Cognizant- Strong deal win momentum continues; company to unlock potential with NextGen programme in FY24-25

Cognizant: Strong deal win momentum continues; company to unlock potential with NextGen programme in FY24-25

Cognizant (CTSH) reported Q2 revenue of $4.89 billion, which was down 0.1% y-o-y in constant currency (cc) but fell within the top end of its guided range. The growth included a significant inorganic contribution of +130 bps y-o-y. The primary driver of revenue growth was Europe, experiencing a 6.3% y-o-y growth in geographies and a 3.7% y-o-y growth in verticals, both in CC. The company’s adjusted Ebit margin stood at 14.2%, showing a decrease of 40 bps q-o-q but surpassing Bloomberg’s expectation of 13.3%. PAT reached $580 million, reflecting a 3.0% y-o-y increase.

CTSH’s trailing 12-month bookings reached $26.4 billion, showing a 14% y-o-y increase. In Q2, bookings were up by 17% y-o-y, with an impressive book-to-bill ratio of 1.4x. Q2’s order bookings featured five large deals exceeding $100 million in size, including two net new deal wins. However, the company’s management acknowledged that they are observing softness in smaller, shorter-duration contracts due to weaker discretionary spending.

CTSH management has revealed its strategy for Gen AI, which involves harnessing the power of third-party foundational models and enriching them using CTSH’s platforms and intellectual property. To achieve this goal, CTSH plans to allocate $1 billion for the enhancement of its AI capabilities over the next three years.