Cognizant Reports Strong Q1 2025 Results, Driven by AI Demand and Investments

Cognizant lifts annual revenue forecast on strong AI demand

April 30 (Reuters) - Cognizant Technology Solutions (CTSH.O), opens new tab raised its annual revenue forecast and beat first-quarter results on Wednesday, driven by increased demand for AI-powered IT services. As clients transition to cloud-based systems and automate their operations, many are turning to AI-infused services offered by companies like Cognizant. This shift has helped the firm mitigate the effects of a volatile market. With Generative AI gaining traction, clients are increasingly integrating AI into software development cycles, streamlining operations and enhancing customer support. Cognizant expects annual revenue in the range of $20.5 billion to $21.0 billion, compared to previous outlook of the midpoint of $20.30 billion and $20.80 billion. Analysts had, on average, expected $20.68 billion for 2025. "We believe our differentiated AI and platform capabilities are helping clients navigate the near-term uncertainty while embarking on longer-term AI-led transformation" said CEO Ravi Kumar S. In March, the company's board approved a $2 billion increase to its ongoing share repurchase plan, raising the total remaining authorization to $3.1 billion. The New Jersey-based company's first-quarter revenue was $5.12 billion, slightly above analysts' average estimate of $5.11 billion. Its adjusted profit per share in the reported quarter was $1.23, compared with the estimate of $1.20 per share. Cognizant expects second-quarter revenue between $5.14 billion and $5.21 billion, the mid-point of which is above estimate of $5.12 billion, according to data compiled by LSEG. Reporting by Priyanka.G in Bengaluru; Editing by Tasim Zahid Our Standards: The Thomson Reuters Trust Principles., opens new tab Suggested Topics:Sustainable Finance & ReportingShareholder Activism

Cognizant Q1 Net Profit Jumps 21%, Reports 1,400 Generative AI Engagements | AIM

CEO Ravi Kumar pointed out that "AI-written code increased to more than 20% for us," calling it a pioneering moment for developer productivity. Cognizant reported a 21% year-over-year increase in net profit for the first quarter ended March 31, 2025, reaching $663 million, up from $546 million in the same quarter last year. The company's revenue rose 7.5% to $5.1 billion during the quarter YoY, but stayed flat quarter on quarter, meeting the expectations set during the last quarter. CEO S Ravi Kumar attributed the performance to growing demand for AI-driven IT services. "We started the year on a strong note, delivering revenue and adjusted operating margin ahead of our expectations, reflecting our steadfast focus on the execution of our strategy over the last several years," said Kumar in a company release. During the earnings call, Kumar said that the company is actively scaling its work in generative AI, reporting approximately 1,400 early-stage GenAI engagements, up from 1,200 in the previous quarter. Cognizant has developed over 20 agentic solutions using Google's LLMs, particularly focused on healthcare, addressing issues such as prior authorizations, fraud, and member experience. Kumar pointed out that "AI-written code increased to more than 20% for us," calling it a pioneering moment for developer productivity. Cognizant is also building out a sophisticated framework for industrialising AI, working with hyperscalers like Microsoft, AWS, and Google, as well as deepening its collaboration with NVIDIA to develop enterprise AI agents, industry-specific large language models, and AI infrastructure. A notable internal breakthrough includes a patent-pending method for managing LLM hallucinations by setting uncertainty thresholds, allowing fallback to rule-based systems when confidence is low. On the GCC front, Cognizant is expanding aggressively, most recently announcing a new GCC with Citizens Financial in Hyderabad. This centre will focus on enhancing enterprise technology, data, and analytics for the client, using Cognizant's Neuro and Flowsource AI platforms. Kumar sees GCCs as a strategic growth lever, adding, "We are undertaking more engagements to support clients on the GCC journey, equipping them with strategic AI tooling and platforms needed to drive operational strength." Earlier, Cognizant in its 2024 annual report pointed out that there is potential threat from GCC when it comes to acquiring talent. While verticals like health sciences, financial services, and products and resources contributed to the revenue boost, the Communications, Media, and Technology segments experienced a decline. The quarter also included a $62 million gain from the sale of an office complex in India. Bookings on a trailing twelve-month basis increased 3% year-over-year to $26.7 billion, representing a book-to-bill ratio of approximately 1.3X. However, bookings in the first quarter alone declined 7% from the previous year. The quarter included four large deals, each valued at $100 million or more. Employee metrics showed that voluntary attrition in the tech services segment stood at 15.8% on a trailing twelve-month basis, compared to 15.9% in Q4 2024 and 13.1% in Q1 2024. Total headcount at the end of March 2025 was 336,300, marking a reduction of 500 employees from the prior quarter. Looking ahead, Cognizant projected second quarter revenue to range between $5.14 billion and $5.21 billion, and full-year 2025 revenue between $20.5 billion and $21.0 billion.

AI Investments Help Cognizant Navigate 'Elevated Uncertainty'

