Cognizant Technology Solutions CTSH reported non-GAAP earnings of $1.25 per share in third-quarter 2024, which beat the Zacks Consensus Estimate by 9.65% and increased 7.8% year over year.

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Revenues of $5 billion beat the consensus mark by 0.82%. The top line increased 3% year over year and 2.7% at constant currency (cc). Acquisitions contributed 150 basis points (bps) to top-line growth.

On a trailing 12-month basis, bookings declined 2% year over year to $26.2 billion, which represented a book-to-bill of approximately 1.3 times. Six deals, each more than $100 million in TCV, were signed. This included four deals in Health Sciences, one in financial services and one in CMT.

Cognizant Technology Solutions Corporation Price, Consensus and EPS Surprise

Cognizant Technology Solutions Corporation price-consensus-eps-surprise-chart | Cognizant Technology Solutions Corporation Quote

Cognizant is heavily investing in AI, with a commitment of $1 billion to enhance platforms and capabilities.

CTSH’s shares have underperformed the Zacks Computer & Technology sector year to date. The stock has moved up 1.5%, while the broader sector has appreciated 27.6%. We believe the raised guidance will help CTSH stock to recover.

CTSH’s Top-Line Details

Financial services revenues (29.5% of revenues) increased 0.7% year over year (up 0.5% at cc) to $1.486 billion. The growth is primarily due to improved discretionary spending and strong execution.

Health Sciences revenues (30% of revenues) increased 7.8% year over year (up 7.6% at cc) to $1.514 billion. The growth is driven by strong offerings and recent large deal wins.

Products and Resources revenues (24.3% of revenues) increased 5% year over year (up 4.6% at cc) to $1.22 billion.

Communications, Media and Technology revenues (16.2% of revenues) were $816 million, which decreased 3.7% from the year-ago quarter (up 4.1% at cc). 

Region-wise, revenues from North America increased 3.8% year over year and at cc and contributed 74% to total revenues.

Revenues from Europe fell 0.3% year over year (down 1.9% at cc) and contributed 19.2% to total revenues. Revenues from the U.K. declined 0.8% (down 2.9% at cc). Continental Europe revenues increased 0.2% (down 0.8% at cc).

The Rest of the World revenues increased 4.3% year over year (up 4.2% at cc) and contributed 6.8% to total revenues.

CTSH’s Operating Details

Selling, general & administrative expenses, as a percentage of revenues, expanded 20 bps year over year to 16.5%.

Total headcount at the end of the third quarter was 340,100 compared with 336,300 in the previous quarter. 

Voluntary attrition - Tech Services on a trailing-12-month basis increased to 14.6%, down from 16.2% for the period ended Sept. 30, 2023. 

Cognizant reported a GAAP operating margin of 14.6%, expanding 60 bps on a year-over-year basis.

The company incurred $33 million in costs related to the NextGen program, negatively impacting the GAAP operating margin by 70 bps.

Non-GAAP operating margin (adjusted for NextGen charges) of 15.3% contracted 20 bps year over year.