Why is GAAP EPS ($4.56) so far below Adjusted EPS ($5.28)?

The gap is mainly a one-time, non-cash income tax expense of $390 million (about $0.80 per share) recorded in Q3 2025. It reflects the company's decision that it no longer expects to realize a deferred tax asset for U.S. R&E costs capitalized outside the U.S., after the OBBBA repealed the capitalization requirement. Adjusted EPS excludes this charge along with a $62 million gain on sale of property and equipment and non-operating FX effects.

How much of 2025 growth came from acquisitions, and what does the 2026 guidance assume?

The Belcan acquisition contributed about 260 bps to full-year 2025 revenue growth, and most of that was in Products & Resources. For 2026, the company expects roughly 150 bps of inorganic contribution, of which about 50 bps comes from future acquisitions not yet announced. Constant currency growth guidance of 4.0%–6.5% therefore implies moderate organic growth.

What is the outlook for shareholder returns in 2026?

Cognizant expects to return $1.6 billion to shareholders in 2026, including $1 billion of share repurchases. The quarterly dividend rises 6.5% to $0.33 per share, payable February 26, 2026. At year-end 2025, $1.9 billion remained under the repurchase authorization, and the 2026 share count assumption is 475 million.

What drove the bookings and large-deal performance?

Trailing-twelve-month bookings grew 5% to $28.4 billion, with Q4 bookings up 9% y/y, giving a book-to-bill of about 1.3x. The company signed 28 large deals in 2025, with large-deal TCV growing nearly 50% y/y. Bookings can be lumpy and are TCV-based, and most contracts are terminable by clients on short notice, so investors should treat them as an indicator rather than a direct revenue forecast.

Are there any notable one-time or balance-sheet items investors should watch?

Year-end cash and short-term investments were $1.91 billion, excluding $733 million of restricted cash tied to the 3Cloud acquisition, which closed around year-end. Net cash was $1.34 billion, roughly flat y/y, and total debt fell to $576 million from $908 million a year earlier after repaying revolver borrowings. Other noncurrent liabilities rose to $847 million from $494 million, and the filing does not explain the increase in detail.

CTSH 8-K: Earnings & Results & Regulation FD

01—Abstract

Summary

Summary of the 8-K filed February 4, 2026. Cited figures are marked; the original filing is the authoritative source.

Cognizant (CTSH) reported fourth-quarter and full-year 2025 results that beat its own guidance ranges.

Q4 revenue was $5.33 billion^a, up 4.9% year-over-year (3.8% constant currency), and full-year revenue reached $21.11 billion, up 7.0% (6.4% constant currency). Full-year Adjusted Operating Margin expanded 50 basis points to 15.8%, and Adjusted Diluted EPS rose 11% to $5.28. GAAP diluted EPS of $4.56 was held down by a one-time, non-cash $390 million tax charge (about $0.80 per share) tied to the OBBBA repeal of R&E capitalization rules.

Trailing-twelve-month bookings grew 5% to $28.4 billion^b, a book-to-bill of about 1.3x, and Q4 bookings grew 9%. Management guided 2026 constant currency revenue growth of 4.0% to 6.5% (reported growth of 4.9% to 7.4%, with roughly 150 bps from acquisitions), an Adjusted Operating Margin of 15.9% to 16.1%, and Adjusted Diluted EPS of $5.56 to $5.70 (5% to 8% growth). Q1 2026 revenue is guided to $5.36 to $5.44 billion.

Free cash flow was $2.67 billion^c for the year, or about 126% of net income on a 2025 basis (the company cites over 100% conversion), and the company returned about $2 billion to shareholders in 2025. For 2026 it expects to return $1.6 billion, including $1 billion of buybacks, and raised the quarterly dividend 6.5% to $0.33.

