10-QPeriod: Q3 FY2025

COGNIZANT TECHNOLOGY SOLUTIONS CORP Quarterly Report for Q3 Ended Sep 30, 2025

Filed October 29, 2025For Securities:CTSH

Summary

Cognizant Technology Solutions Corporation reported solid revenue growth in the third quarter of 2025, with total revenues increasing by 7.4% year-over-year to $5.415 billion. This growth was broad-based across geographies and segments, notably driven by contributions from the recent acquisition of Belcan, which added approximately 250 basis points to revenue growth. The company also saw an increase in operating income and a strengthening of operating margins, reflecting benefits from cost-saving programs and operational efficiencies. However, net income saw a significant decrease of 52.9% year-over-year, primarily due to a one-time, non-cash income tax expense of $390 million related to the enactment of the OBBBA in the United States. This tax event impacted GAAP diluted EPS, though adjusted diluted EPS showed a positive increase of 11.2%. Despite the net income decline, the company's operational performance remains robust, with strong cash flow generation from operating activities. Cognizant continues to invest in AI capabilities and maintain a strong liquidity position, with ample capacity under its credit facilities.

Financial Highlights

49 data points
Beta

Revenue

$5.42B

Net Income

$274.00M

5.1% Net Margin

EPS (Diluted)

$0.56

Total Assets

$20.13B

Cash & Equivalents

$2.34B

Free Cash Flow

$1.16B

Financial Statements
Beta
Revenue$5.42B
SG&A Expenses$833.00M
Operating Income$866.00M
Net Income$274.00M
EPS (Basic)$0.56
EPS (Diluted)$0.56
Shares Outstanding (Basic)486.00M
Shares Outstanding (Diluted)487.00M

Key Highlights

  • 1Total revenues increased by 7.4% to $5.415 billion in Q3 2025 compared to Q3 2024, with 6.5% growth on a constant currency basis.
  • 2The acquisition of Belcan contributed approximately 250 basis points to overall revenue growth.
  • 3Operating margin improved to 16.0% (GAAP and Adjusted) from 14.6% in Q3 2024, driven by cost savings and operational efficiencies.
  • 4A one-time, non-cash income tax expense of $390 million related to the OBBBA significantly impacted net income and GAAP diluted EPS.
  • 5Adjusted Diluted EPS increased by 11.2% to $1.39, demonstrating underlying operational profitability.
  • 6Net cash provided by operating activities for the nine months ended September 30, 2025, was $2.025 billion, a substantial increase from $1.204 billion in the prior year period.
  • 7The company's voluntary attrition rate for Tech Services remained stable at 14.5% for the trailing twelve months ended September 30, 2025.

Frequently Asked Questions

The significant decrease in net income was primarily driven by a one-time, non-cash income tax expense of $390 million recorded in the third quarter of 2025. This expense is related to the enactment of the OBBBA in the United States, which repealed the requirement to capitalize U.S. R&E costs, impacting the realization of certain deferred tax assets.

The acquisition of Belcan contributed approximately 250 basis points to the overall revenue growth in Q3 2025. It also added approximately 900 basis points to the Products and Resources segment's revenue growth. However, it also had a dilutive impact on the operating margin for both the overall company and the Products and Resources segment.

The filing mentions several ongoing legal proceedings, including a significant dispute with the Indian Tax Department (ITD) regarding share repurchase transactions, and a class action lawsuit related to alleged discrimination. For the ITD dispute, the company has made a significant deposit and is awaiting a decision from the High Court. The discrimination lawsuit resulted in a jury verdict in favor of the plaintiffs, and the case is proceeding to a second phase to determine individualized liability and damages. The company believes it has paid all applicable taxes and continues to defend its positions, and has not recorded reserves for these matters as it believes they are not probable or reasonably estimable.

Cognizant is increasingly using AI-based technologies, including Generative AI (GenAI), in its client offerings and internal operations. The company plans to continue making significant investments in its AI capabilities to meet client needs and harness AI's value responsibly. They acknowledge that AI evolution may reduce demand for some current services and impact pricing power.