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COGNIZANT TECHNOLOGY SOLUTIONS CORP (CTSH)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue was $5.082B, up 6.8% year-over-year (6.7% constant currency), with adjusted operating margin of 15.7%; GAAP diluted EPS was $1.10 and adjusted EPS $1.21 . Management highlighted “accelerating momentum” in organic growth led by Health Sciences (>10% YoY) and Financial Services (~3% YoY) .
  • Bookings rose 11% YoY in Q4; trailing-12-month bookings reached $27.1B, implying ~1.4x book-to-bill. Cognizant signed 10 large deals (≥$100M TCV) in the quarter and 29 in 2024 (record), supporting forward visibility .
  • Guidance: Q1 2025 revenue $5.0–$5.1B (+5.6%–7.1% YoY; +6.5%–8.0% CC), FY 2025 revenue $20.3–$20.8B (+2.6%–5.1%; +3.5%–6.0% CC), adjusted operating margin 15.5%–15.7%, adjusted EPS $4.90–$5.06; dividend raised 3% to $0.31 per share for Q1 2025 . CFO expects tax rate 24%–25% and >90% FCF conversion of net income in 2025; net interest income guidance discontinued (expect modest decline) .
  • Catalysts: AI-led productivity (20% of accepted code generated by AI in Q4), expanded ServiceNow partnership (Global Elite status), Belcan integration in ER&D, and Investor Day (Mar 25) could support narrative and estimate revisions. Discretionary spend returning in Financial Services and smaller deals improving ACV trajectory .

What Went Well and What Went Wrong

What Went Well

  • Health Sciences revenue grew over 10% YoY in Q4, with continued strength in TriZetto processing ~two-thirds of U.S. healthcare claims; Ravi: “Q4 marked a high point for year-over-year revenue growth...” .
  • Adjusted operating margin expanded sequentially to 15.7% as NextGen program concluded; Q4 free cash flow was $837M (highest since Q3’21), underscoring operational discipline .
  • Large-deal momentum: 10 signed in Q4 (29 in 2024 vs. 17 in 2023); Ravi: “We did 29 of them, $100M plus in 2024… win rates are significantly higher” .

What Went Wrong

  • Year-over-year adjusted operating margin declined 40 bps in Q4 due to Belcan impact and compensation increases despite NextGen savings; utilization appeared softer numerically, though execution remained strong .
  • Products & Resources and CMT faced cautious discretionary environments; P&R up 11.3% YoY largely from Belcan; CMT up 0.9% YoY (0.4% CC), reflecting pressured tech/telco budgets .
  • Full-year FCF conversion (82% of net income) was constrained by a $360M payment to Indian tax authorities tied to the 2016 matter, highlighting ongoing non-operational headwinds .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$4,850 $5,044 $5,082
Revenue YoY Growth (%)(0.7%) 3.0% 6.8%
Revenue YoY Growth CC (%)(0.5%) 2.7% 6.7%
GAAP Operating Margin (%)14.6% 14.6% 14.8%
Adjusted Operating Margin (%)15.2% 15.3% 15.7%
GAAP Diluted EPS ($)$1.14 $1.17 $1.10
Adjusted Diluted EPS ($)$1.17 $1.25 $1.21
Operating Cash Flow ($USD Millions)$262 $847 $920
Free Cash Flow ($USD Millions)$183 $791 $837

Segment revenue and mix:

Segment ($USD Millions)Q3 2024 RevenueQ3 YoY %Q4 2024 RevenueQ4 YoY %
Health Sciences$1,514 7.8% $1,541 10.4%
Financial Services$1,486 0.7% $1,435 2.9%
Products & Resources$1,228 5.0% $1,295 11.3%
Communications, Media & Tech$816 (3.7%) $811 0.9%
Total$5,044 3.0% $5,082 6.8%

KPIs and mix:

KPIQ3 2024Q4 2024
Bookings (TTM, $USD Billions)$26.2 $27.1
Book-to-Bill (TTM)~1.3x ~1.4x
Large Deals (≥$100M TCV, Count)6 in Q3; 19 YTD 10 in Q4; 29 in 2024
DSO (Days)81 78
Cash & Short-term Investments ($USD Billions)~$2.0 $2.2
Net Cash ($USD Billions)~$0.81 $1.335
Dividend per share$0.30 (declared Oct 2024) $0.31 (declared Feb 2025)

Consensus vs. actuals:

MetricQ2 2024 ConsensusQ2 ActualQ3 2024 ConsensusQ3 ActualQ4 2024 ConsensusQ4 Actual
Revenue ($USD Millions)N/A (S&P Global unavailable)$4,850 N/A (S&P Global unavailable)$5,044 N/A (S&P Global unavailable)$5,082
Primary EPS ($)N/A (S&P Global unavailable)$1.14 N/A (S&P Global unavailable)$1.17 N/A (S&P Global unavailable)$1.10

Note: Wall Street consensus (S&P Global) data was unavailable due to provider limit; therefore, beats/misses versus estimates cannot be assessed for this recap.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Billions)Q1 2025N/A$5.0–$5.1 (YoY +5.6%–7.1%; CC +6.5%–8.0%) New
Revenue ($USD Billions)FY 2025N/A$20.3–$20.8 (YoY +2.6%–5.1%; CC +3.5%–6.0%) New
Adjusted Operating Margin (%)FY 2025N/A15.5%–15.7% New
Adjusted Diluted EPS ($)FY 2025N/A$4.90–$5.06 New
Tax Rate (Adjusted)FY 2025N/A24%–25% New
Free Cash Flow ConversionFY 2025N/A>90% of net income New
Net Interest Income GuidanceFY 2025Provided in prior yearsDiscontinued; expect modest decline Discontinued
Dividend per ShareQ1 2025$0.30 (Q4 declaration) $0.31 (+3% YoY) Raised
Q4 2024 Revenue ($USD Billions)Q4 2024$5.0–$5.1 Actual $5.082 Achieved high end

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2: Q2 2024; Q-1: Q3 2024)Current Period (Q4 2024)Trend
AI/technology productivityQ2: 750 early GenAI engagements; platforms (Neuro IT Ops, Flowsource) in >200 clients; tech-for-tech priority . Q3: >1,000 early engagements; Flowsource code productivity; multi-agent orchestration; NVIDIA/ServiceNow/AWS partnerships .>1,200 early GenAI engagements; 20% of accepted code generated by AI; “double engine” transformation across clients and Cognizant ops .Strengthening adoption and tangible productivity gains
Discretionary spend/macroQ2: Discretionary muted; bookings up; duration lengthening . Q3: Gradual rebound in FS; smaller deals stabilizing .FS discretionary spend improving; ACV up; smaller deals returning .Improving
Large dealsQ2: 5 ≥$100M; 13 YTD . Q3: 6 ≥$100M; 19 YTD .10 ≥$100M; 29 in 2024; win rates higher; broader spread across industries/geographies .Accelerating momentum and breadth
Segment performanceQ2: FS +5% seq CC; Health +3% seq CC; P&R softness; CMT mixed . Q3: Health +7.6% YoY CC; FS +0.5% YoY CC; P&R driven by Belcan; CMT -3.7% YoY .Health >10% YoY; FS ~3% YoY; P&R +11.3% YoY (Belcan); CMT +0.9% YoY .Health/FS solid; CMT/P&R mixed with Belcan lift
Regional trendsQ2: Europe challenged; Americas returning to growth . Q3: Americas +~4% CC; Europe -~2% CC .North America +>8% YoY; Europe ~+1% YoY; RoW ~+4%; UK vs. Europe mix shifts .North America leadership; Europe stabilizing
Regulatory/legalQ2/Q3: Indian tax matter payment ($360M) affecting FCF .FY FCF 82% of net income reflecting prior payment; plan to repay $300M credit facility in 2025 .Legacy headwind absorbed; balance sheet actions
ER&D/Belcan integrationQ2: Announced acquisition; expected margin dilution (~40 bps), revenue synergies . Q3: Closed; pipeline opportunities .Contributed ~450 bps to Q4 YoY revenue; ~250 bps growth expected in FY 2025; Phase 1 integration complete .Integration progressing; growth vector expanding

