Why did Cognizant raise EPS guidance while leaving margin guidance unchanged?

The EPS raise to $5.70 to $5.82 reflects Q2 performance, the India Defined Contribution Obligation benefit of about $0.18 per diluted share pre-tax (partly offset by a tax expense of about $0.05), and the impact of share repurchases that reduce the diluted share count to about 460 million. Adjusted Operating Margin guidance remained at 16.0% to 16.2%, so the EPS change is driven largely by below-the-line items and capital returns rather than a change in operating profitability expectations.

What are the Project Leap charges, and how do they affect reported results?

Project Leap charges were $84 million in Q2 2026, consisting of $56 million in employee separation costs and $28 million in other costs, recorded in restructuring charges. Management expects total costs of $230 million to $320 million, with substantially all incurred in 2026, and estimates a full-year pre-tax EPS impact of about $0.50 to $0.70. These charges are excluded from Adjusted metrics, so GAAP EPS will be lower than Adjusted EPS while the program runs.

How did the company's balance sheet and liquidity change during the quarter?

Cash and cash equivalents fell from $1,901 million at year-end 2025 to $1,038 million at June 30, 2026. Long-term debt rose from $543 million to $1,527 million after a $1.0 billion revolver borrowing, which funded share repurchases and the Astreya acquisition. Goodwill and intangibles increased significantly, and total stockholders' equity declined to $14.5 billion, reflecting buybacks and retained earnings reductions. Investors should watch how the company pays down the revolver while sustaining its buyback pace.

Is the slowdown in Q2 bookings a concern?

Q2 bookings declined 6% year-over-year, although the trailing-twelve-month figure rose 5% to $29.1 billion and the book-to-bill ratio was about 1.3x. Bookings are lumpy and depend on the timing of large deals, and seven large deals (at least $100 million in TCV) were signed in the quarter. Investors will want to see whether bookings recover in the second half, since the trailing measure is still supported by stronger earlier quarters.

What drove the difference between GAAP and Adjusted results in Q2 2026?

GAAP diluted EPS was $1.36 compared with Adjusted Diluted EPS of $1.37. The gap reflects the $84 million Project Leap charge and the $81 million India Defined Contribution Obligation benefit, which together were roughly neutral at the operating income line ($3 million net). Non-operating foreign currency gains of $7 million, net of tax, were excluded as well. The net effect was minimal in Q2, but the Project Leap costs are expected to weigh on GAAP results over the rest of 2026.

CTSH 8-K: Earnings & Results & Regulation FD

01—Abstract

Summary

Summary of the 8-K filed July 29, 2026. Cited figures are marked; the original filing is the authoritative source.

Cognizant (CTSH) reported second-quarter 2026 results on July 29, 2026, with revenue of $5.48 billion^a, up 4.5% year-over-year (4.1% in constant currency).

GAAP diluted EPS was $1.36^b (up 3.8%) and Adjusted Diluted EPS was $1.37 (up 4.6%). GAAP operating margin was 15.9% and Adjusted Operating Margin was 16.0%, up 30 and 40 basis points year-over-year. Financial Services was the standout segment, growing 12.0% reported (11.7% constant currency) for a second consecutive quarter of double-digit growth.

Trailing-twelve-month bookings rose 5% to $29.1 billion^c (book-to-bill about 1.3x), although Q2 bookings alone fell 6% year-over-year. The company raised the low end of its full-year 2026 Adjusted Diluted EPS guidance to $5.70 to $5.82 (8% to 10% growth), while revising constant currency revenue growth guidance to 4.0% to 5.5%. Adjusted Operating Margin guidance was unchanged at 16.0% to 16.2%.

Q2 GAAP results included $84 million^d of Project Leap restructuring charges, which were partly offset by an $81 million benefit from a partial reversal of the India Defined Contribution Obligation. Investors should note that the Adjusted EPS figures exclude these items, and the Project Leap costs are expected to total $230 million to $320 million in 2026. Capital deployment was heavy in the quarter.

