CTSH

MKT CAP $33BP/E 15.1DIV YIELD —FCF YIELD 7.49%REV TTM $21.4B +6.5%NET INCOME $2.2B −5.4%NET CASH $754M52W 38.73 – 86.70NEXT EARNINGS Oct 29SEC XBRL · TTM TO Invalid Date

How CTSH rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

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Cognizant 29 Results of Operations For a discussion of our results of operations for the year ended December 31, 2023, including a year-to-year comparison between 2024 and 2023, refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report Form 10-K for the year ended December 31, 2024.
The Year Ended December 31, 2025 Compared to The Year Ended December 31, 2024 The following table sets forth certain financial data for the years ended December 31: % of % of Increase / Decrease (Dollars in millions, except per share data) 2025 Revenues 2024 Revenues $ % Revenues $ 21,108 100.0 $ 19,736 100.0 $ 1,372 7.0 Operating expenses: Cost of revenues (a) 13,991 66.3 12,958 65.7 1,033 8.0 Selling, general and administrative expenses (a) 3,240 15.3 3,223 16.3 17 0.5 Restructuring charges — — 134 0.7 (134) (100.0) Depreciation and amortization expense 550 2.6 529 2.7 21 4.0 (Gain) on sale of property and equipment (62) (0.3) — — (62) N/A Income from operations and operating margin 3,389 16.1 2,892 14.7 497 17.2 Other income (expense), net 90 46 44 95.7 Income before provision for income taxes 3,479 16.5 2,938 14.9 541 18.4 Provision for income taxes (1,258) (713) (545) 76.4 Income (loss) from equity method investments 9 15 (6) (40.0) Net income $ 2,230 10.6 $ 2,240 11.3 $ (10) (0.4) Diluted EPS $ 4.56 $ 4.51 $ 0.05 1.1 Other Financial Information 2 Adjusted Income From Operations and Adjusted Operating Margin $ 3,327 15.8 $ 3,026 15.3 $ 301 9.9 Adjusted Diluted EPS $ 5.28 $ 4.75 $ 0.53 11.2 (a) Exclusive of depreciation and amortization expense N/A Not Applicable N/A Not Applicable 2 2 Adjusted Income from Operations, Adjusted Operating Margin and Adjusted Diluted EPS are not measures of financial performance prepared in accordance with GAAP.
Cognizant 30 Revenues - Reportable Business Segments and Geographic Markets Revenues of $21,108 million across our business segments and geographies were as follows for the year ended December 31, 2025: 2025 as compared to 2024 Increase (Dollars in millions) $ % CC % 3 Health Sciences $ 415 7.0 6.4 Financial Services 420 7.3 6.8 Products and Resources 503 10.5 9.7 CMT 34 1.0 0.7 Total revenues $ 1,372 7.0 6.4 2025 as compared to 2024 Increase (Dollars in millions) $ % CC % 3 North America $ 1,082 7.4 7.4 United Kingdom 95 5.2 2.1 Continental Europe 158 8.2 3.6 Europe - Total 253 6.7 2.9 Rest of World 37 2.9 4.7 Total revenues $ 1,372 7.0 6.4 Change in revenues was driven by the following factors: • Revenue growth across all geographies was primarily driven by our Financial Services and Health Sciences segments, which were positively impacted by the ramp up of several recently won large deals; • Our acquisition of Belcan contributed 260 basis points of growth to the overall revenue growth, including approximately 960 basis points of growth to our Products and Resources segment, primarily in North America and to a lesser extent the United Kingdom; • Our Communications Media and Technology segment has seen weakness amongst communications and media customers, offset by growth in technology customers. 3 Constant currency revenue growth is not a measure of financial performance prepared in accordance with GAAP.
Cognizant 31 Cost of Revenues (Exclusive of Depreciation and Amortization Expense) é $1,033M é 0.6% as a % of revenues ¡ % of Revenues Our cost of revenues consists primarily of salaries, incentive-based compensation, stock-based compensation expense, employee benefits, project-related immigration and travel for technical personnel, subcontracting and costs of third-party products and services relating to revenues.
