Q2 2025 Cognizant Technology Solutions Corp Earnings Call

Operator: Ladies and gentlemen, welcome to the Cognizant Technology Solutions' second quarter 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question at that time, please press *1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press *2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the * keys. Thank you. I would now like to turn the conference over to Mr. Tyler Scott, Vice President, Investor Relations. Please go ahead, sir.

Ladies and gentlemen, welcome to the Cognizant Technology Solutions. Second quarter, 2025 earnings conference call.

All lines have been placed on mute to prevent any background noise.

After the speaker's remarks, there will be a question and answer session.

If you would like to ask a question at that time, please press star 1 on your telephone keypad,

A confirmation tone. Will indicate your line is in the question queue?

You may press star 2 if you would like to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Thank you. I would now like to turn the conference over to Mr. Tyler Scott, Vice President of Investor Relations. Please go ahead, sir.

Tyler Scott: Thank you, operator, and good afternoon, everyone. By now, you should have received a copy of the earnings release and investor supplement for the company's second quarter 2025 results. If you have not, copies are available on our website, cognizant.com. The speakers we have on today's call are Ravi Kumar, Chief Executive Officer, and Jatin Dalal, Chief Financial Officer. Before we begin, I would like to remind you that some of the comments made on today's call and some of the responses to your questions may contain forward-looking statements. These statements are subject to the risk and uncertainties as described in the company's earnings release and other filings with the SEC. Additionally, during our call today, we will reference certain non-GAAP financial measures that we believe provide useful information for our investors.

Thank you, operator and good afternoon Everyone by now, you should have received a copy of the earnings release and investor supplement for the company's second quarter 2025 results. If you have not copies are available on our website cognizant.com

The speakers we have on today's call. Are Ravi Kumar chief executive officer and Johnson, Dalal Chief Financial Officer?

Before we begin, I would like to remind you that some of the comments made on today's call and some of the responses to your questions. May contain forward-looking statements,

These statements are subject to the risk and uncertainties as described in the company's earnings release and other filings with the SEC.

Tyler Scott: Reconciliations of non-GAAP financial measures where appropriate to the corresponding GAAP measures can be found in the company's earnings release and other filings with the SEC. With that, I'd now like to turn the call over to Ravi. Please go ahead.

Additionally, during our call today, we will reference certain non-gaap Financial measures that we believe provide useful information for our investors.

Reconciliation of non-GAAP financial measures, where appropriate, to the corresponding GAAP measures can be found in the company's earnings release and other filings with the SEC.

Ravi Kumar: Thank you, Tyler, and good afternoon, everyone. Thank you for joining us. Our momentum continued in the second quarter of 2025 as we again delivered revenue growth and adjusted operating margin ahead of our expectations, while also accelerating our bookings growth. Our performance reflects the depth and strength of our portfolio, supported by our continued strategic focus on AI-led opportunities and disciplined execution. As you can see from today's results, we continue to make progress towards building a resilient and durable company that thrives in both slow and high-velocity markets. In the past, I've described the AI opportunity as a double-engine transformation for our clients, both on productivity and innovation. In the second quarter, we delivered a healthy combination of wins in AI efficiency-led large deals and innovation-led projects, with agentic AI unlocking new revenue pools and spend cycles.

With that. I'd now like to turn the call over to Robbie. Please go ahead.

Thank you, Tyler, and good afternoon, everyone. Thank you for joining us.

Our momentum continued in the second quarter of 2025 as we again delivered revenue growth and adjusted operating margin ahead of our expectations.

While also accelerating our booking growth.

Supported by our continued, strategic, focus on AI LED opportunities, and disciplined execution.

As you can see, from today's results we continue to make progress towards building a resilient and durable company that thrives in both slow and high velocity markets.

In the past, I've described the AI opportunity as a double engine transformation for our clients.

Both on productivity and innovation in the second quarter, we delivered a healthy combination of wins in AI efficiency-led large deals and innovation-led projects.

Ravi Kumar: The three-vector AI opportunity we have laid out on our strategy is resonating very well with our clients. AI projects in experimentation over the past few quarters have started to build momentum in downstream opportunities. I will expand on this further when I review our strategic progress shortly. First, I will walk through the highlights and our key drivers from the quarter. Second quarter revenue grew 7.2% year-over-year in constant currency to $5.2 billion. Our results marked the fourth consecutive quarter of year-over-year organic growth and another solid placement in our industry's winners' circle. Organic revenue growth was led by financial services and health sciences and benefited from the ramp of recently won large deals. Q2 bookings grew 18% year-over-year, translating to trailing 12 months' growth of 6%.

With agentic AI unlocking, new Revenue pools, and spend Cycles.

The 3 Vector AI opportunity, we have laid out on our strategy is resonating very well with our clients.

AI projects in experimentation, over the past few quarters have started to build momentum in Downstream opportunities.

I will expand on this further when I review our strategic progress shortly.

First.

I will walk through the highlights and a key drivers from the quarter.

Second quarter revenue grew 7.2% year-over-year in constant currency to $5.2 billion.

Our results marked the fourth consecutive quarter of year-over-year organic growth and another solid placement in our industry is Winners Circle.

Organic Revenue growth was led by financial services, and Health Sciences and benefited from the ramp of recently 1 large deals.

Ravi Kumar: During the quarter, we landed six large deals with TCV of $100 million or greater, including two mega deals, each valued around $1 billion. As a result of these wins, the TCV of our large deals more than doubled year-over-year. Adjusted operating margin of 15.6% improved by 40 basis points year-over-year. We are on track to achieve our 20 to 40 basis points margin expansion goal for 2025. Headcount grew about 2% sequentially, led by hiring of recent college graduates, while trailing 12 months' voluntary attrition for tech services declined by 60 basis points sequentially to 15.2%. The progress reported today is the result of the strategic actions we have taken over the past two and a half years to sharpen our innovation engine and develop our capabilities through investments in AI, engineering, and our platform strategy.

22, bookings. Grew 18% year-over-year translating to trading 12 months growth of 6%.

During the quarter, we landed 6, large deals with tcv of 100 million dollars or greater including 2 Mega deals each valued around 1 billion.

As a result of these wins, the tcv of a large deals, more than doubled year-over-year.

In margin of 15.6% improved by 40 basis points year over year.

We are on track to achieve a 20 to 40 basis points margin expansion goal for 2025.

Grew about 2.

Led by hiring.

For tech services declined by 60 basis points, sequentially to 15.2%.

The progress reported today is the Strategic is the result of the Strategic actions. We have taken over the past 2 and a half years to sharpen our Innovation engine, and develop our capabilities through investments in AI engineering and our platform strategy.

Ravi Kumar: While we are still in the early innings of capturing the AI opportunity, I believe these strategic steps are helping drive our performance. A few data points of our progress include: first, we currently have more than 2,500 early Gen AI client engagements compared to 1,400 in quarter one. Nearly 30% of our code was AI-generated in quarter two, significantly improving the productivity of our developers. This compares to only approximately 20% when we first disclosed this estimate two quarters ago. And thirdly, our AI research labs are accelerating the industrialization of agent-based systems backed by a robust portfolio of 59 US patents. Our areas of research are focused on building AI platforms and tooling to help clients accelerate the embrace of AI and agentic systems in enterprise landscapes. In the current economic environment, clients are prioritizing productivity and value, what we have characterized as vector one.

While we are still in the early Innings of capturing, the AI opportunity, I believe the Strategic steps are helping Drive our performance, a few data points of our progress include first.

We currently have more than 200 early Genai client engagements compared to 1400 in quarter 1.

Nearly 30% of a code was AI generated in quarter 2, significantly improving the productivity of a developers. This compares to only approximately 20% when we first disclosed this estimate to quarters ago.

And thirdly, our AI research Labs is accelerating. The industrialization of agent based systems backed by a robust portfolio of 59 us patents.

Our areas of research are focused on building AI platforms and tooling to help clients accelerate the Embrace of AI and agentic systems in Enterprise landscapes.

In the current economic environment, clients are prioritizing productivity and value. What we have characterized as Vector 1

Ravi Kumar: Our ability to proactively craft AI-driven technology deployments that deliver faster execution, improve productivity, and cost savings is driving several of our large deal wins, including the two mega deals we won in quarter two. We expect vector one to further accelerate as clients underwrite their innovation and growth projects with AI productivity-led savings we are enabling. In the second quarter, out of a subset of our client base of nearly 360 key accounts, 97% of clients have adopted AI, of which 56% are scaling Gen AI, and out of which 78% have demonstrated impact from the adoption and scaling. We are also actively pursuing vector two and vector three opportunities, which we have labeled as industrializing AI and agentifying the enterprise, respectively. This includes proactively helping clients with their AI-led innovation and agentic strategy as we quickly evolve our capabilities from experimentation to scaled production-grade programs.

Our ability to proactively craft ai-driven technology, deployments that deliver faster execution. Improved productivity, and cost savings is driving several of our large deal wins, including the 2, Mega deals, we won in quarter 2,

We expect Vector 1 to further accelerate as clients underwrite their innovation and growth projects with AI productivity. Let's savings. We are enabling.

in the second quarter out of a subset of our client base of nearly 360 key accounts. 97% of clients have adopted AI of which 56% are scaling Genai and out of which 78% have demonstrated impact from the adoption and scaling.

We also actively pursuing Vector, 2 and Vector 3 opportunities, which we have labeled as industrializing Ai. And identifying the Enterprise respectively,

Ravi Kumar: In a scaled and structured manner, we have created cross-service line cohorts anchored by our client partner teams to deliver agentic workshops across our client base. For example, we are combining our strengths in logistics, customer service, and agentic AI to extend our relationship with Lineage, the world's largest owner and operator of temperature-controlled warehouses. Under our new agreement announced earlier this week, we will use powerful tools like agentic AI automation and predictive insights to empower Lineage customer care professionals and help deliver a differentiated experience for their customers. I will touch on a few more examples shortly. Now, I want to update you on our progress against our strategic priorities to amplify our talent, scale innovation, and accelerate growth. First, with amplifying talent, we continue to prepare our workforce for an AI-led future.

This includes proactively helping clients with their AI LED Innovation and agentic strategy. As we quickly evolve our capabilities from experimentation to scaled production grade programs.

In a scaled and structured manner, we have created cross-service line cohorts.

Anchored by our client partner teams to deliver agentic workshops across our client base.

And agentic AI to extend a relationship with lineage, the world's largest owner and operator of temperature controlled warehouses.

Under our new agreement announced earlier this week, we will use powerful tools like agentic AI Automation and predictive insights to empower lineage.

Customer Care Professionals and help deliver a differentiated experience for their customers. I will transfer a few more examples shortly.

Ravi Kumar: We are deepening our talent investments in emerging technology hubs with plans to expand operations in Vishakapatnam. This follows a new site in Gift City, Ahmedabad, and plans for a new 21-acre learning center in Chennai that is expected to train freshers and experienced hires in advanced AI skills. Our talent efforts are reflected in our employee engagement survey completed during the quarter, where scores remain well above industry and best-in-class benchmarks for the third year in a row. Next, with scaling innovation, our engine continues to gain momentum. Earlier this month, we launched Cognizant Agent Foundry, which accelerates enterprise-scale adoption of agentic AI. Agent Foundry is powered by our NeuroAI suite and a strong AI partner ecosystem with hundreds of distinctive agents already available for use. It spans industries and platforms with domain-specific small language models, agent templates, and a library of pre-built agents supporting the full agent lifecycle.