Cognizant repurchased 22.5 million shares for $1.15 billion, including a $500 million accelerated share repurchase, and completed the Astreya acquisition for $634 million, funded in part by a $1.0 billion revolver draw. Total debt rose to about $1.56 billion, and cash fell to $1.04 billion, leaving net cash negative relative to year-end 2025.

Free cash flow was $459 million in the quarter. Management also announced a quarterly dividend of $0.33 per share.

02—Key points

Key Highlights

Q2 2026 revenue of $5,481 million grew 4.5% year-over-year (4.1% constant currency), with about 100 basis points from recent acquisitions and about 170 basis points from third-party product sales tied to the integrated offerings strategy.
Financial Services revenue of $1,733 million grew 12.0% year-over-year, the second straight quarter of double-digit growth in the company's largest segment.
Adjusted Operating Margin of 16.0% expanded 40 basis points year-over-year, while GAAP operating margin of 15.9% expanded 30 basis points.
Adjusted Diluted EPS guidance was raised to $5.70 to $5.82 (8% to 10% growth), while constant currency revenue growth guidance was revised to 4.0% to 5.5%.
Project Leap restructuring charges of $84 million in Q2 are expected to total $230 million to $320 million for 2026, and an $81 million India Defined Contribution Obligation reversal partly offset them.
Cognizant repurchased $1,153 million of stock in Q2 (22.5 million shares) and has $2.3 billion remaining on its authorization, while total debt rose to about $1.56 billion after a $1.0 billion revolver draw.
Q2 bookings declined 6% year-over-year, although trailing-twelve-month bookings grew 5% to $29.1 billion, and headcount reached 356,700.

03—Questions

Frequently Asked Questions

Why did Cognizant raise EPS guidance while leaving margin guidance unchanged?
The EPS raise to $5.70 to $5.82 reflects Q2 performance, the India Defined Contribution Obligation benefit of about $0.18 per diluted share pre-tax (partly offset by a tax expense of about $0.05), and the impact of share repurchases that reduce the diluted share count to about 460 million. Adjusted Operating Margin guidance remained at 16.0% to 16.2%, so the EPS change is driven largely by below-the-line items and capital returns rather than a change in operating profitability expectations.
What are the Project Leap charges, and how do they affect reported results?
Project Leap charges were $84 million in Q2 2026, consisting of $56 million in employee separation costs and $28 million in other costs, recorded in restructuring charges. Management expects total costs of $230 million to $320 million, with substantially all incurred in 2026, and estimates a full-year pre-tax EPS impact of about $0.50 to $0.70. These charges are excluded from Adjusted metrics, so GAAP EPS will be lower than Adjusted EPS while the program runs.
How did the company's balance sheet and liquidity change during the quarter?
Cash and cash equivalents fell from $1,901 million at year-end 2025 to $1,038 million at June 30, 2026. Long-term debt rose from $543 million to $1,527 million after a $1.0 billion revolver borrowing, which funded share repurchases and the Astreya acquisition. Goodwill and intangibles increased significantly, and total stockholders' equity declined to $14.5 billion, reflecting buybacks and retained earnings reductions. Investors should watch how the company pays down the revolver while sustaining its buyback pace.
Is the slowdown in Q2 bookings a concern?
Q2 bookings declined 6% year-over-year, although the trailing-twelve-month figure rose 5% to $29.1 billion and the book-to-bill ratio was about 1.3x. Bookings are lumpy and depend on the timing of large deals, and seven large deals (at least $100 million in TCV) were signed in the quarter. Investors will want to see whether bookings recover in the second half, since the trailing measure is still supported by stronger earlier quarters.
What drove the difference between GAAP and Adjusted results in Q2 2026?
GAAP diluted EPS was $1.36 compared with Adjusted Diluted EPS of $1.37. The gap reflects the $84 million Project Leap charge and the $81 million India Defined Contribution Obligation benefit, which together were roughly neutral at the operating income line ($3 million net). Non-operating foreign currency gains of $7 million, net of tax, were excluded as well. The net effect was minimal in Q2, but the Project Leap costs are expected to weigh on GAAP results over the rest of 2026.

04—Continue

← View all 8-K filings