The increase, as a percentage of revenues, was driven by increased compensation costs, the dilutive impact of the acquisition of Belcan and resales of third-party products in connection with our integrated offerings strategy, partially offset by operational efficiencies and the beneficial impact of foreign currency exchange rate movements.
The decrease, as a percentage of revenues, was primarily driven by net savings generated from our NextGen program. é $17M ê 1.0% as a % of revenues ¡ % of Revenues Gain on Sale of Property and Equipment During the year ended December 31, 2025, we realized a gain of $62 million on the sale of an office complex in India.
For further detail see Note 5 to our consolidated financial statements.
Depreciation and Amortization Expense Depreciation and amortization expense increased by 4.0%, and remained relatively flat as a percentage of revenues, in 2025 as compared to 2024.
The increase in amortization expense, driven by intangible assets related to our acquisition of Belcan, was partially offset by the decline of depreciation expense, which was driven by actions taken under our NextGen program.
Operating Margin and Adjusted Operating Margin 4 - Overall The increase in our 2025 GAAP operating margin and Adjusted Operating Margin 4 was primarily driven by net savings generated from our NextGen program, operational efficiencies and the beneficial impact of foreign currency exchange rate movements, partially offset by increased compensation costs and the dilutive impact of the acquisition of Belcan.
In addition, our GAAP operating margin for 2025 was positively impacted by 30 basis points, or $62 million, from the gain on sale of property and equipment, and our GAAP operating margin for 2024 was negatively impacted by NextGen charges, both of which were excluded from our Adjusted Operating Margin. 4 4 Adjusted Income From Operations and Adjusted Operating Margin are not measures of financial performance prepared in accordance with GAAP.
Cognizant 32 A predominant portion of our costs in India are denominated in the Indian rupee, representing approximately 23% of our global operating costs during the year ended December 31, 2025.
Including the impact of the hedges, the depreciation of the Indian rupee positively impacted our operating margin for the year ended December 31, 2025 by 50 basis points as compared to the year ended December 31, 2024.
Excluding the impact of applicable designated cash flow hedges, the depreciation of the Indian rupee against the U.S. dollar positively impacted our operating margin by approximately 70 basis points in 2025.
Each additional 1.0% change in exchange rate between the Indian rupee and the U.S. dollar will have the effect of moving our operating margin by approximately 17 basis points (excluding the impact of our cash flow hedges).
In 2025, the settlement of our cash flow hedges negatively impacted our operating margin by approximately 15 basis points, compared to a positive impact of 5 basis points in 2024.
Segment Operating Profit In the first quarter of 2025, we made certain changes to the internal measurement of segment operating profit for the purpose of evaluating segment performance and resource allocation.
The primary reason for the change was to reflect a more complete cost of delivery.
Specifically, segment operating profit now includes an allocation of corporate costs, which were previously included in "unallocated costs." We have reported 2025 segment operating profits using the new allocation methodology and have recast the 2024 results to conform to the new methodology.
While we have recast the 2024 results to conform to the new methodology, it is impracticable for us to recast our 2023 segment operating results as the detailed information required for the allocation of such costs to the segments is not reasonably available.
Segment operating profit and operating margin percentage were as follows: Segment operating profit % Segment operating margin In 2025, segment operating margins across all our segments were positively impacted by net savings generated from our NextGen program, operational efficiencies and the beneficial impact of foreign currency exchange rate movements, partially offset by increased compensation costs.
In 2025, segment operating profit in the Products and Resources segment was negatively impacted by the dilutive impact of the Belcan acquisition and by resales of third-party products in connection with our integrated offerings strategy.