Now, now I want to update you on a program against the Strategic priorities to amplify our talent scale, Innovation, and accelerate growth first with amplifying Talent. We continue to prepare our Workforce for an AI lead future.

We are deepening our talent investments in emerging technology. Hubs

with plans to expand operations in Vishakapatnam. This follows a new site in GIFT City, Ahmedabad, and plans for a new 21-acre Learning Center in Chennai that is expected to train freshers and experienced hires in advanced AI skills.

Our talent of.

are reflected in our Employee Engagement survey completed during the quarter, where scores remain well above industry and best-in-class benchmarks for a third year in a row.

Next with scaling Innovation, our engine continues to gain momentum earlier this month we launched cognizant agent Foundry, which accelerates Enterprise scale, adoption of agentic AI.

Agent founder is powered by our neuro AI suite and a strong AI partner ecosystem, with hundreds of distinctive agents already available for use.

Ravi Kumar: As enterprises reimagine their process and workflows, we are building a repository of reusable agents for rapid deployment into enterprise landscapes. Earlier today, we launched our first-ever wide coding week for all 344,000 of our associates to evangelize an AI-enabled software development cycle as the new and only way to deliver software with the help of our code-assist platform partners. We believe this is the world's largest initiative of its kind, but what excites me most is the opportunity for every associate to build real AI fluency and deliver continued higher productivity to all our clients' project work. Also today, we launched Cognizant AI training data services for global 2,000 clients who are embracing AI models in their businesses. For many years, Cognizant has helped digital native leaders train some of the world's most advanced AI models.

It spans Industries and platforms with domain specific, small language models, agent templates and the library of pre-built agents, supporting the full agent life cycle.

As Enterprises reimagine, their process and workflows. We are building a repository of reusable agents for Rapid deployment into Enterprise landscapes.

Earlier today, we launched a first ever wipe coding week for all 3444, thousand of our Associates to evangelize and AI enabled software development cycle as the new and only way to deliver software with the help of our code assist platform. Partners

We believe this is the world's largest initiative of its kind, but what excites me most is the opportunity for every associate to build real AI fluency and deliver continued higher productivity to all our client project work.

also today, we launched

Ravi Kumar: Working with trailblazers in tech, healthcare, automotive, media, and retail, our more than 10,000 specialists have curated, annotated, and quality-checked billions of data points and millions of data labels across every major modality. This includes speech, 2D, 3D imagery, video, and LiDAR, often enriched with geospatial metadata for added accuracy. Our domain know-how has enabled us to produce high-precision specialized data sets across industries. This new strategic offering will help empower enterprises to quickly build, fine-tune, validate, and deploy production-grade AI models at scale. Thirdly, with accelerated growth, let me share a few examples of our innovation in action. Last month, we introduced Cognizant Autonomous Customer Engagement, a platform built with Google Cloud that uses agentic AI to deliver faster, smarter, and more intuitive customer service. It is a significant advancement, and we have already secured clients in both health sciences and global food sectors.

Data services for Global 20000 clients who are embracing AI models in their businesses. So many years cognizant has helped digital native leaders trained. Some of the world's most advanced AI models,

working with Trailblazers in, Tech Healthcare at Automotive media and Retail, I will more than 10,000 Specialists, have created annotated and quality checked, billions of data points and millions of data labels across every major modality,

this includes speech.

2D 3D imagery video and lighter often enriched with geospatial metadata for added accuracy. A domain know-how has enabled us to produce High Precision specialized data sets across Industries. This new strategic offering will help Empower Enterprises to quickly build finetune validate and deploy production grade AI models at scale. Thirdly with accelerated growth. Let me share a few examples of our innovation in action.

Last month.

We introduced Cognizant Autonomous Customer Engagement to a platform built with Google Cloud that uses agentic AI to deliver faster, smarter, and more intuitive customer service. It is a significant advancement, and we have already secured clients in both health sciences and global food sectors.

Ravi Kumar: We have formed a strategic partnership with a major global biopharmaceutical company to outsource the management of its global IT systems and applications and transform them using generative AI and agentic AI. Our global collaboration is twofold: driving productivity and efficiency by modernizing IT operations, while upskilling and cross-skilling technology specialists who will transfer to Cognizant. This partnership highlights our growing leadership in AI-led transformation, as well as our long-term vision to empower clients through talent development and innovation. Earlier today, we announced a new partnership with Writer, a leader in agentic AI for the enterprise. This collaboration will bring together our deep industry knowledge with the global scale of Writer's end-to-end enterprise-grade platform to enable organizations to build and deploy AI agents with a focus on highly regulated industries. We recently won new business to deliver third-party administration services for a leading insurer's closed book of annuities business.

We have formed a strategic partnership with a major Global bio pharmaceutical company to Outsource the management of its Global ID systems and applications, and transform them using generative, Ai and, and agentic AI.

Our Global collaboration is twofold driving productivity and efficiency by modernizing it operations, while upskilling and cross cross. Killing technology Specialists, who will transfer to Cognizant this partnership. Highlights, a growing leadership in AI Le transformation as well as our long-term Vision to empower clients through talent development and innovation.

Earlier today, we announced a new partnership with writer a leader in agent. AI for the Enterprise, this collaboration will bring together a deep industry. Knowledge, with the global scale of writers, end to end Enterprise grade platform to enable organizations to build and deploy, AI agents with a focus on highly regulated Industries

Ravi Kumar: What makes me particularly excited about this strategic agreement is the next-generation AI platform we'll build to not only modernize the portfolio but also the opportunity for us to scale this AI platform to other clients in the future. And finally, we delivered key TriZetto milestones in quarter two. In May, we completed what we believe is the largest TriZetto Facets cloud migration with a leading North American healthcare payer. We moved over 10 million member records to a containerized cloud environment, improving scalability and stability and achieving new performance benchmarks. In parallel, TriZetto has advanced its agentic AI strategy with nearly 30 agents now live or in pilot and another 10 in development. These agents are streamlining workflows across care management, claims, benefits, and customer service, cutting onboarding time and improving case handling efficiency.

We recently won new business to deliver third-party Administration services for a leading insurers closed book of annuities business.

Prove this AI platform to other clients in the future.

And finally, we delivered key tries to Milestones in quarter 2.

In May, we completed what we believe is the largest T of Facets Cloud migration with a leading North American healthcare pair. We moved over 10 million member records to a containerized cloud environment, improving scalability and stability and achieving new performance benchmarks.

In parallel triso has advanced its agentic AI strategy with nearly 30 agents now live, or in Pilot.

And another tenant development, these agents are streamlining workflows across K management claims, benefits, and customer service.

Ravi Kumar: The underlying foundation of the TriZetto agentic strategy is the TriZetto AI Gateway, which we are pleased to announce will launch next week. Looking ahead, as I've described today and at our investor day earlier this year, we are positioning Cognizant for the generative and agentic AI future. And in the process, I believe we are building a new opportunity, one defined by identification at scale with new client spend cycles. We see this as a once-in-a-lifetime opportunity enabled by a revolutionary technology to reimagine enterprises' work, workplaces, and the workforce. We believe we have a bigger total addressable spend than ever before to partner with our clients on their AI journeys. Our three core strategic imperatives are unchanged, but I want to shift the aperture on our lens to help you see more holistically the steps we have taken to differentiate ourselves in a rapidly changing market.

Cutting onboarding time and improving case handling efficiency.

The underlying foundation of the tetto. Agentic strategy is the Tido AI Gateway, which we are pleased to announce will launch next week.

Looking ahead.

As I've described today and at our investor day earlier, this year, we are positioning cognizant for the generative and agentic AI future. And in the process, I believe we are building a new opportunity. 1 defined by identification at scale with new client, spend Cycles.

We see this as a once-in-a-lifetime opportunity enabled by a revolutionary technology to reimagine Enterprises work, workplaces and the workforce, we believe we have a bigger total addressable spend than ever before to partner with our clients. On the AI Journeys,

Ravi Kumar: I believe the AI wave is different from the prior waves. So too is the way Cognizant is responding. Historically, the most successful companies in our industry thrived by sensing technological shifts and incubating economically viable solutions and new capabilities at scale. To capture the AI opportunity, we recognized and have started building a new layer, one that's in addition to the traditional interdisciplinary capabilities. This new layer includes translating our award-winning AI labs' work to differentiated AI platforms, small language models and tooling to address the accuracy of the models, reasoning layers to help make the technology responsible, investments into the evolving agent development lifecycles. Our pioneering work in context engineering, which is building layers of context, tribal knowledge, data flows, and workflows to create efficient and productive agentic systems, is already making waves with our clients on their agentic journeys.

Our 3 core strategic imperatives are unchanged, but I want to shift the aperture on our lens to help you see more holistically. The steps we have taken to differentiate ourselves in a rapidly changing Market. I believe the AI wave is different from the prior waves.

So to is the way cognizant is responding.

Historically the most successful companies in our industry thrived by sensing technological shifts and incubating economically viable Solutions and new capabilities at scale.

To capture the AI opportunity, we recognized and have started building.

New layer.

In addition to the traditional interdisciplinary capabilities, this new layer.

Includes.

Translating our award-winning AI labs works to differentiate AI platforms.

Small language models and tooling to address accuracy of the models.

Reasoning layers to help make the technology responsible.

Investments into the evolving agent development life cycles.

Are pioneering work in Context Engineering, which is building layers of context, tribal knowledge data, flows, and workflows to create efficient and productive, agentic systems.

Is already making waves with the clients on the agentic journeys?

Ravi Kumar: For now, I call this new layer IP on the edge, a working description in the evolving transitionary phase of agentic AI. Our IP on the edge progress is a very important differentiator in a fragmented and heterogeneous market of AI builders. We believe our early investments in AI, led by IP on the edges, are scaled interdisciplinary capability. Our partnerships are continued focus to diffuse AI efficiently into our project and client services teams have really helped us stay strategic to our clients' AI journeys, which is reflected in our financial, people, and client metrics. In closing, we are proud of our Q2 results. We appreciate that long-term success will be determined by our ability to deliver sustainable performance.

For now I call this new layer IP on the edge, a working description in the evolving, transitionary phase of agentic AI.

Our IP on the Edge program is a very important differentiator in a fragmented and heterogeneous market of AI builders.

We believe our early investments in AI led by IP on the edges are scaled interdisciplinary capability. Our Partnerships, our continued Focus to diffuse AI efficiently into our project and Client Services teams

Have really helped us stay strategic to our clients AI Journeys which is reflected in our financial people and client metrics.

In closing, we are proud of our Q2 results.

Ravi Kumar: That said, while the demand environment remains dynamic, we are encouraged by our continued ability to drive large deal momentum and win a growing number of new spend cycles in vector two and vector three agentic opportunities. Now, I'm going to turn the call over to Jatin.

We appreciate that. Long-term success will be determined by our ability to deliver sustainable performance.

That said while the demand environment remains Dynamic, we are encouraged by our continued ability to drive large deal momentum and win a growing. Number of new spend cycles and Vector 2 and Vector 3 agents.

Now, I'm going to turn the call over to jatin.