'We've been investing in building [AI] capabilities, training, partnerships, and platforms at a pace we believe has been ahead of our peers since 2023. The scaling laws of AI continue to accelerate computing, efficiency, cost reductions, and accessibility, unlocking use cases at a rapid phase and making the outputs more accurate and cheaper,' says Cognizant CEO Ravi Kumar S. Cognizant continues to sail through uncertainty thanks to its growing strength stemming from its investment in AI. Cognizant CEO Ravi Kumar S told analysts during Wednesday's first fiscal quarter 2025 earnings call that Cognizant continues to build a resilient and durable AI-focused company that thrives in both slow and high-velocity markets. "The macro environment changed sharply in early April and continues to evolve in real time," Kumar said during his prepared remarks. "As our clients navigate this period of elevated uncertainty, they are partnering with us to re-baseline the cost of technology deployment, and we continue to see opportunities related to productivity, efficiency and cost takeout. The capabilities we have built around productivity, including our AI platform investments, puts us in a strong position to win in this environment." [Related: Cognizant CEO: Growth Will Be Fueled By Large Deals, AI] Cognizant's AI opportunities are being driven by clients' desires for efficiency and savings, Kumar said. The pipeline for those opportunities is strong, and Cognizant has taken steps in recent years aimed at developing leadership and talent, strengthening our operational discipline and rebooting its innovation engine to position itself ahead of the curve while building resilience and durability. "We're investing heavily in AI-powered software-led engineering at the intersection of digital and physical worlds, making products intelligent, connected, and autonomous," he said. Consistent with its heritage, Cognizant sensed those opportunities early, Kumar said. "We've been investing in building these capabilities, training, partnerships, and platforms at a pace we believe has been ahead of our peers since 2023," he said. "The scaling laws of AI continue to accelerate computing, efficiency, cost reductions, and accessibility, unlocking use cases at a rapid phase and making the outputs more accurate and cheaper." Cognizant has about 1,400 early GenAI engagements, compared to 1,200 at the end of the fourth quarter, and sees the development of AI playing out in three distinct vectors in the near term. Vector one is focused on AI-led productivity as an opportunity for enterprises to address the estimated $2 trillion in technical debt on their balance sheets, he said. "In quarter one, AI-written code increased to more than 20 percent for us, and is a pioneering opportunity for our developer communities," he said. "Sharing this AI and hyper productivity has been among the key differentiators for us in originating large deals led by productivity and lowering technology deployment cost." Vector two involves industrializing AI, Kumar said. "We believe every company needs unique plumbing to successfully adopt AI by localizing, customizing, and integrating AI into enterprise technology landscapes," he said. "In addition to our efforts with hyperscaler partners like Microsoft, AWS, and Google, and enterprise software providers like ServiceNow and Salesforce among others, in the first quarter we deepened our partnership with Nvidia. Our work together will be aimed at accelerating the cross-industry adoption of AI technology in five key areas: enterprise AI agents; industry-specific large language models; digital twins for smart manufacturing; foundational infrastructure for AI, and Cognizant's new AI platform for integration of Nvidia AI technology and orchestration across the enterprise technology stack." The evolving vector three, agentifying the enterprise, will be the largest opportunity as it has the potential to unlock many new labor pools and create a significant multiplier effect on total addressable spend, Kumar said. "We are seeing early agentification experiments from our clients in financial services, retail, and healthcare," he said. "To illustrate an example, working with Google LLM models, our teams have developed more than 20 agentic solutions addressing many of healthcare's most pressing challenges. Our work touches efficiency, customer experience, clinical decisioning, and regulation. It spans across prior authorization, appeals and grievances, member portals, fraud, and auto adjudication, among other areas. In this space, we have secured pilot engagement, and are focusing on transitioning them to scale deployments." With the help of Cognizant's AI lab, the company is significantly strengthening its Cognizant Neuro AI platform which allows clients to embrace AI on an accelerated path, Kumar said. "As an example, just recently, we achieved a groundbreaking milestone in LLM uncertainty estimation," he said. "This patent-pending technology allows us to set uncertainty thresholds on LLM outputs to manage hallucinations and on a case-by-case basis fall back to rules-based code for human intervention, making multi-agent systems safer and more consistent. This work adds to our 50-plus existing patents in AI." Cognizant is continuing to strategically invest in AI, Kumar said. The company continues to upskill its workforce at scale, leveraging AI to meet demand faster, and identifying talent pools to address new areas unlocked by AI, he said. Last month, Cognizant unveiled plans to establish a 14-acre Immersive Learning Center in Chennai, India, with the aim of training 100,000 individuals annually in advanced AI technologies in India. During the question and answer period of the conference call, when asked to provide more details about the uncertainties referenced during his prepared remarks, Kumar said that Cognizant sees continued opportunities and strength in financial services; stability in communication, media, and technology; and pockets of caution in the health business. "The one where we see an impact is [our] products and resources business, which has more direct impact and implication from tariffs, be it our manufacturing sector or our consumer and retail sectors," he said. When an analyst asked if Cognizant via its Belcan acquisition has been impacted by contract terminations from the Elon Musk-led Department of Government Efficiency (DOGE) moves to cut government spending while acknowledging that the company's exposure to U.S. government work is limited, Kumar said that Belcan focuses on engineering and not on enabling technology. "So engineering is building things for the future, and in some ways, engineering has always been on the building side of the [revenue] equation versus the enabling side," he said. "So that is one part. The second is, the exposure to government is very little for them, and some of it is a little bit through the primes and contractors. It is primarily a lot of commercial aerospace work they do, which has no impact on us. So far, we have not seen any impact, and the exposure they have is pretty small." Cognizant By The Numbers For its first fiscal quarter 2025, which ended March 31, Cognizant reported revenue of $5.12 billion, up 7.5 percent over the $4.76 billion the company reported for its first fiscal quarter 2024. The company also reported GAAP operating margin of 16.7 percent, up from last year's 14.6 percent, and GAAP earnings of $1.34 per share, up from $1.10. On a non-GAAP basis, Cognizant reported operating margin of 15.5 percent, up from 15.1 percent, and earnings of $1.23 per share, up from $1.12. Looking ahead, Cognizant said it expects second quarter revenue to be $5.14 billion to $5.21 billion, which would represent a 5.9 percent to 7.4 percent increase over last year. Full year 2025 revenue is slated to be $20.5 billion to $21.0 billion, or up 3.9 percent to 6.4 percent.