Total segment operating profit was as follows for the year ended December 31: (Dollars in millions) 2025 % of Revenues 2024 % of Revenues Increase / (Decrease) Total segment operating profit $ 3,485 16.5 $ 3,152 16.0 $ 333 Less: unallocated costs 96 0.4 260 1.3 (164) Income from operations $ 3,389 16.1 $ 2,892 14.7 $ 497 The decrease in unallocated costs for 2025 as compared to 2024 was primarily driven by the 2025 gain on sale of property and equipment and the absence of NextGen charges, partially offset by higher amortization of intangible assets and certain corporate costs.
The following table sets forth total other income (expense), net for the years ended December 31: (in millions) 2025 2024 Increase / Decrease Foreign currency exchange gains (losses) $ 15 $ (29) $ 44 Gains on foreign exchange forward contracts not designated as hedging instruments 3 10 (7) Foreign currency exchange gains (losses), net 18 (19) 37 Interest income 105 119 (14) Interest expense (37) (54) 17 Other, net 4 — 4 Total other income (expense), net $ 90 $ 46 $ 44 The foreign currency exchan ge gains and losses were attributed to the remeasurement of net monetary assets and liabilities denominated in currencies other than the functional currencies of our subsidiaries.
The gains on foreign exchange forward contracts not designated as hedging instruments related to the realized and unrealized gains and losses on cont racts en tered into to offset our foreign currency exposures.
As of December 31, 2025, the notional value of our undesignated hedges was $748 million.
Interest income declined in 2025 as compared to 2024, driven by a mix of lower invested balances and lower yields.
Higher interest expense during 2024 was driven by the borrowing of $600 million under our revolving credit facility to partially fund the acquisition of Belcan during the third quarter of 2024.
The borrowing was subsequently repaid in the fourth quarter of 2024 and first quarter of 2025.
Provision for Income Taxes é $545M ¡ Effective Income Tax Rate é 11.9% The effective income tax rate for 2025 was negatively impacted by the one-time, non-cash income tax expense of $390 million related to the enactment of the OBBBA.
See Note 10 to our consolidated financial statements for additional information.
Net Income The decrease in net income was primarily driven by the one-time, non-cash income tax expense of $390 million related to the enactment of the OBBBA, partially offset by an increase in income from operations, including the $62 million gain on sale of property and equipment. ê $10M ê 0.7% as a % of revenues ¡ % of Revenues Non-GAAP Financial Measures Portions of our disclosure include non-GAAP financial measures.
Our non-GAAP financial measures Adjusted Operating Margin and Adjusted Income from Operations exclude unusual items, such as the gain on sale of property and equipment in 2025 and NextGen charges in 2024.
Our non-GAAP financial measure Adjusted Diluted EPS excludes unusual items, such as the one-time income tax expense related to the enactment of the OBBBA, the gain on sale of property and equipment and NextGen charges, and net non-operating foreign currency exchange gains or losses and the tax impact of all the applicable adjustments.
Constant currency Cognizant 34 revenue growth is defined as revenues for a given period restated at the comparative period’s foreign currency exchange rates measured against the comparative period's reported revenues.
Free cash flow is defined as cash flows from operating activities plus proceeds from sale of property and equipment, net of purchases of property and equipment.
We believe that the presentation of these non-GAAP financial measures, which exclude certain costs, read in conjunction with our reported GAAP results and reconciliations to the most comparable GAAP measure, as applicable, can provide useful supplemental information to our management and investors regarding financial and business trends relating to our financial condition and results of operations.
The following table presents a reconciliation of each non-GAAP financial measure to the most comparable GAAP measure, as applicable, for the years ended December 31: (Dollars in millions, except per share data) 2025 % of Revenues 2024 % of Revenues GAAP income from operations and operating margin $ 3,389 16.1 % $ 2,892 14.7 % (Gain) on sale of property and equipment (1) (62) (0.3) — — NextGen charges (2) — — 134 0.6 Adjusted Income From Operations and Adjusted Operating Margin $ 3,327 15.8 % $ 3,026 15.3 % GAAP diluted EPS $ 4.56 $ 4.51 Effect of above adjustments, pre-tax (0.13) 0.27 Effect of non-operating foreign currency exchange (gains) losses, pre-tax (3) (0.04) 0.04 Tax effect of above adjustments (4) 0.09 (0.07) One-time income tax expense related to the enactment of the OBBBA (5) 0.80 — Adjusted Diluted EPS $ 5.28 $ 4.75 Net cash provided by operating activities $ 2,883 $ 2,124 Purchases of property and equipment (288) (297) Proceeds from sale of property and equipment 70 — Free cash flow $ 2,665 $ 1,827 (1) During 2025, we realized a gain of $62 million on the sale of an office complex in India.