Jatin Dalal: Thank you, Ravi, and thank you all for joining us. Our second quarter revenue exceeded the high end of our guidance range, once again earning us a place in the winners' circle based on peer results reported so far. Our Q2 performance was characterized by sharp operational rigor, disciplined cost management, and a productivity-first mindset that helped drive year-over-year margin expansion and EPS growth that outpaced revenue growth. Through the first half of 2025, on a year-over-year basis, we achieved top-tier revenue growth, 40 basis points of adjusted operating margin expansion, and 11% adjusted EPS growth. Now, let's turn to the details of the quarter. Second quarter revenue of $5.2 billion grew 7.2% year-over-year in constant currency. Growth was led by strong organic performance in financial services and health sciences. Veltran contributed approximately 400 basis points of inorganic growth. The demand environment was largely unchanged in the quarter.

Thank you, Robbie, and thank you all for joining us.

Our second quarter Revenue, exceeded the high end of our guidance range. Once again earning us a place in The Winner Circle based on peer results, reported so far

Our Q2 performance was corrected by sharp operational rigor, discipline, cost management, and a productivity-first mindset that helped drive our overall margin expansion and EPS growth, outpacing revenue growth.

Through the first half of 2025, on a year-over-year basis. We achieved top tier Revenue growth

40 basis points of adjusted operating margin expansion.

And 11% adjusted EPS growth.

Now, let's turn to the details of the quarter.

Growth was led by strong organic performance in financial services.

And Health Sciences.

Welcome contributed approximately 400 basis points of inorganic growth.

Jatin Dalal: While visibility is still limited, the ramp of large deals more than offset discretionary spending pressure. Now, let me provide some color by segment and region. All segment and region growth commentary represents year-over-year constant currency growth, unless otherwise stated. Financial services grew 6% year-over-year and led our organic growth with broad-based demand across sub-industries driven by digital engineering, legacy modernization, and vendor consolidation initiatives. These have supported a healthy pace of Gen AI productivity-led deals and GCC opportunities across BSSI. For example, earlier this year, we were chosen as a transformation partner by a large North American bank. This multi-year, multi-hundred million dollar deal has the client partnering with Cognizant in driving talent and technology transformation across the bank's banking and insurance units to support its go-to-market and talent strategies at the right cost.

The demand environment was largely unchanged in the quarter.

While visibility is still Limited.

The ramp of large deals more than offset discretionary spending pressure.

Now, let me provide some color by segments and region.

all segments and region growth commentary represents year-over-year constant currency growth unless otherwise stated

Financial Services grew 6% year-over-year and led our organic growth with broad-based demand across sub-industries driven by digital engineering Legacy modernization, and vendor consolidation initiatives.

This have supported a healthy pace of gen, AI productivity, like deals,

and GCC opportunities across BSI.

For example, earlier this year, we were chosen as a transformation partner by a large North American Bank.

This multi-year multi hundred million dollar deal.

As the client partnering, with cognizant, in driving talent, and Technology transformation, across the bank's Banking, and insurance units, to support, its go to market and talent strategies at the right cost.

Jatin Dalal: While our BSS business continues to build on its strong performance, our insurance business is showing signs of improved growth, supported by strategic engagements with several key insurance clients in North America. Health sciences grew 5% year-over-year, driven by organic growth across payers, providers, and life sciences customers. As we noted last quarter, our clients are navigating a rapidly changing environment. We expect the recent passage of the US budget bill and its changes to Medicaid will weigh on near-term discretionary demand from payers and providers. Meanwhile, life sciences customers face heightened uncertainty related to the tariffs. Despite this uncertainty, we believe our deep domain expertise and strong client relationships position us well as a strategic partner to help healthcare organizations adapt quickly, unlocking new opportunities for innovations, efficiency, and growth. As a great example, one of the mega deals we signed in Q2 was with a large healthcare client.

While our BFFs, business continues to build on its strong performance, our insurance business is showing signs of improved growth.

Supported by strategic engagements with several key Insurance clients in North America.

Health Sciences. Grew 5% year-over-year.

By organic growth across payers providers, and Life Sciences customers.

As we noted last quarter.

Our clients are navigating a rapidly changing environment.

We expect the recent passage of the US budget bill and its changes to Medicaid will weigh on near-term discretionary demand from payers and providers.

Meanwhile, Life Sciences customers face heightened uncertainty.

Related to the Tariff.

Despite this uncertainty, we believe our deep domain expertise and strong client relationships position as well as a strategic partner to help Healthcare organizations adapt quickly.

Unlocking, new opportunities for Innovations.

Efficiency and growth.

As a great example.

Jatin Dalal: Our proactive approach and compelling value proposition helped us extend our long-standing relationship. We are helping this customer drive productivity and fund innovation by leveraging our deep industry expertise, AI skills, and platform investments. In products and resources, growth was primarily attributable to Veltran. Although trade policy uncertainty has tempered discretionary spending, we are seeing demand for cost takeout and productivity-led engagements, areas where our value proposition remains strong. In retail, consumer goods, and travel and hospitality, clients are actively investing in Gen AI pilots aimed at elevating the customer experience. Communication, media, and technology returned to organic growth this quarter, led by the technology sector. We are witnessing robust demand from clients aiming to reduce costs and reallocate capital towards R&D and other CapEx investments. Our expanding expertise in Gen AI is strengthening our position as a strategic partner in the CMT industry, enabling us to secure significant wins.

One of the mega deals we signed in Q2 was with a large healthcare client.

Our proactive approach and compelling value proposition helped us extend our long-standing relationship.

We are helping this customer drive productivity and fund innovation by leveraging our deep industry expertise, AI skills, and platform investments.

In products and resources growth was primarily attributable to welcome.

Although trade policy uncertainly has tempered discretionary spending.

We are seeing demand for cost takeout and productivity Le engagements.

Areas where our value proposition remains strong.

And Retail consumer goods and travel and Hospitality clients are actively investing in Genai. Pilots aimed at elevating the customer experience.

Communication media and Technology returned to organic growth. This quarter led by the technology sector.

We have witnessing robust demand from clients, aiming to reduce costs and reallocate capital towards R&D and other capex Investments.

Our expanding expertise in Genai is strengthening our position as strategic partner in the CMT industry. Enabling us to secure significant wins

Jatin Dalal: An example of this is the mega deal we won in the communications sector in Q2. The partnership encompasses both Gen AI-driven productivity transformation and a good mix of new business through the contract duration. For our client, this deal leverages all three pillars of our AI strategy: accelerating growth through AI-native offerings, enhancing enterprise productivity through AI-driven automation, and transforming customer experience with intelligent personalization. By geography, revenue grew across all major regions. North America led with 8% growth, driven by financial services and health sciences. Continued strength in large deals and disciplined execution enabled us to deliver industry-leading growth again in Q2. We believe we are gaining market share in this region. Europe grew 4%, again driven by growth among life sciences and financial services clients, including the public sector.

An example of this is the Mega deal. We won in the communications sector in Q2.

The partnership and capacities, both GenAI-driven, productivity transformation, and a good mix of new business through the contract duration.

For our client, this deal leverages all 3 pillars of our AI strategy.

Enhancing Enterprise productivity through ai-driven automation.

And transforming customer experience with intelligent personalization.

By geography, Revenue grew across all major regions.

North America, led with 8% growth driven by financial services and Health Sciences.

Continued strength in large deals and disciplined execution enabled us to deliver industry-leading growth again in Q2.

We believe We Are gaining market share in this region.

Jatin Dalal: We are pleased with our momentum in the region, supported by new logos and a revamped sales strategy that have led to an improved large deal pipeline. The rest of the world increased by about 6%, driven by financial services and health sciences from a segment standpoint and by Australia geographically. Now to bookings. As Ravi mentioned, mega deals drove strong bookings this quarter. Second quarter bookings included a balanced mix of new wins and renewals. And trailing 12-month annual contract value, or ACV, increased high single digits year over year. This improved backlog, along with our last 12-month book-to-bill of 1.4 times, supports our full-year revenue outlook. Turning to margins, second quarter operating margin of 15.6% increased by 40 basis points on an adjusted basis, benefiting from next-gen program savings and operational rigor and the Indian rupee depreciation, despite the dilutive impact of Veltran.

Europe, grew 4% again, driven by growth among life, sciences and financial services clients including public sector.

We are pleased with our momentum in the region supported by new logos, and a revamped sales strategy that have led to an improved large deal pipeline.

Rest of the world increased by about 6% driven by Financial Services.

And Health Sciences from a segment standpoint and by Australia geographically.

Now, to book it, as Ravi mentioned, Mega deals, drove strong bookings, this quarter.

Second quarter, bookings included, a balanced mix of new wins and renewals and trailing 12-month annual contract value.

Or ACV increased High single digits year-over-year.

Or 1.4 times.

Support our full year Revenue Outlook.

Turning to margins.

Second quarter, operating margin of 15.6% increased by 40 basis point, on an adjusted basis.

Jatin Dalal: These improvements were partially offset by increased compensation costs and initial ramp-up costs of large deals. Now moving to cash flow and capital allocation. DSO of 83 days increased by two days sequentially and by three days year over year. Second quarter free cash flow was $331 million compared to $183 million a year ago. During the second quarter, we returned $521 million of capital to shareholders through share repurchases and dividends, bringing the first half total to $885 million. We ended the quarter with cash and short-term investments of $1.8 billion, or net cash of $1.2 billion. Before turning to guidance, I'll provide a brief overview of the expected impact from recent changes in US tax laws. In July, the US passed a budget bill which, among other provisions, repealed certain requirements to capitalize research and experimental costs.

Benefiting from NextGen program savings, and operational rigor, and the India Rupee depreciation despite the dilutive impact of welcome.

These improvements were partially offset by increased compensation costs and initial ramp up costs of large deals.

Now, moving to cash flow and capital allocations.

DS of 83 days increased by 2 days sequentially and by 3 days year over year

Second quarter free cash flow was $331 million, compared to $183 million a year ago.

During the second quarter, we returned 521 million of capital to shareholders through, share repurchases and dividends

Bringing the first half total.

To 885 million.

We ended the quarter with cash and short-term Investments of 1.8 billion or net cash of 1.2 billion.

Before turning to guidance, I'll provide a brief overview of the expected impact from recent changes in US tax laws.

In July, the U.S. passed a budget bill, which, among other provisions, repealed certain requirements to capitalize research and experimental costs.

Jatin Dalal: As a result of this change, we expect to incur a one-time non-cash tax expenses of approximately $400 million in the third quarter related to a deferred tax asset on our Q2 balance sheet. This amount would have otherwise been available to offset future taxes related to our non-US earnings. On a cash basis, this legislation is expected to reduce our near-term cash taxes and increase our operating cash flow. In 2025, we expect this improvement to be $200 million, therefore increasing our capital available to return to shareholders. Now, the details of our forward outlook. For the third quarter of 2025, we expect revenue to grow 3.5% to 5% year over year in constant currency. As a reminder, Q3 includes only a partial year-over-year benefit from Veltran acquisition, which closed in August 2024. We expect a little more than 200 basis points of inorganic contribution in the third quarter.

As a result of this change, we expect to incur a one-time, non-cash tax expense of approximately $400 million.

In the third quarter related to a deferred tax asset on our Q2 balance sheet.

this amount would have otherwise been available to offset future taxes related to our non-us earnings

on a cash basis.

This legislation is expected to reduce.

Our near-term cash taxes and increase our operating cash flow.

In 2025, we expect this improvement to be $200 million, therefore, increasing our capital available to return to shareholders.

Now, the details.