The filing also lists a set of client wins, partnerships with Anthropic, Microsoft, and others, and the completed 3Cloud acquisition, which was funded with restricted cash of $733 million^d at year-end. Investors will likely focus on whether the strong large-deal activity (28 deals of $100 million or more in 2025) and the margin expansion can continue in 2026, given the modest constant currency growth guidance.

02—Key points

Key Highlights

Q4 2025 revenue of $5.33B grew 4.9% y/y (3.8% constant currency); FY2025 revenue of $21.11B grew 7.0% (6.4% CC), with Belcan contributing about 260 bps.
FY2025 Adjusted Operating Margin of 15.8% (+50 bps y/y); GAAP operating margin of 16.1% (+140 bps), helped by a $62M gain on sale of an India office complex.
FY2025 Adjusted Diluted EPS of $5.28 (+11%); GAAP diluted EPS of $4.56 includes a one-time, non-cash $0.80 tax charge tied to the OBBBA repeal of R&E capitalization.
Trailing-twelve-month bookings of $28.4B (+5% y/y, ~1.3x book-to-bill); 28 large deals ($100M+) in 2025, including 5 mega deals ($500M+) and 12 large deals in Q4.
2026 guidance: constant currency revenue growth of 4.0%–6.5%, Adjusted Operating Margin of 15.9%–16.1%, and Adjusted Diluted EPS of $5.56–$5.70; Q1 2026 revenue of $5.36–$5.44B.
Strong cash generation: FY2025 operating cash flow of $2.88B and free cash flow of $2.67B; capital returned of about $2B in 2025, with $1.6B planned for 2026 and the quarterly dividend raised 6.5% to $0.33.
Headcount reached 351,600 (+14,800 y/y), and trailing-twelve-month voluntary attrition in Tech Services fell to 13.9% from 15.9% a year earlier.

03—Questions

Frequently Asked Questions

Why is GAAP EPS ($4.56) so far below Adjusted EPS ($5.28)?
The gap is mainly a one-time, non-cash income tax expense of $390 million (about $0.80 per share) recorded in Q3 2025. It reflects the company's decision that it no longer expects to realize a deferred tax asset for U.S. R&E costs capitalized outside the U.S., after the OBBBA repealed the capitalization requirement. Adjusted EPS excludes this charge along with a $62 million gain on sale of property and equipment and non-operating FX effects.
How much of 2025 growth came from acquisitions, and what does the 2026 guidance assume?
The Belcan acquisition contributed about 260 bps to full-year 2025 revenue growth, and most of that was in Products & Resources. For 2026, the company expects roughly 150 bps of inorganic contribution, of which about 50 bps comes from future acquisitions not yet announced. Constant currency growth guidance of 4.0%–6.5% therefore implies moderate organic growth.
What is the outlook for shareholder returns in 2026?
Cognizant expects to return $1.6 billion to shareholders in 2026, including $1 billion of share repurchases. The quarterly dividend rises 6.5% to $0.33 per share, payable February 26, 2026. At year-end 2025, $1.9 billion remained under the repurchase authorization, and the 2026 share count assumption is 475 million.
What drove the bookings and large-deal performance?
Trailing-twelve-month bookings grew 5% to $28.4 billion, with Q4 bookings up 9% y/y, giving a book-to-bill of about 1.3x. The company signed 28 large deals in 2025, with large-deal TCV growing nearly 50% y/y. Bookings can be lumpy and are TCV-based, and most contracts are terminable by clients on short notice, so investors should treat them as an indicator rather than a direct revenue forecast.
Are there any notable one-time or balance-sheet items investors should watch?
Year-end cash and short-term investments were $1.91 billion, excluding $733 million of restricted cash tied to the 3Cloud acquisition, which closed around year-end. Net cash was $1.34 billion, roughly flat y/y, and total debt fell to $576 million from $908 million a year earlier after repaying revolver borrowings. Other noncurrent liabilities rose to $847 million from $494 million, and the filing does not explain the increase in detail.

04—Continue

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