S e e Note 5 to our consolidated financial statements for additional information.
(2) Consists of employee separation, facility exit and other costs incurred in connection with the NextGen program.

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Gone since FY2024

During the third quarter of 2024, we completed the acquisition of Belcan.
See Note 3 to our consolidated financial statements.
This acquisition is expected to have a modest near-term dilutive impact to our 2025 operating margin, primarily due to integration-related expenses and amortization of acquired intangibles. 2 Adjusted Operating Margin is not a measurement of financial performance prepared in accordance with GAAP.
See “Non-GAAP Financial Measures” for more information and reconciliations to the most directly comparable GAAP financial measures.
Cognizant 29 Results of Operations For a discussion of our results of operations for the year ended December 31, 2022, including a year-to-year comparison between 2023 and 2022, refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report Form 10-K for the year ended December 31, 2023.
The Year Ended December 31, 2024 Compared to The Year Ended December 31, 2023 The following table sets forth certain financial data for the years ended December 31: % of % of Increase / Decrease (Dollars in millions, except per share data) 2024 Revenues 2023 Revenues $ % Revenues $ 19,736 100.0 $ 19,353 100.0 $ 383 2.0 Cost of revenues (a) 12,958 65.7 12,664 65.4 294 2.3 Selling, general and administrative expenses (a) 3,223 16.3 3,252 16.8 (29) (0.9) Restructuring charges 134 0.7 229 1.2 (95) (41.5) Depreciation and amortization expense 529 2.7 519 2.7 10 1.9 Income from operations and operating margin 2,892 14.7 2,689 13.9 203 7.5 Other income (expense), net 46 98 (52) (53.1) Income before provision for income taxes 2,938 14.9 2,787 14.4 151 5.4 Provision for income taxes (713) (668) (45) 6.7 Income (loss) from equity method investments 15 7 8 114.3 Net income $ 2,240 11.3 $ 2,126 11.0 $ 114 5.4 Diluted EPS $ 4.51 $ 4.21 $ 0.30 7.1 Other Financial Information 3 Adjusted Income From Operations and Adjusted Operating Margin $ 3,026 15.3 $ 2,918 15.1 $ 108 3.7 Adjusted Diluted EPS $ 4.75 $ 4.55 $ 0.20 4.4 (a) Exclusive of depreciation and amortization expense 3 3 Adjusted Income from Operations, Adjusted Operating Margin and Adjusted Diluted EPS are not measures of financial performance prepared in accordance with GAAP.
Cognizant 30 Revenues - Reportable Business Segments and Geographic Markets Revenues of $19,736 million across our business segments and geographies were as follows for the year ended December 31, 2024: 2024 as compared to 2023 Increase / (Decrease) (Dollars in millions) $ % CC % 4 Health Sciences $ 258 4.5 4.5 Financial Services (56) (1.0) (1.1) Products and Resources 154 3.3 3.2 CMT 27 0.8 0.5 Total revenues $ 383 2.0 1.9 2024 as compared to 2023 Increase / (Decrease) (Dollars in millions) $ % CC % 4 North America $ 435 3.0 3.1 United Kingdom (58) (3.1) (5.1) Continental Europe 23 1.2 0.9 Europe - Total (35) (0.9) (2.1) Rest of World (17) (1.3) — Total revenues $ 383 2.0 1.9 Change in revenues was driven by the following factors: • North America revenues, particularly in the Health Sciences segment, were positively impacted by the ramp up of several recently won large deals; • Recently completed acquisitions contributed 200 basis points of growth to the overall change in revenues, including approximately 600 basis points of growth to our Products and Resources segment (primarily in North America) and approximately 150 basis points of growth to our Communications, Media and Technology segment (primarily in North America); • The resale of third-party products, primarily in North America, in connection with our integrated offerings strategy, contributed 70 basis points of growth to the overall change in revenue; • Reduced demand for discretionary work negatively impacted revenues across all segments.
