Cognizant Technology Solutions Corporation

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, Investor Relations. Please go ahead, sir.

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. 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.

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. 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 winner's 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%. 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. 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 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 one. 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 VectorOne 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 GenAI, and out of which 78% have demonstrated impact from the adoption and scaling. We're also actively pursuing Vector 2 and Vector 3 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. 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 customers 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 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-led future. We are deepening our talent investments in emerging technology hubs with plans to expand operations in Vishakhapatnam. 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. 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 Vibe 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 CodeAssist 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 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. 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. Currently, 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 AI customer service. It is a significant advancement and we have already secured clients in both health sciences and global food sectors. 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 a 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 insurance closed book of annuities business. What makes me particularly excited about this strategic agreement is the next generation AI platform will build to not only modernize the portfolio, but also the opportunity for us to scale this AI platform to other clients in the future. 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 pair. 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. The underlying foundation of the Trizetto agent tech 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 agent tech 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, 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. 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 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. 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. For now, I call this new layer, IP on the Edge, a working description of the evolving transitionary phase of agentic AI. Our IP on the Edge progress is a very important differentiator in a fragmented and a heterogeneous market of AI builders. We believe our early investments in AI led by IP on the edges, our scaled interdisciplinary capability, our partnerships, our continued focus to diffuse AI efficiently into our product 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 determine 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 spent cycles in Vector 2 and Vector 3 agentic opportunities. Now I'm going to turn the call over to Jatin.