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Revenue: $5 billion, grew 3.5% sequentially in constant currency, 2.7% year-over-year growth in constant currency.
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Adjusted Operating Margin: 15.3%, improved sequentially.
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Adjusted EPS: Grew approximately 7% year over year.
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Health Sciences Revenue Growth: Increased 7.6% year over year in constant currency.
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Financial Services Revenue Growth: Grew 0.5% year-over-year in constant currency.
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Products and Resources Revenue Growth: Grew 4.6% year over year in constant currency.
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Cash and Short-term Investments: $2 billion.
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Free Cash Flow: $791 million for Q3, approximately $1 billion year-to-date.
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Shareholder Returns: $391 million returned in Q3, $900 million year-to-date.
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Bookings: Roughly flat year over year; trailing 12-month bookings $26.2 billion.
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Fourth Quarter Revenue Guidance: $5 billion to $5.1 billion, 5.1% to 7.1% year-over-year growth.
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Full Year Revenue Guidance: $19.7 billion to $19.8 billion, 1.6% to 2.1% growth.
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Full Year Adjusted Operating Margin Guidance: Approximately 15.1%.
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Full Year Adjusted EPS Guidance: $4.63 to $4.67.
Release Date: October 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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Cognizant Technology Solutions Corp (NASDAQ:CTSH) reported a sequential revenue growth of 3.5% in constant currency, reaching $5 billion, with a year-over-year growth of 2.7%.
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The company achieved an adjusted operating margin of 15.3%, showing improvement due to strong cost discipline and operational rigor.
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Health sciences segment grew by 7.6% year-over-year in constant currency, driven by strong demand for TriZetto platform solutions and large deal wins.
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Cognizant Technology Solutions Corp (NASDAQ:CTSH) signed six large deals in the quarter, each with a total contract value of $100 million or more, indicating strong deal momentum.
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The company is leveraging AI to enhance productivity, with over 1,000 GenAI early engagements and significant traction in AI-led revenue opportunities.
Negative Points
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The communications, media, and technology (CMT) segment declined by 4% year-over-year in constant currency, reflecting a tight discretionary spending environment.
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Europe’s revenue declined by about 2% year-over-year, impacted by softer discretionary spending.
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Bookings were roughly flat year-over-year, indicating potential challenges in securing new business.
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The company faces headwinds from acquisition-related costs and the impact of non-cash amortization of acquired customer intangibles.
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There is a noted weakness in discretionary spending within manufacturing, logistics, aerospace, and automotive industries.
Q & A Highlights
Q: Just looking at the midpoint of Q4 guidance, is organic growth expected to be around 2%? Can we consider this a floor for Cognizant to accelerate off of in 2025? A: Yes, the upper end of the year-over-year Q4 guidance is around 2%. We are starting to build an organic year-on-year positive movement, with the midpoint at 1% and the upper end at 2%. This provides good momentum heading into 2025. – Ravi Singisetti, CEO
Q: What is the estimated productivity improvement from AI-enabled coding efforts, and how are you avoiding revenue cannibalization? A: Productivity improvements are significant, with 2 million lines of code accepted annually by our developers. Clients are interested in doing more for less, which allows us to share productivity benefits and remain competitive. This approach helps us win more deals and consolidate where our productivity is higher than peers. – Ravi Singisetti, CEO
Q: Can you discuss your confidence in replenishing the large deal pipeline, given the number of deals signed year-to-date? A: We have already signed 19 deals over $100 million this year, surpassing last year’s total of 17. We are confident in sustaining this momentum by focusing on transformation opportunities, cost takeout, and vendor consolidation. We are also expanding geographically and across industries. – Ravi Singisetti, CEO
Q: Which verticals might outperform corporate revenue growth in 2025, and which might lag? A: Financial services and healthcare are expected to lead growth. We aim to regain momentum in communications, media, and telecom, and manufacturing should also improve. These sectors will drive growth in the coming quarters. – Jatin Dalal, CFO
Q: How do you view the durability of the health sciences recovery, especially in the payer and life sciences segments? A: Life sciences clients are using technology at the core, not just for enabling business, which supports growth. In the payer segment, technology is crucial for cost reduction, and we see opportunities for transformation. Overall, the healthcare sector is poised for significant technological transformation. – Ravi Singisetti, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.