Clients in our Financial Services, Products and Resources, and Communications, Media and Technology segments were particularly affected; • Revenue decline in our United Kingdom region was primarily driven by weakness in the Communications, Media and Technology and Financial Services segments; and • Revenue decline in our Rest of World region was primarily driven by weakness in the Products and Resources and Financial Services segments. 4 Constant currency revenue growth is not a measure of financial performance prepared in accordance with GAAP.
Cognizant 31 Cost of Revenues (Exclusive of Depreciation and Amortization Expense) é $294M é 0.3% as a % of revenues ¡ % of Revenues Our cost of revenues consists primarily of salaries, incentive-based compensation, stock-based compensation expense, employee benefits, project-related immigration and travel for technical personnel, subcontracting and costs of third-party products and services relating to revenues.
The increase, as a percentage of revenues, was due to higher compensation costs, primarily as a result of a merit increase cycle, and the resale of third-party products in connection with our integrated offerings strategy, partially offset by the beneficial impact of foreign currency exchange rate movements and operational efficiencies.
The decrease, as a percentage of revenues, was primarily driven by the net savings generated from our NextGen program, partially offset by the impact of recently completed acquisitions, primarily as a result of transaction and integration related expenses. ê $29M ê 0.5% as a % of revenues ¡ % of Revenues Restructuring Charges Restructuring charges consist of costs related to the NextGen program.
Restructuring charges were $134 million or 0.7%, as a percentage of revenues for the year ended December 31, 2024, as compared to $229 million or 1.2%, as a percentage of revenue, for the year ended December 31, 2023.
For further detail on our restructuring charges see Note 4 to our consolidated financial statements.
Depreciation and Amortization Expense Depreciation and amortization expense increased by 1.9%, and was flat as a percentage of revenues, in 2024 as compared to 2023.
The increase in amortization expense driven by intangible assets related to our recently completed acquisitions was partially offset by the decline of depreciation expense, which was driven by actions taken under our NextGen program.
Operating Margin and Adjusted Operating Margin 5 - Overall The increase in our 2024 GAAP operating margin and Adjusted Operating Margin 5 was primarily driven by net savings generated from our NextGen program and the beneficial impact of foreign currency exchange rate movements, partially offset by increased compensation costs, primarily as a result of a merit increase cycle, and the dilutive impact of recently completed acquisitions, primarily as a result of transaction and integration related expenses and amortization of acquired intangibles.
In addition, our 2024 and 2023 GAAP operating margins were negatively impacted by the NextGen charges, as discussed in Note 4 to our consolidated financial statements, which were excluded from our Adjusted Operating Margin 5 . 5 Adjusted Income From Operations and Adjusted Operating Margin are not measurements of financial performance prepared in accordance with GAAP.
Cognizant 32 A predominant portion of our costs in India are denominated in the Indian rupee, representing approximately 24% of our global operating costs during the year ended December 31, 2024 .
Including the impact of the hedges, the depreciation of the Indian rupee positively impacted our operating margin for the year ended December 31, 2024 by 44 basis points as compared to the year ended December 31, 2023.
Excluding the impact of applicable designated cash flow hedges, the depreciation of the Indian rupee against the U.S. dollar positively impacted our operating margin by approximately 25 basis points in 2024.
Each additional 1.0% change in exchange rate between the Indian rupee and the U.S. dollar will have the effect of moving our operating margin by approximately 18 basis points (excluding the impact of our cash flow hedges).