Of our forward output.

For the third quarter of 2025, we expect Revenue to grow.

3.5 to 5% year-over-year in constant currency.

as a reminder Q3 includes only a partial year-over-year benefit from balcon acquisition, which closed in August 2024,

We expect a little more than 200 basis points of inorganic contribution in the third quarter.

Jatin Dalal: The remaining guidance items I will discuss are for full-year 2025. We are modestly increasing the midpoint of our revenue range based on our year-to-date performance and improved confidence in the second half. In 2025, we now expect revenue to grow 4% to 6% in constant currency, reflecting a 50 basis point increase at the low end of the range. Revenue details in dollars are available in our press release and supplement. We continue to expect full-year inorganic contribution of approximately 250 basis points. Our revenue guidance is based on current visibility and considers a range of scenarios that could unfold in the second half of the year. The low end of the range continues to assume further deterioration in the demand environment. The midpoint incorporates an unchanged environment with ongoing discretionary weakness partially offset by pipeline conversion.

Discuss are for full year 2025.

We have modestly increased the midpoint of our revenue range based on our year-to-date performance and improved confidence in the second half.

In 2025, we now expect Revenue to grow 4 to 6% in constant currency, reflecting a 50 basis. Point increase at the low end of the range.

Revenue details in dollars are available in our brace release and supplement.

We continue to expect full year inorganic contribution of approximately 250 basis points.

Our Revenue guidance is based on current visibility and considers a range of scenarios that could unfold in the second half of the year.

The low end of the range continues to assume further deterioration in the demand environment.

The midpoint incorporates an unchanged environment with ongoing discretionary weakness, partially offset by pipeline conversion.

Jatin Dalal: And the high end assumes an improved demand environment, further supported by our large deal pipeline. Our adjusted operating margin guidance range remains 15.5% to 15.7%, or 20% to 40 basis points of expansion. We expect margin expansion will be driven by cost discipline and SG&A leverage. In general, we are driving continued operational rigor through AI-led automation and pyramid optimization to support gross margins over the medium. As a reminder, the second half of the year will include margin investments in large deals and a merit cycle. Due to cash flow benefit from the US budget bill I discussed earlier, we now expect free cash flow to represent approximately 100% of net income, excluding the one-time non-cash charge that will be recorded in the third quarter. This has also allowed us to increase our expected return of capital.

And the high-end assumes an improved demand environment.

Further, supported by our large deal pipeline.

Our adjusted operating margin guidance, range remains 15.5 to 15.7% or 20 to 40 basis points of expansion.

We expect margin expansion.

Will be driven by cost discipline and SG&A liberation.

In general, we are driving continued operational rigor through AI layer automation and optimization to support gross margins over the medium term.

As a reminder.

The second half of the year will include margin investments in large deals, and a marriage cycle.

Due to the cash flow benefit from the U.S. budget bill I discussed earlier, we now expect free cash flow to represent approximately 100% of net income, excluding the one-time non-cash charge that will be recorded in the third quarter.

Jatin Dalal: For the full year, we plan to return $2 billion to shareholders, an increase of $300 million from last quarter, driven by higher expected share repurchases. In total, we expect to deploy approximately $1.4 billion in repurchases this year. Even with this increase, we maintain flexibility to pursue opportunistic M&A this year. Other than the one-time non-cash tax charge I discussed, we don't expect the budget bill to impact our effective tax rate. Therefore, our adjusted tax rate guidance, which will exclude the one-time charge, is unchanged at 24% to 25%, but is trending towards the lower end of the range based on first half performance. We are increasing our EPS guidance range to $5.08 to $5.22, compared to our prior range of $4.98 to $5.14, reflecting our revised revenue guidance and favorable foreign currency rates. This represents 7% to 10% year-over-year growth.

This is also allowed us to increase our expected return of capital.

For the full year, we plan to return $2 billion to shareholders, an increase of $300 million from last quarter, driven by higher expected share repurchases.

In total, we expect to deploy approximately 1.4 billion dollars in repurchases this year.

Even with this increase, we maintain flexibility to pursue opportunistic m&a this year.

Other than the 1 time non-cash tax charge. I discussed we don't expect the budget Bill to impact our effective tax rate.

Therefore, our adjusted tax rate guidance, which will exclude the 1 time charge.

is unchanged at 24% to 25%.

But is trending towards the lower end of the range based on first half performance.

We are increasing our EPS guidance range to $5.08 to $5.22.

Compared to our prior range of $4.98.

To $5.14.

Reflecting, our revised Revenue guidance and favorable, foreign currency rates.

This represents 7 to 10% year-over-year growth.

Jatin Dalal: We expect a weighted average dilutive share count of about 489 million versus 491 million previously. With that, we'll open the call for your questions.

We expect a weighted average dilutive share count of about 489 million, compared to 491 million previously.

With that, we'll open the call for your questions.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press *1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press *2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the * keys. In the interest of time, we ask that you limit yourself to one question and one follow-up. One moment, please, while we poll for questions. The first question comes from Tianxin Huang with JP Morgan. Please go ahead.

Thank you.

We will now be conducting a question and answer session.

If you would like to ask a question, please press star 1 on your telephone keypad,

A confirmation tone. Will indicate your line is in the question key?

you may press star and 2 if you would like to remove your question from the queue,

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

In the interest of time, we ask that you limit yourself to 1 question and 1 follow-up.

1 moment, please while we Poll for questions.

The first question comes from tensen, Huang with JP Morgan. Please go ahead.

Tyler Scott: Thanks so much. Good afternoon. Really, really strong bookings here, so I'll ask on that if that's okay. I think I heard a pretty balanced mix of renewals and new deals, so I just wanted to clarify that. And it sounds like you're seeing early renewals with clients looking to implement AI efficiencies. So I just want to clarify that because, you know, we're all looking ahead and thinking about the pipeline. So I'm curious if you can replenish the pipeline and what's your outlook for bookings in the second half of the year.

Pretty balanced mix of renewals and new deals. So, just wanted to

Clarify that, and it sounds like you're seeing early renewals with clients looking to implement AI efficiencies. So just want to clarify that because, you know, we're all looking ahead and thinking about the pipeline. So, I'm curious if the you can replenish the pipeline and and what your outlook for, for bookings and, and the second half of of the year.

Ravi Kumar: Jatin, thank you for the question. This is Ravi here, and I'll ask Jatin to add. We had a good bookings mix. I mean, 18% Y-on-Y, 6% trailing 12 months, a good mix of renewals and new business, six large deals, two mega deals, more than a billion dollars. I wouldn't say clients are proactively pushing and renewing earlier. There are occasional opportunities of that kind. I would equally say that clients are looking for sharing productivity when the renewal cycles come. And if we see an opportunity where we can sole source and originate a deal, even if we are an incumbent because we can actually share the benefit and create a bigger estate for ourselves, we are actually proactively reaching out to clients wherever we can if we have the ability to create that value for the client and for ourselves.

Yep. And thank you for the question. This is Ravi your and I'll ask Jan to add. Um, we had a good booking, uh, mix. I mean 18%, why and why 6%? Um,

Uh, trading 12 months.

Uh, good mix of Renewables and new business.

6 large deals; 2 mega deals, more than a billion dollars.

Um, I wouldn't say clients are.

Proactively pushing and renewing earlier.

There are occasional opportunities of that kind.

Uh, I would equally say that clients are looking for sharing a productivity when the renewal Cycles come.

and if we see an opportunity where we can source,

And originated a deal. Even if we are an incumbent because we can actually uh, share the benefit and create a bigger estate for ourselves. We are actually proactively reaching out to clients wherever we can. If we have the ability to create that value for the client and for ourselves.

Ravi Kumar: I'm also, you know, one of the things in the last few quarters Tinchit was mostly large deals, and momentum was related to productivity, consolidation, and AI-led productivity. Now we are starting to see innovation-led deals. I call them vector two and vector three. We're starting to see innovation-led deals, which is very encouraging because that is new spend cycles for our clients, and it kind of, you know, it kind of aligns to growth imperatives of our clients. So this is the first quarter where we're seeing a combination of large deals, small deals. Our ACV numbers are going up. Our ACV numbers are going up, which is very, very exciting because the monetization of billings to revenue will be faster. It's gone up sequentially, gone up Y-on-Y. A combination of renewals and new, small and big.

Um, I'm also, you know, one of the things in the last few quarters that was mostly large deals, and momentum was related to productivity consolidation. And, um,

Uh, and um, AI LED AI LED productivity.

Now, we are starting to see Innovation LED deals, I call them Vector 2 and Vector 3.

We're starting to see Innovation that deals which is very encouraging because that is a new spend Cycles from a clients.

And uh, it kind of uh, you know, it kind of uh aligns to growth imperatives of our clients. So we are this is the first quarter where we see the combination of

Large deals. Small deals are ACV. Numbers are going up.

Uh, our ACV numbers are going up, which is very, very exciting because the monetization of Billings to revenue will be faster.

It's gone up sequentially. It's gone up by, and why?

Ravi Kumar: I mean, the big mega deals have, we have sustained the momentum, and we're now seeing productivity and innovation both layering together. So it's probably one of the most healthy mixes of how I see bookings shaping up, and hopefully, it kind of continues that way for the rest of the year.

Uh, combination of renewables and new small and big. I mean, the big mega deals have...

We have sustained the momentum and we are now seeing productivity and Innovation both layering.

Uh, layering together. So it's probably 1 of the most healthy mixes uh, of how I see bookings shaping up.

And um, hopefully it it it kind of continues that way for the rest of the year.

Jatin Dalal: Tinchin, as we look at pipeline, we continue to feel good about what we have and how we are shaping the pipeline. So, yes, it's been a great quarter, but we continue to work hard to add more to our pipeline as we look at the second half of the year.

Thank you, as we look at pipeline. Uh, we continue to feel good about what we have and how we are shaping the pipeline. So, uh, yes it's been a, a great quarter, but we continue to work hard to add more to our pipeline as we look at the second half of the year.

Tyler Scott: Great. No, that's interesting. Good color. Thank you for that. Just my, and thank you for sharing the ACV comment, both of you. Just wanted to quickly follow up, just gross margin outlook. You mentioned deal ramps, of course, is contract execution. So these deals are coming on. Any considerations for gross margin as we look to the second half of the year? Thank you for the time.

Great message saying good color. Thank you for that. Just my and thank you for sharing the ACV. Comment, both of you. Um, just on the quickly follow up. Just gross margin Outlook. You mentioned, Theo ramps, of course, this contract execution. So these deals are coming on. Um, any considerations for gross margin as we look to the second half of the Year, thank you for my for the time.

Jatin Dalal: We will continue to execute well. If you see our utilization for the first half, it's approximately 2 percentage points higher than the first half of 2024. We are doing some investments as we execute the second half. You saw that the headcount has actually gone up by 7,500 employees. And so that's the play that we have, Tinchin, as we execute. We'll have to constantly balance how well we use our resources, but at the same time, continue to evolve our resource mix for the demand that we see in the marketplace. And that will shape our gross margin. There is an overlay of the investments that we make as we ramp up our large deals, and we have won two of them in quarter two. So that overlay also will play out in the second half of the year.

