CTSH changes
Pick any two versions below to diff them.
- Price
- $66.03 → $64.43(−2.4%)
- Next earnings
- Oct 29, 2026 → Jan 29, 2027
- Next earnings is estimate
- No → Yes
- Thesis
- The market fears that AI tools will reduce demand for the labor-based IT services that Cognizant sells. Revenue growth removed: slowed to 4.1% in constant currency added: slowed to 4.8% in removed: Q2 added: Q3 2026 from removed: 7.2% added: 6.5% a year earlier, and removed: Q2 added: quarterly bookings fell removed: 6%. added: 6% in Q2 and 7% in Q3. In October 2026, Cognizant removed: also took an $84 million added: lowered the top of its 2026 revenue guidance, to growth of 4.0% to 4.4% in constant currency from 4.0% to 5.5%. Its Project Leap restructuring removed: charge added: costs $180 million to $250 million in removed: Q2 2026. added: 2026 and Q1 2027. Management says that AI creates more work in data, infrastructure and removed: engineering, added: engineering. The adjusted operating margin rose for the seventh quarter in a row, and the company removed: bought back $1.6 added: spent $2.3 billion removed: of shares added: on buybacks and dividends in the first removed: half added: nine months of 2026. For the gap to close, three things must be true. Revenue must grow within the added: Q4 2026 guidance of removed: 4.0% added: 3.2% to removed: 5.5% added: 4.7% in constant removed: currency. added: currency, and growth must not slow further in 2027. The adjusted operating margin must reach removed: 16.0% to 16.2% added: about 16.1% in 2026 and keep rising. Bookings must grow again, so that the trailing 12-month book-to-bill stays above 1.0. The removed: Q3 added: Q4 2026 report removed: on October 29, 2026 and the 2027 outlook in early 2027 are the next tests. If these checks pass, the gap can close over the next two years. The main reason it may not close is that AI lowers prices for IT services faster than new AI work grows.
- Risks
- AI tools can do more of the coding, testing and support work that Cognizant sells by the hour. Clients can ask for lower prices or fewer people, and revenue can grow slower than costs fall. removed: Q2 2026 added: Quarterly bookings fell removed: 6%. added: 6% in Q2 2026 and 7% in Q3 2026. If large deals slow further, revenue growth falls in 2027. Voluntary attrition removed: rose added: was 12.6% in the 12 months to added: September 30, 2026, after 13.0% in the 12 months to June 30, 2026. Higher attrition raises hiring and training costs and can lower delivery quality. Debt removed: rose to $1.56 added: was $1.55 billion at removed: June added: September 30, 2026, added: up from $576 million at December 31, 2025, after buybacks and acquisitions. Debt is still small compared with earnings.
- Balance sheet
- Cash: removed: $1.1B added: $1.6B Debt: $1.6B Net debt: removed: $510M added: $0.0M Interest cover: removed: 86× added: 66× Undrawn credit line: $850M, to October 2031 Debt due within 12 months: removed: $33M added: $0.0M Last debt due: 2031 Cognizant has low debt. At removed: June added: September 30, 2026, debt was removed: $1.56 billion: added: $1.55 billion, all long-term: $1.0 billion drawn on the revolving credit facility and removed: a added: the rest on the term removed: loan of $561 million. added: loan. Cash and short-term investments were removed: $1.05 added: $1.55 billion, down from $1.91 billion at December 31, 2025, after share repurchases removed: of $1.6 billion and acquisitions removed: of $1.3 billion in removed: the first half of 2026. On October 5, 2026, Cognizant replaced its credit facilities with a $550 million term loan and a $1.85 billion revolving credit facility, both due removed: on added: in October removed: 3, 2031, and borrowed removed: about $1.0 billion under the new revolver to repay the old one. added: Principal payments on the new term loan start in December 2027. In October 2026, Cognizant agreed to buy DyFlex Solutions for about $210 million in cash. Interest cover is income from operations added: of $2.59 billion divided by interest expense added: of $39 million for the first removed: half added: nine months of 2026. As of removed: Jun added: Sep 30, 2026.
- Checkpoints
- Oct 29, 2026: Q3 2026 earnings: growth and bookings. removed: Pending. added: Failed. Watch: Revenue within the Q3 guidance of $5.60 billion to $5.68 billion and growing bookings pass; revenue below guidance or another fall in bookings fail. removed: Q1 added: Outcome: Revenue of $5.66 billion was within the guidance, but Q3 bookings fell 7% from a year earlier, after a 6% fall in Q2. Jan 29, 2027 (estimate): added: Q4 2026 earnings: 2027 outlook. Pending. Watch: 2027 guidance for revenue growth near 2026 levels and further margin expansion pass; guidance for slower growth or a lower margin fail.
- Recent events
- Oct added: 29, 2026: Cognizant reported Q3 2026 results. Revenue rose 4.6% to $5.66 billion, or 4.8% in constant currency, and Financial Services revenue grew 12%. Adjusted EPS rose 7.2% to $1.49, and the adjusted operating margin rose to 16.3% from 16.0%. Trailing 12-month bookings rose 4% to $28.7 billion, a book-to-bill of about 1.3, but Q3 bookings fell 7%. Cognizant lowered its 2026 revenue growth guidance to 4.0% to 4.4% in constant currency, from 4.0% to 5.5%, and set adjusted EPS guidance at $5.72 to $5.79, from $5.70 to $5.82. It now expects Project Leap costs of $180 million to $250 million. Oct 21, 2026: Cognizant agreed to buy DyFlex Solutions, an SAP transformation firm based in Australia, for about $210 million in cash, subject to closing adjustments. Oct 5, 2026: Cognizant signed new credit facilities: a $550 million term loan and a $1.85 billion revolving credit facility, both due on October 3, 2031. It used them to repay its old term loan and about $1.0 billion of revolving loans. Jul 29, 2026: Cognizant reported Q2 2026 results. Revenue rose 4.5% to $5.48 billion, or 4.1% in constant currency. Adjusted EPS rose 4.6% to $1.37. Trailing 12-month bookings rose 5% to $29.1 billion, but Q2 bookings fell 6%. It raised 2026 adjusted EPS guidance to $5.70 to $5.82 and narrowed revenue growth guidance to 4.0% to 5.5% in constant currency. Jun 22, 2026: Cognizant completed its purchase of Astreya, an AI-first IT managed services provider, for $634 million net of cash, including contingent consideration of $25 million. May 18, 2026: Cognizant raised its 2026 share repurchase target by $1 billion to $2 billion, and the board added $2 billion to the repurchase authorization. The company borrowed $1 billion under its revolving credit facility for the buyback and the Astreya purchase.