (Diluted) | $4.56$4.51 | +1.1% |
| Shares Outstanding (Basic) | 488.00M496.00M | −1.6% |
| Shares Outstanding (Diluted) | 489.00M497.00M | −1.6% |
05—Questions
Frequently Asked Questions
Why did GAAP EPS grow only 1.1% when operating income rose 17.2%?
A one-time, non-cash $390 million income tax expense from the July 2025 OBBBA enactment reduced GAAP diluted EPS by $0.80. Excluding this and other non-recurring items, Adjusted Diluted EPS increased 11.2% to $5.28.
How strong is Cognizant's cash generation and balance sheet flexibility?
Operating cash flow was $2.88 billion and free cash flow was $2.67 billion. Cash and short-term investments totaled $1.91 billion, with about $1.85 billion of revolver capacity available. The company repaid its $300 million revolver borrowing in 2025, leaving only the $577 million Term Loan outstanding.
What is the outlook for AI's effect on demand and pricing?
Management expects clients to keep pursuing AI-driven transformation and plans significant AI investment. However, the filing warns that AI and automation may reduce demand for some existing services and weaken pricing power on certain work, so the net impact on growth and margins remains uncertain.
What are the main unresolved legal and tax exposures?
The Syntel trade-secret judgment is being retried on damages, with the jury awarding $70 million in June 2025 and entry of judgment still pending. A class action over bench terminations is in its second phase, and the company has not accrued for it. Tax disputes with India's ITD involve about $367 million on the 2016 transaction plus the 2013 matter, and no reserves have been recorded.
How did workforce and attrition trends change?
Voluntary Attrition in Tech Services fell to 13.9% from 15.9%, and headcount grew to about 351,600 from 336,800. The company also reports upskilling more than 330,000 associates on GenAI since mid-2023.
06—Continue