Uh, we will continue to execute. Well, if you see our utilization for the first half, it is approximately 2 percentage points higher than the first half of 2024.

uh, we are

doing some Investments as we execute the second half. You, you saw that the headcount has actually gone up by 7,500 employees. And, and, uh, so that's the play that, that we have, I think Jane, as we as we execute, will have to constantly balance, how well, we use our resources, but at the same time, continue to evolve our resource mix, um, uh, for for the, for the demand that we see in the marketplace and that will shape.

Our gross margins have an overlay of...

Jatin Dalal: We have done so far well in terms of a stable gross margin year over year. We have done slight improvement sequentially. So we'll continue to work on this path as we move forward.

Ravi Kumar: And those two mega deals have sizable new component, new business component.

Feels then slight Improvement sequentially. So, we'll continue to work on this path, uh, as we move forward and those 2 Mega deals have uh, uh, sizable, new new new component, new business component.

Tyler Scott: Understood. Thank you.

Understood, thank you.

Operator: Thank you. Our next question comes from James Fawcett with Morgan Stanley. Please go ahead.

Thank you.

Our next question comes from James Faucet with Morgan Stanley. Please go ahead.

Tyler Scott: Great. Thank you so much. Appreciate all the details here. I want to probably touch on kind of the work that you've been doing. And I'm intrigued by, as you characterize it, vector one, vector two, vector three. We've noticed the number of patents that you've been awarded. You talked about on today's call about having 100 agents or so available. Can you just talk about how you're pricing those and incorporating those into deals and putting together that structure? That's a question we get a lot from investors is how to think about some of this IP cognizance developing that's unique to it and how to think about its impact on the business, both from a pricing as well as a business opportunity standpoint.

Great. Thank you so much. Um, appreciate all all the details here. I want to probably touch on, um, kind of the, the work that you've been doing. And I'm I'm intrigued by as you characterize it back to 1 back to 2 back to 3, we've noticed the number of of patents. Um, that you've been awarded you talked about, on today's call about having, uh, 100 agents or so available. Do you just talk about how your pricing those and incorporating those into to, um, deals? And, and putting together that structure, that's a question. We get a lot from investors is how to think about some of the site P. Cognizance developing that you need to and, and how to think about it, it's, it's impact on the business both from a pricing as well as um, business opportunity, standpoint.

Ravi Kumar: Yeah, that's a great question. Well, you know, I think for the first time, we have an opportunity to really make it mainstream, you know, outcome-based. This is an evolving space. I think the differentiation for the IT services sector, and I've mentioned this in my remarks, is no longer about just building capability. It's actually about interdisciplinary capability layered with IP on the edge, as I call it. IP on the edge because this is last-mile infrastructure needed to get enterprise-grade AI or agentic. We have invested heavily on sensing them and converting them into platforms, tools, and reusable agent components in our foundry. It certainly gives us the opportunity to make it sticky, as well as to create some premium attached to it. Early days, but I'm very optimist. I'm very pleased, and I'm very optimistic about the fact that we have created a real differentiation for ourselves.

Yeah, that's a great question. Um, um, well, you know, I think for the first time we have an opportunity to

Uh, really make it mainstream.

you know, outcome based

Um, this is an evolving space.

um, I think the differentiation for the ID Services sector,

And I've mentioned this in my remarks.

Is no longer about just building capability, it's actually about.

Interdisciplinary capability layered with IP on the edge. As I call it, uh, it on the edge because this is the last-mile infrastructure needed to...

Get enterprise-grade AI or agentic. We have invested heavily in sensing them and converting them into platform tools.

Um, and, uh, reusable agent components in our Foundry.

Uh, it's certainly gives us the opportunity to make it sticky as well as to create some premium attached to it early days.

But I would, I would I'm I'm very Optimist, I'm very pleased and uh I'm very optimistic about the fact that we have created a real differentiation for ourselves.

uh, the

Ravi Kumar: Just the real opportunity now is to continue building on it. I mean, we are starting to think about small language models. We're starting to think about areas where, when you hit the finishing line, you need things which are not going to be available, either by software companies or by the companies which are establishing the plumbing, which is like, how does an application, how does an agent development cycle look like? We are investing into it. We are investing into, you know, for the first time, there is a revolutionary technology which is now going to disrupt every process, every workflow, every data flow in a company. How do we create the ontology around it and package it into the things we can hand over to our project teams so that that becomes real? So this is fast evolving.

Just the the the real opportunity now is to continue building on it. I mean we are starting to think about small language models. We're starting to think about areas where when you hit the Finishing Line.

You need things, which uh, are going to be available either by software companies or by the companies, which are establishing the plumbing, which is like, how does an application. How does the agent development cycle? Look like,

We are investing into it. We are investing into

Uh, you know, for the first time, there is a revolutionary technology which is now going to disrupt every process, every workflow, and every data flow in a company.

Uh, how do we create the ontology around it and package it into into the things we can?

Hand over to our project team. So that that becomes real.

Ravi Kumar: I'm excited about how we could price it, how we could bundle it. And this is very different to productivity. Productivity, you share it with clients, while innovation capital, you can monetize in a nonlinear way. So we will continue to invest and continue to shape this narrative. And I think this is going to be our single biggest differentiator as we take our customers into agentic journeys. What's also happening, I did mention this in my remarks, this is not just about identifying a process or a function in a company. In addition to that, it's also an opportunity to run that process on behalf of the company, which then means there is a new spend area which we are going to capture. And that's why I said the total addressable spend is higher than before.

Um so this is uh first evolving. I'm excited about how we could price it, how we could bundle it and this is very different to productivity productivity. You share it with clients.

uh, while Innovation Capital you you you can monetize uh,

In a nonlinear way.

So, uh, so we will continue to invest and continue to shape this narrative. And I think this is going to be our single biggest differentiator as we take, uh, as we take our customers into agentic Journeys.

What's also happening? I did mention this in my remarks.

This is not just about identifying a process or a function in a company.

in addition to that, it's also our opportunity to

Run that process on behalf of the company, which then means there is a new spend area, which we are going to capture. And that's why I said the total addressable spend

Ravi Kumar: I mean, there are things we just applied technology and allowed our clients to run that now clients are saying, "Wait a minute. If there's digital labor and human labor, and they're going to come together, say, for a customer care function, are you better suited to run the customer care function?" Which means the pie is going to increase because it's not just the technology, but we have to run the process. We have to run that function on behalf of a company. So we are starting to think about how do we go and pitch to clients on process functions which are amenable for a partner to come and run it on their behalf with digital and human labor. So higher addressable spend, elasticity to pricing, and the ability to capture new talent pools, new spend pools.

Uh, is higher than before?

I mean, there are things, we

Just applied technology and allowed our clients to run that. Now clients are saying, "Wait a minute, if this digital labor and human labor are going to come together, say for a customer care function, are you better suited to run the customer care function?" Which means the PI is going to change and is going to increase because.

So we are starting to think about how do we go and Pitch to clients on process functions.

Ravi Kumar: And of course, the talent we need is going to be interdisciplinary between domain and technology. So we're seeing some good, exciting examples with our partnerships with our clients.

Uh, which are, uh, which are available for a partner to come and run it on on their behalf with digital and human labor. So higher addressable spend elasticity to pricing and the ability to capture new Talent pools new, uh, spend pools. And of course, the talent we need is going to be interdisciplinary between domain and Technologies. So,

you're seeing we're seeing some good exciting examples uh, with our Partnerships with the clients

Tyler Scott: That's great. And then I wanted to touch on capital allocation. Back at the analyst meeting earlier this year, you talked about spending up to half of free cash flow on acquisitions. Just wondering if you can give an update on progress on pipeline there and what you're seeing from a valuation perspective, etc.

That's great. And then I wanted to to touch on Capital allocation back at the analyst meeting. Earlier this year, you talked about spending up to half of free, cash flow on Acquisitions. Just wondering if you can give a an update on progress on Pipeline there and what you're seeing from a valuation perspective, Etc.

Jatin Dalal: Sure. James, we covered two aspects at the investor day, and I will cover them again. The first is the capital allocation that we have spoken about for 2025, and second is the long-term capital allocation plan. So for 2025, we had spoken about returning $1.7 billion to our shareholders at the investor day, which we have further increased to $2 billion, as I covered in my opening remarks. And of that $2 billion, $1.4 billion is for share repurchases, and $600 million is towards dividends. And that leaves us approximately with about $500 million for M&A for this year, and we have a decent pipeline to think about it in the second half of the year. Now, let me touch about the overall long-term capital allocation policy. That remains 50/25/25, which is 50 for M&A, 25 for the share buyback, and 25 for dividends.

Sure. Uh since we we covered 2 aspects at uh at the investor day and um I will cover them again. The the the first is the capital allocation.

That we have spoken about for 2025 and second is the long-term capital allocation plan? So for 2025, we had spoken about returning, 1.7 billion.

Uh, to our shareholders at the Investor Day, which we have further increased to $2 billion, as I covered in my opening remarks. Of that $2 billion, $1.4 billion is for share repurchases, and $600 million is towards dividends.

And and that leaves us approximately with about 500 million dollars for m&a for for this year. And and we have uh a decent pipeline to think about it in the second half of of the year.

now, let me touch about the overall long-term, um, Capital location of policy, uh, that remains 502525, which is 54, I mean, a 25 for, uh, the share buyback and, uh, 25 for dividends

Tyler Scott: That's great. Thanks very much, guys. Have a good day.

Jatin Dalal: Thank you.

That's that's great. Thanks very much guys. Have a good day.

Thank you.

Operator: Thank you. Our next question comes from the line of Jonathan Lee from Google and Partners. Please go ahead.

Thank you.

Tyler Scott: Great. Thanks for taking my question. You laid out the range of assumptions embedded in your full-year outlook, but can you help frame how we should think about that as it relates to your 4Q exit rate? Are you assuming any sort of change in velocity in the business given some of the embedded deceleration in that back half?

Our next question comes from the line of Jonathan Lee from Google and Partners. Please go ahead.

Great. Thanks for taking my question. You laid out the range of assumptions embedded in your full-year outlook, but can you help frame how we should think about that as it relates to your Q4 exit rate? Are you assuming any sort of change in velocity in the business, given some of the embedded deceleration in that back half?

Jatin Dalal: So thank you for that question. You know, really, where we land in quarter four is a factor of quarter three performance and quarter four performance and nearly half of the year to go. Really, as a range, given the current uncertainty, it's a wide range today. At the lowest end, it's a negative number. At midpoint, we see that exit number around 1%. And at the upper end, that is just under 4%. So we have flexibility within the range to execute, and we believe we'll continue to execute within that range in the way we have done so far. But it's a wide range, and we are not, I mean, we always mention that we are anchored around the midpoint of our guidance, but we always endeavor, of course, to do our best as we execute during the course of the year.

So, uh, thank you for that question. You know, uh, really.

How where we land in quarter 4 is is a factor of quarter 3 Performance and quarter, 4 performance, and and really half of the year to go.

Um, really as a as a range, uh, given the current uncertainty as a wide range today, uh, at the lowest stand, it's a negative number at midpoint, we see that exit number around 1% and at at the upper end that is just under 4%. So we have flexibility within the range to execute. Uh, and, and we believe will continue to execute uh, within that range in in, in, in the way we have done, uh, so far. Uh, but it's a wide range and we are not. I mean, we, we are always mentioned that, we are anchored around the midpoint of our guidance, but we always Endeavor, of course, to to, to do

Best as we execute during the course of the year.

