Cognizant Technology Solutions, a leading US-based IT services firm, outperformed Wall Street estimates in the first quarter of 2025, reporting $5.1 billion in revenue, marking a 7.5% year-over-year growth or 8.2% growth in constant currency (CC). This figure was above its own guidance range and the analyst consensus of $5.07 billion, demonstrating strong execution and robust demand, particularly in health sciences and financial services verticals.

The Teaneck, New Jersey-headquartered company, which follows the calendar year unlike most Indian peers, also reported net profit of $663 million, a 21% increase YoY, for the quarter ending March 31, 2025.

Revenue Growth Backed by Large Deals and Acquisitions

CEO Ravi Kumar S highlighted that the company’s growth was broad-based and largely driven by recently secured large deals, which helped counterbalance selective client spending constraints.

Notably, Cognizant signed four large deals in Q1, including one mega deal exceeding $500 million in contract value. These wins helped strengthen the company’s position in the market and contributed to its quarterly revenue beat.

Recent acquisitions like Belcan and Thirdera significantly boosted revenue growth by approximately 400 basis points, showcasing the success of Cognizant’s inorganic strategy. The $1.3 billion Belcan acquisition, finalized in 2024, also expanded Cognizant’s reach in aerospace and defence sectors, offering access to blue-chip clients.

Vertical-Wise Performance

• The health sciences vertical emerged as the top performer with an 11.4% YoY growth, generating $1.57 billion in revenue in CC terms.

• The financial services vertical grew 6.5% YoY to $1.46 billion, recovering after trailing health sciences for six consecutive quarters.

• Products and resources vertical saw the highest growth at 13.6% YoY, bringing in $1.28 billion.

This marked the sixth consecutive quarter where financial services lagged behind health sciences, a significant deviation from Cognizant’s historical trend, but management expressed optimism about its rebound and long-term potential.

Geographical Performance

North America remained Cognizant’s largest market, accounting for $3.85 billion, with a 9.7% YoY growth. Meanwhile, revenue from Europe grew by 3% YoY to $950 million.

CFO Jatin Dalal stated that Cognizant outperformed many peers organically and achieved top-tier revenue growth in the region, highlighting success in wallet share gains and operational execution.

Operating Margin and Financial Health

Cognizant’s operating margin improved by 210 basis points YoY to 16.7%, driven by cost controls, operational efficiencies, and AI-led productivity initiatives.

Bookings for the quarter stood at $26.7 billion, up 3% YoY, with a book-to-bill ratio of 1.3x. However, bookings declined 7% YoY, indicating some softness possibly tied to April’s macro uncertainty.

Forward Guidance and Q2 Expectations

Despite the solid Q1 performance, the company retained its annual revenue growth guidance in CC terms at 3.5% to 6%. However, Q2 guidance was slightly lower, with growth expected between 5% and 6.5% in CC terms.

Dalal cautioned that April brought slower decision-making from clients, particularly in health services, though the impact was isolated and not reflective of a broader slowdown.

CEO Kumar remarked, “The macro environment changed sharply in early April and continues to evolve, but we remain agile and prepared.”

AI and Gen AI Initiatives

Artificial intelligence remains a core pillar of Cognizant’s strategy. The company now has 1,400 early-stage Gen AI projects, up from 1,200 in the previous quarter.

Key focus areas include:

• Enterprise AI agents

• Industry-specific large-language models (LLMs)

• Digital twins for smart manufacturing

• Foundational AI infrastructure

• AI platform integrations with NVIDIA technologies

Cognizant has also developed over 20 agentic AI solutions with Google and other partners, tackling critical issues in healthcare, such as uncertainty estimation in LLMs to combat AI hallucinations, and fallback mechanisms for human intervention.

These innovations aim to enhance safety, reliability, and efficiency in AI-led deployments.

Employee Metrics and Utilisation

As of Q1 2025, Cognizant employed approximately 3,36,300 people, with India being the largest workforce hub. The company experienced:

• A net headcount reduction of 500 employees sequentially

• A YoY drop of 8,300 employees

• Attrition increased by 2.7 percentage points to 15.8% on a trailing twelve-month basis

• Utilisation rate dropped by 3 percentage points to 85%

CEO Kumar added that 13,000 former employees returned to the company in 2024, and 10,000 more are in the pipeline to rejoin, underscoring improved employee confidence and talent brand revival.

Strategic Outlook and Vision

Kumar emphasized that AI-driven transformation, cost optimization, and hyper-productivity are central to Cognizant’s forward strategy. He said the company is well-positioned to help clients navigate short-term uncertainties and build for long-term success.

“Our strong Q1 results show that we are heading in the right direction,” he said, highlighting the potential of dual-engine growth from AI innovation and digital transformation.

Conclusion

Cognizant’s Q1 2025 performance exceeded expectations with strong revenue growth, margin expansion, and a robust deal pipeline, particularly in health sciences, products, and financial services. Its focus on AI, strategic acquisitions, and geographical diversification are key enablers of its continued outperformance.

While April's slowdown presents a cautionary note, the company appears well-prepared to adapt and lead, driven by AI innovation, industry-specific expertise, and resilient financial execution.

The Upcoming IPOs in this week and coming weeks are Wagons Learning, Srigee DLM, Manoj Jewellers.

The Current active IPO are Kenrik Industries, Arunaya Organics.

Start your Stock Market Journey and Apply in IPO by Opening Free Demat Account in Choice Broking FinX.

Join our Trading with CA Abhay Telegram Channel for regular Stock Market Trading and Investment Calls by CA Abhay Varn - SEBI Registered Research Analyst.