In 2024, the settlement of our cash flow hedges positively impacted our operating margin by approximately 6 basis points, compared to a negative impact of 13 basis points in 2023.
Segment Operating Profit Segment operating profit and operating margin percentage were as follows: Segment operating profit % Segment operating margin In 2024, segment operating margins across all our segments were negatively impacted by increased compensation costs, partially offset by savings generated from our NextGen program and the beneficial impact of foreign currency exchange rate movements.
Segment operating profit in the Health Sciences and Communications, Media and Technology segments was negatively impacted by resales of third-party products in connection with our integrated offerings strategy and higher costs typical to the initial phases of several recently won large deals.
Segment operating profit in the Products and Resources segment was negatively impacted by the dilutive impact of the Belcan acquisition.
Segment operating profit in the Financial Services segment was positively impacted by reduced resales of third-party products in connection with our integrated offerings strategy.
Total segment operating profit was as follows for the year ended December 31: (Dollars in millions) 2024 % of Revenues 2023 % of Revenues Increase / (Decrease) Total segment operating profit $ 4,156 21.1 $ 4,117 21.3 $ 39 Less: unallocated costs 1,264 6.4 1,428 7.4 (164) Income from operations $ 2,892 14.7 $ 2,689 13.9 $ 203 The decrease in unallocated costs for 2024 as compared to 2023 was primarily driven by lower corporate expenses as well as lower NextGen charges of $134 million in 2024 as compared to $229 million in 2023 (see Note 4 to our consolidated financial statements).
The following table sets forth total other income (expense), net for the years ended December 31: (in millions) 2024 2023 Increase / Decrease Foreign currency exchange gains (losses) $ (29) $ 42 $ (71) Gains (losses) on foreign exchange forward contracts not designated as hedging instruments 10 (40) 50 Foreign currency exchange gains (losses), net (19) 2 (21) Interest income 119 126 (7) Interest expense (54) (41) (13) Other, net — 11 (11) Total other income (expense), net $ 46 $ 98 $ (52) The foreign currency exchan ge losses were attributed to the remeasurement of net monetary assets and liabilities denominated in currencies other than the functional currencies of our subsidiaries.
The gains on foreign exchange forward contracts not designated as hedging instruments related to the realized and unrealized gains and losses on cont racts entered into to offset our foreign currency exposures.
As of December 31, 2024, the notional value of our undesignated hedges was $489 million.
Interest income for the year ended December 31, 2024 decreased by $7 million as compared to 2023.
While our invested balances decreased during the year ended December 31, 2024, primarily due to the required payment related to the ITD dispute in January 2024 (see Note 11 to our consolidated financial statements) and the Belcan acquisition in August 2024, we benefited from higher interest rates compared to the year ended December 31, 2023.
Interest expense for the year ended December 31, 2024 increased by $13 million as compared to 2023 primarily due to the drawdown on our revolving credit facility in connection with the Belcan acquisition.
Provision for Income Taxes é $45M ¡ Effective Income Tax Rate é 0.3% See Note 11 to our consolidated financial statements for additional information.
In December 2021, the OECD adopted model rules for a global framework to impose a 15% global minimum tax referred to as Pillar Two with a targeted effective date of January 1, 2024.
The OECD has continued and is continuing to issue additional guidance on the operation of the model rules.
While the United States has not enacted Pillar Two, certain countries in which we operate have adopted their own version of the Pillar Two model rules.
Although Management continues to monitor additional guidance from the OECD and countries’ implementation of Pillar Two, based on current guidance, our net income, cash flows, or financial condition has not and will not in the future be materially impacted by Pillar Two.
Net Income The increase in net income was driven by the increase in income from operations. é $114M é 0.3% as a % of revenues ¡ % of Revenues Cognizant 34 Non-GAAP Financial Measures Portions of our disclosure include non-GAAP financial measures.
Our non-GAAP financial measures Adjusted Operating Margin and Adjusted Income from Operations exclude unusual items, such as NextGen charges.

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