Tyler Scott: I appreciate that insight. And given some of the demand-related puts and takes you laid out in your prepared remarks, can you help unpack which verticals and geographies you'd expect to maybe decelerate versus accelerate for the remainder of the calendar year, especially considering some of the large deal ramps you're anticipating?

I appreciate that insight and the demand-related puts and takes you laid out in your prepared remarks. Can you help unpack which verticals and geographies you'd expect to maybe decelerate versus accelerate for the remainder of the calendar year, especially considering some of the large deal ramps you're anticipating?

Ravi Kumar: Yeah. So look, you know, we've had financial services doing pretty well. This is the fourth consecutive quarter we've been able to do Y-on-Y growth in almost the whole year. We have actually three quarters now sequentially we've been growing in financial services. That's a sector I'm very excited about. It's unlocking innovation dollars, not just dollars related to productivity. And whenever you unlock innovation dollars, you know, it's related to revenue, related to growth. So it's always exciting. I see healthcare as an opportunity. I mean, as we talk, there is just a thought out of the press: make American healthcare technology great again. And that opportunity is all about applying technology to reduce the operational overhead overhang on that sector. It's been a sector which hasn't as much embraced technology, and it has been fragmented all the way from payer providers and pharmacies.

Yeah. So uh

Look, you know, we've had

um,

Financial Services is.

Doing pretty well. Uh, this is

The fourth consecutive quarter. We have, uh, we've been able to do why and why growth in.

Uh, almost the whole year we have actually three quarters. Now, sequentially, we've been growing in financial services. That's a sector that I'm very

excited about

It's unlocking Innovation dollars, not just, uh,

Not just uh, uh, dollars related to productivity; and whenever you unlock Innovation dollars, you know it's related to revenue and growth, so it's always exciting.

Uh, I see Healthcare as a opportunity. I mean, uh, as we talked there is a

American Healthcare technology. Great again.

Uh, and um, that opportunity is all about applying technology to reduce the operational overhead and overhang on that sector. It's been a sector which...

Has, uh, which hasn't as much?

Um, we have embraced technology, and it has been fragmented all the way from.

Ravi Kumar: So we see that as a sector where we have strength as well. So we're going to see that. I mean, this is also the first time over the last few quarters our comms and technology sector has gone into a positive zone, and we are starting to improve in products and resources. So effectively, you know, if you see the performance of this quarter, it's been all-round performance, including our geo-based. If you double-click on our geo, even if you take the Belt and numbers out, all three geographies, Asia-Pacific, Europe, and the US, US on a big base. I mean, amongst our peers, if you look at it, we are doing significantly well in the US. So it is reflective of all-round performance, all-weather company, a durable and a more sustainable momentum for us.

Um, you know, payer, provider, and pharmacies. So, we see that as effective where we have strength as well.

So, we are going to see that. I mean, this is also the first time, over the last few quarters, our Comms and Technology sector has gone into a positive zone.

And uh we are starting to improve in uh, products and resources. So effectively, you know, if you see the performance of this quarter,

Uh, including a geo-based, uh, if you if you double-click on a geo, even if you take the P&L numbers out,

Uh, all three geographies: Asia Pacific, Europe, and the U.S.—uh, the U.S. has a big base. I mean, amongst the peers, if you look at it, we are doing significantly well in the U.S. Um, so it is reflective of, uh,

Ravi Kumar: So I'm optimistic about all-round, continued all-round performance as we go forward into the second half.

Our all-out performance and all-weather strategy provide a durable and more sustainable momentum for us. So,

I'm optimistic about all-around continued performance. As we go forward into the second half,

Tyler Scott: Thanks for that call, Ravi.

thanks for that color Robbie.

Operator: Thank you. Our next question comes from the line of Jamie Friedman with SIG. Please go ahead.

Thank you.

Our next question comes from the line of Jamie Freedman with Sig, please go ahead.

Jamie Friedman: Thank you for taking the questions. So Ravi, if you go back to the three-vector approach that you've articulated, enabling hyperproductivity was one, industrializing AI was two, identifying the enterprise is three. And I know you just recently laid these out at the analyst day, but I'd just be curious if you could update us your perspective as to which of those, because the chronology that you had described was that it's now for all of them. Are any of those ahead of the others? You know.

Uh, thank you for taking the questions. So um,

Right? If you go back to the three that you've articulated enabling,

Hyper productivity was 1 industrializing, AI was 2, a gentrifying, the Enterprises 3. Um and I know you just recently made these out of the analyst day but I just be curious.

If you could update us on your perspective regarding which of those—because the chronology that you described was that it's now for all of them.

Um, are any of those ahead of the other?

Ravi Kumar: Great question. Of course, the vector one is significantly ahead of the other two. It is, you know, timed in a way that we are in an uncertain market, slow market. Clients are looking for value, and some clients are underwriting those savings for innovation. So vector one has been, I mean, look, we did 29 large deals last year. We did 17 in 2023. We've been on this journey for a while, and we've been doing very well on it. I mean, on productivity, which we commit to our clients, we have been able to deliver as well as keep the savings what we can for ourselves. I mean, I'm doing very well on bid versus bid and productivity. We have today, just today, we ran this huge event in Cognizant to get everybody onto code-assist platforms. So productivity is probably ahead of the other two.

You know, uh, great.

Significantly ahead of.

It is, you know, timed in a way that we are in an uncertain market. Slow market clients are looking for value.

And sometimes, we are underwriting those savings for innovation. So, Vector 1 has been, I mean, look, we did 29 large deals last year, and we did 17 in 2023. We've been on this journey for a while.

And we've been doing very well on it. I mean, on productivity, which we commit to our clients, we have been able to deliver as well as keep it, keep the savings what we can for ourselves. I mean, I mean I'm doing very well on bid versus trade and

Productivity we have today. Just today, we ran this huge event in Cognizant to get everybody on to.

Ravi Kumar: On the second and third, they're interlinked. I mean, they're interlinked because you do the second to lay the foundation for the third. But I'm actually surprised that the third is catching so much momentum. I wouldn't have said this a quarter ago, but so much momentum: customer care, F&A, financial services as an industry, healthcare. Now our healthcare Triledo platform has agents which our clients are trying to embrace. So identification of an enterprise, not looking at identification as the purpose, but looking at reducing, you know, elapsed times or increasing throughput or straight-through processing or a completely new experience. Clients are experimenting, and you just see the numbers. 1,400 projects we had last quarter. That number was incrementally moving, and this quarter we had 2,500 projects. So it's suddenly almost close to double.

Uh, you know, um, Code Code. Assist platform. So productivity is probably ahead of the other two.

On the second and third interlink, I mean the interlink because you do the second to lay the foundation for the third.

But I'm actually surprised that the third is catching so much momentum. I couldn't, I wouldn't have said this, um, a quarter ago, but so much momentum in customer care, FNA Financial Services as an industry.

Healthcare. Now, our healthcare Try Zero platform has agents, which...

A client's are trying to embrace the identification of an enterprise.

Not looking at identification as the purpose, but looking at

Reducing.

you know, elapsed times or increasing throughput or

Straight-through processing or completely new experience, clients are experimenting and just see the numbers: 1,400 projects. We had last quarter.

that number was for was incrementally moved and this quarter, we are at 2500 projects.

So if suddenly almost close to double.

Ravi Kumar: So I would say stable on a runway vector one, and vector two and vector three is trying to catch up like a hockey stick now. I mean, that's the right, you know, I always expected it that way. More spend will happen, more unlock of dollars will happen, and when that happens, the excitement of using AI for growth, using AI for creating new products and new services will drive additional spend cycles, which we want to capture: additional labor pools and additional spend cycles. So.The

Um, so I would say

Stable.

On a Runway Vector 1 and Vector 2. And Vector 3 is trying to catch up like a hockey, stick tile. I mean, that's the right, you know, I always expected it. That way more spend will happen, more unlock of dollars will happen. And when that happens,

uh, the excitement of using AI for growth using AI for, uh, for uh, creating new products and new services will drive uh will drive additional spend Cycles, which we

Tools and additional spend Cycles.

so,

Ravi Kumar: runway on productivity will start to slow down, and the runway on innovation will start to take off.

The runway on productivity will start to slow down, and the runway on innovation will start to take off.

Jatin Dalal: And then for my follow-up, this time last year, you used to talk about the swim lane of cost takeout. And that was the, was and may remain the theme. This time, though, you're mentioning the word innovation more. I'm just trying to reconcile that with, short duration discretionary. I mean, when you say innovation, does that mean short duration discretionary? Because it doesn't seem like your guidance contemplates much cadence there, but your commentary does.

And then for my follow-up. Um, this time last year you used to talk about the swim Lane of cost takeout

And that was the way and may remain the theme this time, though you're mentioning the word "Innovation" more. I'm just trying to reconcile that with, um, short duration, discretionary. I mean, when you say "Innovation," does that mean short duration? Discretionary? Because it doesn't seem like your guidance contemplates much cadence there, but.

Ravi Kumar: You know, part of it also gets to cost in the second cycle, you know, Vector 2 and 3, even if it's innovation-led. I mean, productivity, the way I defined it, was software development cycles. That's how I defined it. We went from 20 to 30%, written by machines. The way I define innovation is, even if you're doing it to reduce the cycle time, you're doing it to reduce, operational cost, but you're doing it in an innovative way. I'll give you examples. Say, if you go to a bank and say, you know, I can reduce your know your customer cycle to two days or one day versus four or five days using agentic. You could arguably say better experience, higher throughput, faster, you know, velocity, which is also reduced costs. So clients are looking at some of that, which is self-service, self-served, if I may.

But your commentary does.

so, part of

Software development cycles—that's how I defined it. We went from 20% to 30%, um, written by machines.

The way I define innovation is even if you're...

If you're doing it to reduce the cycle time,

You're doing it to reduce operational costs, but you're doing it in an innovative way. I'll give you an example. Say, if you go to a bank and say,

You know, I can reduce your know, your customer cycle to 2 days.

Or 1 day versus 4 or 5 days using agent Tech.

You could arguably say a better experience.

Higher throughput faster, you know velocity which is also reduced cost. So clients are looking at

self.

service self-serve, if I may,

Ravi Kumar: I mean, we announced a deal on customer care, which is for a logistics company called Lineage. I mean, that was a combination of things, experience, cost, everything put together, but it's agentic. So there is still runway on productivity because productivity has only got to 30%. I mean, 30% is average. I have myself said that writing code from machines could be 50% in one year. I've said this before in some of my podcasts, and that is true. That is catching up. So I think there is headroom there. There is non-linearity there. But my excitement is more about the innovation side of it because as enterprises start to see the value, they will flip to newer products, newer services, growth, and using agentic to get there.

I mean I we we announced a deal on, uh, on customer care.

Uh, which which is for, for a logistics company called lineage.

I mean, that was a combination of things—experience, cost, everything put together, but it's agentic.

So,

there is still runway on productivity because productivity has only got to 30%. I mean, 30% is average.

Uh, I have myself said that, um,

Riding code from machines could be 50% in 1 year. I've said this before in.

In some of my uh podcasts and that is true, that is catching up. So I think there is a there is Headroom there, there is nonlinearity there, but I my excitement is more about the Innovation side of it because as

Enterprises start to see the value. They will flip to newer products, newer, Services growth and using agentic to get there.

Jatin Dalal: Thank you.

Thank you.

Jatin Dalal: Thank you. The next question comes from Brian Bergen with TD Cohen. Please go ahead.