Management Commentary

  • “We finished the year on a strong note… Revenue was $5.1 billion, up 6.7% year-over-year in constant currency… Health Sciences led with over 10% revenue growth… Adjusted operating margin improved sequentially to 15.7%” .
  • “In the fourth quarter, we estimated that 20% of our code accepted by our developers was generated by AI, allowing us to do more for less and unleash a wave of hyper-productivity” .
  • “Fourth quarter bookings increased 11% year-over-year… trailing 12-month bookings grew 3% year-over-year and represented a 1.4x book-to-bill” .
  • “For the full year 2025, we expect adjusted operating margins will be 15.5% to 15.7%… we expect free cash flow will represent more than 90% of net income” .
  • “We signed 10 large deals in Q4… This brought our large deal total to 29 in 2024 compared to 17 in 2023” .

Q&A Highlights

  • Bookings rhythm and conversion: Ravi emphasized tail velocity, higher win rates, and spread across industries; small deals returning, lifting ACV .
  • Organic growth in 2025: Management sees broad-based growth with stronger FS discretionary spend and continued Health Sciences momentum; Q1 guidance positive despite seasonality .
  • Agentic AI: Cognizant building orchestration layers (Flowsource) and multi-agent frameworks; DeepSeek’s commoditization of foundation models should accelerate enterprise adoption at the front end .
  • Belcan contribution: ~250 bps to 2025 growth; no additional inorganic assumptions built into guidance .
  • Margin drivers: Operational rigor, NextGen savings, AI-led productivity, and effective large-deal execution underpin sequential margin gains; utilization optics aside, on-the-ground performance improved .
  • GCCs: Growing demand for build-operate-transfer and micro-services offerings around captives; opens new addressable spend beyond CIO budgets .

Estimates Context

  • S&P Global consensus (EPS/Revenue) for Q2–Q4 2024 was unavailable due to provider limitations during retrieval. As a result, this recap cannot characterize beats/misses versus Wall Street estimates. Cognizant did deliver Q4 revenue at the high end of its $5.0–$5.1B guidance range and sequential margin expansion, which may be viewed constructively by investors pending consensus updates .

Key Takeaways for Investors

  • Momentum broadening: Health Sciences (>10% YoY) and FS (~3% YoY) underpin organic growth; large-deal pipeline and smaller deals (ACV) point to improving intra-year revenue quality .
  • AI productivity is tangible: 20% AI-generated code accepted in Q4; platforms (Flowsource, Neuro) embed leverage into delivery and client offerings—likely a structural margin driver over time .
  • ER&D growth vector: Belcan lifts growth (~450 bps of Q4 YoY) and diversifies end markets; ~250 bps contribution guided for 2025 with Phase 1 integration complete .
  • Capital discipline: Free cash flow robust ($837M in Q4); FY FCF conversion 82% despite Indian tax payment; net cash $1.335B; dividend increased to $0.31; planned $1.2B capital return in 2025 .
  • Guidance sets a base: FY 2025 adjusted margin expansion (15.5%–15.7%) and adjusted EPS $4.90–$5.06 provide a credible pathway for modest earnings growth even with currency headwinds .
  • Watch CMT/P&R discretionary cycles: CMT remains cautious; P&R growth aided by Belcan—organic trends should be monitored as macro improves .
  • Near-term catalysts: Investor Day (Mar 25), ServiceNow Global Elite status, Stores 360 retail solution launch, and cybersecurity partnerships (CrowdStrike/Zscaler) may reinforce AI-led narrative and cross-sell .

Citations: Earnings call Q4 2024 –; Press releases (Q4 results, guidance, segments, KPIs) –; Q3 2024 press release/transcript – –; Q2 2024 press release/transcript – –; Stores 360 –; McDonald’s renewal ; CrowdStrike partnership –; Zscaler partnership –.