Thank you.

The next question comes from Brian Bergin with TD Cohen, please go ahead.

Operator: Hi, guys. Thanks for taking the question. I wanted to ask on the healthcare headwinds versus potential offsets here. So is there any way to frame how much the BBB may be incrementally weighing on growth in that segment versus what you thought 90 days ago? Any commentary on how you see healthcare moving through the second half of this year? And then where are the offsets in the business if there are incremental headwinds?

Hi guys. Thanks for taking the question. I wanted to ask about the healthcare headwinds versus potential offsets here. So, is there any way to frame how much the BVB may be incrementally when growth in that segment versus what you thought 90 days ago? Any comments around how you see healthcare moving through the second half of this year, and then where are the offsets in the business if there are incremental headwinds?

Ravi Kumar: You know, I don't see, I mean, the way I see this is our exposure to Medicaid and Medicare is not a lot, right? We, you know, it's a, you know, we have a lot of commercial healthcare, a lot of payer business and provider business. And of course, we also have a fairly big exposure to life sciences. Life sciences is actually spending more than before. They will take the money from, they will take the money from productivity and move it to innovation because innovation cycles are going to be run by technology and life sciences. In healthcare, the United States, it's predominantly the United States, almost all the problems you can talk about are related to productivity, related to outcomes. And, you know, based on what I know, technology is the only way you can come out of it.

You know, I don't see. I mean, the way I see it, our exposure to Medicaid and Medicare is not a lot, right? We, you know, it's...

A, um, it's uh, you know, we have a lot of commercial Healthcare.

uh,

A lot of pair business and provider business, and of course, we also have a fairly big exposure to Life Sciences.

Life Sciences is actually spending more than before they, they will, they will they will take the money from, you know they will take the money from productivity and move it. Move it to Innovation because Innovation Cycles are going to be run by technology and life life sciences.

In healthcare, United States is predominantly United States.

Almost all the problems you can talk about are related to productivity.

Ravi Kumar: So I would categorize healthcare as an opportunity of winning in the terms, more productivity in that because that is the need of the hour. It will not be as much innovation like I spoke in my previous thing. But I would categorize that opportunity as, I mean, one of the deals we did, one of the billion dollars deals we did was a healthcare company. And they did it because they wanted to, you know, unlock the productivity from AI-led transformation. And we've been able to create a win-win situation. So I'm going to see more of those opportunities in healthcare versus financial services, which will be more innovation-led.

Uh, outcomes, and you know, based on what I know, technology is the only way you can come out of it. So, I would categorize healthcare as an opportunity for winning in terms of more productivity-led outcomes, because that is the need of the hour.

It will not be as much Innovation, like I spoke in my previous thing.

Uh, but I would be uh, I would, I would categorize that opportunity as I mean, 1 of the deals we did the 1 of the billion dollars of deals, we did was a was a Healthcare Company.

And they did it because they wanted to, um, you know, um, unlock the productivity from AI LED.

Opportunities.

uh, in healthcare versus Financial Services, which will be more Innovation like

Operator: Okay, understood. And then Ravi, just a question for you as it relates to kind of a convergence of IT services and BPM. There's obviously a deal announced here recently in the space. How are you thinking about that dynamic from the standpoint of organic capabilities you have in Cognizant now versus inorganic targets to ensure you have that deep domain expertise and broader process depth as you talk about digitizing and gentrifying client operations and then running them?

Okay, understood and then Robbie just a question for you as as it relates to kind of the convergence of IT services and BPM. There's obviously a deal announced here recently in the space. How are you thinking about that Dynamic from the standpoint of organic capabilities? You have in cognizant Now versus inorganic targets to ensure you have that that deep domain expertise and broader process depth. As you, you talk about, you know, digitizing engineering client operations and then running them.

Ravi Kumar: Great question again. I mean, look, you know, originally everybody thought applying technology, applying AI to operations will be the first thing to do. But sequentially, the way this shaped up is we first applied it to software development cycles. Now the lens is on operations. And I would actually believe that operations, data, AI, agentic, they're all going to come together. And the companies which have technology prowess can go and disrupt existing portfolios. So the convergence of all of them and the application of agentic to operations of companies is a unique opportunity. The way to go about that opportunity is, can you actually grow faster than what it cannibalizes? If you look at our BPO portfolio, a large part of it is also related to what we cater to digital natives. In fact, today we announced a service called Cognizant AI Data Training Services.

Great question again. I mean, um, look, you know, um,

Originally everybody thought.

Applying technology and applying AI to operations will be the first thing to do. Sequentially, the way this shaped up is we first applied it to software development cycles.

Uh, now let’s turn to the lenses on operations.

And I would actually believe that.

Operations data, AI, agentic, they all going to come together.

And the companies that have technology providers.

Can go and disrupt existing, uh, portfolios.

Um, so the conversions of all of them and the application of agentic to operations of companies is a unique opportunity.

Uh, the the way.

Ravi Kumar: This is AI algorithms and machine learning algorithms we were training for years. We have 10,000 people doing that. Now look at the unique opportunity. I can actually flip it around and take it to Fortune 500 and the Global 2000, who are now building AI models. And we could create a unique differentiation because we are one of the largest players in that space. So there are opportunities. You could almost argue that there are some things in BPO which will completely get commoditized and completely get automated. It will lead to a new set of things which you can attack, which is new labor pools. So I actually see BPO as a headless transformation opportunity with agentic and AI in the middle. And we are anchoring a lot of our deals using this as a key strength.

To go about that opportunity is can you actually grow faster than what it cannibalizes? If you look at our you know BPO portfolio a large part of it is also related to what we cater to digital natives. In fact, today we announced their service called cognizant. Um, uh, you know, uh, AI data data Training Services. This is AI, algorithms and machine learning algorithms. We were training for years, we have 10,000 people doing that. Now, look at the unique opportunity. I can actually flip it around and take it to Fortune 500 and the global 20000 who are now building AI models. And uh, we could uh, we could create a

Unique differentiation because we are 1 of the largest players in that space. So there are

Opportunities. You could almost argue that there's some things in BPO which will completely get commoditized and completely get automated. Uh, it will lead to a new set of things, which you can, uh, attack, which is new labor pools. So I actually see BPO as a headless transformation opportunity with, uh, agentic and AI in the middle and we are anchoring a lot of our deals uh using using this as a

As a key strength.

Jatin Dalal: Thank you. Our next question comes from the line of Amit Daryanani with Evercore ISI. Please go ahead.

Thank you.

Our next question comes from the line of Ahmed dhanani with evercore. Isi. Please go ahead.

Jatin Dalal: Yep. Thanks a lot. Thanks for giving me my question. You know, I guess maybe to start with your headcount, I think was up on a year-over-year basis for the first time in about eight quarters. Yeah, as you look into the back half of the year, can you just talk about how should we think about headcount growth and can the utilization rates actually sustain this mid-85% range or is there potential for that to dip down?

Yep, um, thanks a lot. Thanks for being my question. Um, you know, I guess maybe to start with your headcount. I think it was up on a year-over-year basis for the first time in about eight quarters. Um, as you look into the back of the year, can you just talk about how we should think about headcount growth? And can the utilization rates actually sustain this mid 85% range? Or is there a potential for that to dip down?

Operator: Yeah, hi Amit. You know, this represents the hiring that we do during this time of the year of recent college graduates, and that has reflected in the increase of 7,500 compared to quarter one. You will see some increase also in the second half of the year, but it won't be large increases as we will continue to double down on the AI-led productivity and how do we do more with less. So it would be a combination. On one hand, we will infuse more college recent graduates as part of our talent pool, and on the other hand, try and get the best out of what we can do with AI-led productivity. So you would see some increases, but it won't be large numbers.

Yeah, hi. Ah, we will, you know, we this this represents the, the hiring that we do during this time of the year of recent college graduates, uh, and that has reflected in the increase of 7,500 compared to quarter 1.

Uh, you will see some increase, uh, also in the second half of the year, but it won't be large increases as we will continue to double down on the AI-led productivity. And how do we do more with this? So it would be a combination on one hand. We will infuse.

Ravi Kumar: In fact, if you do a Y and Y comparison, you would notice that we are almost like flat because we had 6 to 7,000 people who got added from Bellcam. But we have actually done 3%, 3 plus percent, more than 3% organic growth. So it's a combination of, I would say, AI-led productivity, which we could keep to ourselves, plus operational rigor, which Jatin spoke about. And the addition now which we have had is freshers, school graduates. And what we'll do for the rest of the year is also mostly school graduates out of India.

Uh, more college, uh, recent graduates. As part of our talent pool, on the other hand, we try and get the best out of what we can do with AI-led productivity. So you would see some increases, but they won't be large numbers.

in fact, if you do a Y and Y comparison, um, you would notice that um,

We are.

Almost like flat because we had 6 to 7 thousand people who got added from belcan.

But we have actually done 3%, 3 plus percent.

more than 3% organic growth.

so, it's a combination of

Uh, I would say AI leads productivity, which we could keep to ourselves. Plus.

Um, plus, um, you know, operational rigor, which Jatin spoke about.

Is.

And what we'll do for the rest of the year is also mostly school graduates out of India.

Jatin Dalal: Perfect. Thank you. And then you know, if I go back to the bookings growth, I think bookings were up like 18%. And clearly, the industry is not growing at that rate. So it's fair to assume that you folks are picking up a good bit of market share over here. I'm curious, what do you attribute these share gains to? And you know, are these share gains coming at potentially a lower margin point, at least initially, versus what you traditionally get?

Perfect. Thank you. And then, you know, if I go back to the bookings growth, I think bookings were up like 18%, and clearly, the industry is not growing at that rate. So it's fair to assume that you focused on picking up a good bit of market share over here. I'm curious, what do you attribute the share gains to? And, you know, are these share gains coming at potentially a lower margin point, at least initially, versus what you traditionally get?

Ravi Kumar: So again, Jatin, you can jump in. Look, you know, we have been, we have won them competitively. These are deals which we rightly prized. We know we'll hit the margin numbers we targeted for. In fact, the 29 last year and the 17 the year before, we have now got a template in place, which we are therefore getting stronger and stronger. Our win rates have significantly increased. We are able to sole source and, you know, originate new deals. In fact, one of the deals we did was a deal we originated, the billion dollar deal. One of them we originated it ourselves. It didn't exist.

So, uh, again, just in case you can jump in, uh.

Look, you know, we have been

We are one of them competitively.

Uh, these are deals which we rightly priced.

We know we'll hit the margin numbers we targeted for. In fact, the 29% last year and the 17% the year before. We have now got a template in place.

Which we are, uh, therefore getting stronger and stronger. Our win rates have significantly increased. We are able to source and, you know, originate new deals.

Ravi Kumar: So our ability to take this to the market in an agile way and our ability to call it out where we think we can, we have been super sleek in the market to make that value proposition to our clients who see this as a win-win. This quarter, you know, as I said earlier, it's been a fairly good mix. New business, higher ACV, 18% YNYTCV, good mix of small and large deals, renewables and new, and innovation and productivity led. I mean, you know, I've kind of used innovation more often in this quarter than before because we've really seen more traction attached to it. So I'm kind of encouraged by the spread and the distribution across industries and geographies as well.

Uh in fact 1 of the deals we did uh is was a deal. We originated the the billion dollar deal 1 of them. We originated it ourselves, it was it didn't exist.

So our ability to take this to the market in an agile way, and our ability to call it out where we think we can, we have been super sleek in the market to.

Make that, um, make that value proposition to our clients who see this as a win-win.

Uh, this quarter, you know, as I said earlier, it's been a

Fairly good mix of new business, higher AC. We, uh, 18%, why and YTC. We good. Mix of small and large deals, renewables and new.

And productivity. Right? I mean, we've kind of used, you know, innovation more often in this quarter than before because we've really seen more traction attached to it.

um, so, I mean

the, uh, and the

Uh, distribution across industries and geographies as well.

Operator: And Amit, you are aware that we have been consistently winning. And Ravi referred to that 17 deals in '23 and then 29 in '24. This year also started with very healthy numbers, with three mega deals that we have won since the beginning of the year. And in '24, as well as in '25, we have guided for a 22, I mean, now in '25, we are guided to 20 to 40 basis point margin expansion. For the first half of this year, we have delivered 40 basis point higher. So this stream, the point I'm trying to make is these large deals are now mainstream part of our business.

And and, uh, and I'm with you, you you, you are aware that we have been consistently winning and Robbie referred to that 17 deals in, in 23. And and then 29 and 24, this year also started with with, with very healthy numbers with 3, mega deals that we have won since the beginning of the year and in 24 as well. As in 25 we we have

Operator: And we are able to execute the investment in this deal with the overall cost discipline in the organization to overall, you know, give out the outcomes which are on aggregate accuracy and margin, which is expanding as per, you know, with everything that Ravi spoke about. You know, we have a bid versus deed. We have a tight governance on how we execute and so on and so forth.

Uh, guided for '22. I mean, now in '25 years, I did 220 to 40 basis point margin expansion. For the first half of this year, we have delivered 40 basis points higher. So this stream, the point I'm trying to make is that these large deals are now a mainstream part of our business.

And we are able to execute.

Uh, the investment in this deal with the overall cost discipline in the organization, to overall, you know, give out the outcomes which are.

Um, which are on aggregate, aggregative, uh, and margin, which is expanding, um, as per, you know, with everything that we spoke about, you know, we have a bid versus, did we have a tight governance on how we execute, and so on and so forth?

Jatin Dalal: Thank you. Our last question for today comes from the line of Surinder Thin with Jeffries. Please go ahead.

Thank you.

Our last question for today comes from the line of Surinder Thin with Jefferies. Please go ahead.

Jatin Dalal: Thank you. Ravi, when I think about all of the commentary on innovation spend, I guess, is that code for saying that, you know, clients are getting more comfortable with the discretionary spend components? And then I guess, as part of that, what is allowing them to make those decisions given what I would argue is the pace of technological change, right? Like it seems like every month, every few weeks, every quarter, we're seeing pretty big advances in the frontier models. And so I just want to understand that that decision-making and the conversations that you're having and how we should think about what I would call these green shoots here of spend.

Um, thank you.

Roughly. When I think about all of the commentary on innovation spend, I guess is that code for...

Seeing that clients are getting more comfortable with the discretionary spend components. And then I guess as part of that...

What is allowing them to make those decisions? Given what I would argue is the pace of technological change, right? Like, it seems like.

Every month, every few weeks, every quarter, we're seeing pretty big advances in the frontier models. And so, I just want to understand that decision-making in the conversations that you're having and how.

Ravi Kumar: Yeah. So Surinder, you know, I kind of use the word innovation, but I would actually frame it as innovation-led process change, right? I mean, as I said, you want to go to a bank and do a process and know your customer in a lesser time, better experience, and with lower cost. It is not as much just cost, but it is also because some of these processes have not been disrupted for a very, very long time. And right now, they've all started to look at this technology to go and revisit how to change. Like what happened when the internet came, sales and marketing changed forever. Now there is a unique opportunity to change that. But the opportunity is not just about going and applying AI or going and applying agentic.

We should think about what I would call these green shoots of spend.

Yeah, so certainly, you know, I kind of...

use the word innovation.

I would actually frame it as

Innovation, LED process change, right? I mean, as I said,

You want to go to a bank and complete your process, and know your customer in a lesser time, for a better experience.

And uh, with lower cost.

A very long time.

And right now, they have all started to, um, look at this technology to go and revisit, um, how to change.

Uh, like, what happened when the internet came? Sales and marketing changed forever.

Ravi Kumar: The opportunity is also to service that labor pool as a part of an opportunity where a customer is willing to outsource it now while they didn't do it in the past because there is digital and human labor attached to it. So we've been thoughtful about going and finding those kinds of opportunities. I mean, customer care is probably the best example. Customer care, nobody is wanting to do it, you know, go through the identification to just reduce cost. They're going through the identification to improve experience and to also create more real-time access to, I mean, more real-time leverage to their end consumers. So the way I see it is to do all of this, I mean, you spoke about frontier models. To do all of this, the frontier models by itself can't do anything. They will need to be layered with a lot of things.

Now there is a unique opportunity to change that, but the opportunity is not just about going and applying AI or going and applying agent tech. The opportunity is also to um,

Service the labor pool as a part of an opportunity where a customer is willing to Outsource it. Now while they didn't do it in the past because there is digital and human labor attached to it. So we've been uh, thoughtful about going and finding those kind of opportunities. I mean, customer care is a is is probably the best example, customer care. Nobody is wanting to do it. You know, go through the identification to just reduce cost. They're going through the identification to improve experience.

And, uh, to also create more real-time.

Uh, real time. Uh,

Access to, I mean, more real-time leverage to their, uh, and consumers.

so,

The way I see it is to do all of this. I mean, you spoke about frontier models to do all of this. The frontier models, by themselves, can't do anything.

Ravi Kumar: They will have to be layered with a data flow strategy, work, you know, how you're going to change the workflows, how you build context engineering. I spoke about context engineering in some of my public posts before. How do you weave, you know, tribal knowledge and context of an enterprise? All of this is a role of a system integrator. And I'm starting to see, you know, I'm now starting to see even application, even agent development life cycles, which are very different to software development cycles. Agent development life cycle is about scoping for outcomes, not scoping for a spec. Scope, you know, behavioral design of agents, scaling agents, deploying agents. Maintenance in software is different to maintenance in agents. You know, you have to supervise agents even during maintenance. So that whole cycle has changed.

They will need to be layered with a lot of things. They'll be able to they will be have to be layered with a data flow strategy uh work. You know. Are you going to? How are you going to change the workflows, uh, how you build Context Engineering? I spoke about Context Engineering in, uh, in some of my public posts before. How do you, how do you weave, um, you know, tribal knowledge and context of an Enterprise? All of this is a role of a system integrator. And I'm starting to see, uh, the, you know, I'm now starting to see even application, even agents development life cycles, which are very different to software development Cycles,

The agent development life cycle is about scoping for outcomes, not scoping for a spec.

um,

Scope, you know, uh, behavioral design of agents.

Scaling agents deploying agents and maintaining maintenance in software is different from maintenance in agents. You know, you have to supervise agents even during maintenance, so that's.

Ravi Kumar: So we have reinvented that process of building that IP on the edge methodology, sensing what labor pools will be ready for it with the limited discretionary which is there. And as discretionary goes up, the art of the possibilities will change. But as discretionary is available, you will have to, you know, route it to the right places. In financial services, it's much more open. So we're seeing more of it. In other sectors, it is less. But that unlock will happen. It is bound to happen. And the value has to shift to the front end where the system integrators will anchor it.

Cycle has changed. So we have reinvented the process.

Of, uh, building that IP on the edge methodology. Sensing what labor pools will be, uh, ready for it.

With the limited discretionary resources that are available, and as the discussion progresses, the possibilities will change. But as discretionary resources are available,

You will have to, you know, uh, route it to the right places.

In financial services, it's much more open. So we're seeing more of it, in other sectors, it is less but, uh, that unlock will happen. It is, uh, it is, uh, bound to happen. And the value has to shift to the front end with the system integrators,

Will anchor it.

Jatin Dalal: That's actually quite helpful. And then I guess since you brought this up with the frontier models, a few weeks ago, you know, OpenAI announced that, you know, they're willing to do certain consulting services if, let's say, you know, you're willing to spend at least $10 million with them. Is that something that we should consider or that you consider from a competitive perspective that they're starting to get into the services game here? How should we take that news?

That's actually quite helpful. And then I I guess since you brought this up with the, the frontier models, um, a few weeks ago, you know, openai announced that you know, they're willing to do certain Consulting Services. If let's say they, you know, you're willing to spend at least $10 million with them.

Ravi Kumar: So it's very complicated for just a technology company which owns a frontier model to go and implement a business process change, which is a combination of domain, a combination of operations, and system integration. You know, I spoke about the layers. In addition to the frontier model, which you need to make the technology work in context to an enterprise, you could draw parallels to customization in an enterprise. You know, when traditional software, when you have to do customization, you could draw the parallel to context engineering, data flows, workflows, and all of that. So you have to walk the corridors of the client to know how that is done in a company and how it could be done now. And it's a combination of technology, ops, and domain.

Is that something we should consider, or that you consider from a competitive perspective, given that they're starting to get into the services game here? How should we take that into account?

It's very complicated for.

Just the technology company that owns a Frontier Model to go and implement a business process change.

Which is a combination of domain, combination of, uh, operations. And

Um, system integration. Uh, you know, I spoke about the layers.

Uh, in addition to the Frontier Model, which you need to make.

The technology works in the context of an enterprise. You could draw parallels to customization in an enterprise. You know, with traditional software, when you have to do customization, you could, uh, draw the parallel to context, engineering, data flows, workflows, and all of that. So,

You have to walk the corridors of the...

to know.

How that is, how that is done in a company and how it could be done now. And, uh,

Ravi Kumar: So there's no way you can actually deliver those services without that unless you believe that the frontier model companies want to be in the services business. And as I said, my services business is not just about capability. My services business is also to build these layers. And as I said before, there are companies which are plumbing in AI. There are companies which are going to build in AI. And we want to be that AI builder company. Now, over a period of time, maybe some, you know, a couple of good big products integrated will show up at that point of time. And the role of a system integrator might change. Or maybe we will own so much IP by then that we will continue to monetize it. But IP on the edge is a real differentiator and a real thing needed in the AI era.

It's a combination of technology ops and domains. So there's no way you can actually deliver those services without that unless you believe that the Frontier Model companies want to be in the services business.

And as I said, my services business is not just about capability. My services business is also to build these layers.

Which are plumbing and AI the companies that are going to build an AI, and we want to be that AI builder company.

Now, over a period of time, maybe some, you know,

couple of good big products.

Ravi Kumar: And we are actually using some of our capital to invest into it.

Uh, integrated will show up at that point in time, and the role of a system integrator might change. Or maybe we will own so much IP by then that we will continue to monetize it. But IP on the edge is a real differentiator and a real thing needed in the AI era, and we are actually using some of our capital to invest into it.

Jatin Dalal: Thank you, Ravi. That's very, very helpful.

Thank you, Ravi. That's very, very helpful.

Jatin Dalal: Thank you. Ladies and gentlemen, this concludes today's Cognizant Technologies Solutions second quarter 2025 earnings conference call. You may now disconnect your lines. Thank you for your participation.

Thank you.

Ladies and gentlemen, this concludes today's Cognizant Technology Solutions second quarter 2025 earnings conference call. You may now disconnect your lines. Thank you for your participation.