Cognizant Technology Solutions Corporation

Ladies and gentlemen, welcome to the Cognizant Technology Solutions year-end fourth 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'd 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'd 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, Senior Vice President, Investor Relations. Thank you. Please go ahead, sir.

Thank you, Operator, and good morning, everyone. Welcome to Cognizant's fourth quarter and full year 2025 earnings call. I am joined today by Ravi Kumar, our CEO, and Jatin Dalal, our CFO. By now, you should have received a copy of the earnings release and the investor supplement. If you have not, copies are available on our website, Cognizant.com. 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, over to you, Ravi.

Thank you, Tyler. Good morning, everyone. Thank you for joining us today. I'm pleased to report our momentum continued in the fourth quarter as revenue growth and adjusted operating margin increased again outpaced our expectations. Looking at the quarter's highlights, revenue grew 3.8% year-over-year in constant currency, all organic, driven by North America. By segment, financial services led growth with constant currency revenue increasing 9% year-over-year during the quarter and 7% for the year, the highest annual level since 2016. Q4 bookings grew 9% year-on-year, driving a record quarterly total contract value. We signed 12 large deals with TCV of $100 million or greater, including one deal valued at more than $1 billion. The value of these large deal wins is 60% greater than a year ago. Adjusted operating margin of 16% improved by 30 basis points year-over-year. We now have over 4,000 AI engagements across all three vectors, and over 30% of our developer effort in software development cycles is AI-assisted and agentech. And our productivity improved, as fixed bid and transaction-based work now represent more than 50% of our revenue. We also saw a 5% and an 8% increase in trailing 12-month revenues and adjusted operating income per employee, respectively. These results drove 2025 revenues up 6.4% in constant currency revenues surpassing the $20 billion mark and the high end of our guidance range. Importantly, we delivered profitable growth. Our 15.8% adjusted operating margin exceeded guidance, rising 50 basis points over last year. We achieved this result while investing in our people, including through a merit cycle for most associates and our highest discretionary annual bonus funding level since 2018. January marked my third anniversary as Cognizant CEO. When we began this journey in early 2023, we set out to reclaim our winning heritage. In 2024, we successfully pivoted from stabilization to growth, industrialized our large deal engine, and expanded our platform strategy with AI-led investments to broaden our capabilities. In early 2025, we laid out our strategic objectives to amplify talent, scale innovation, and accelerate growth. We also set a goal to reach out industry's winner's circle by 2027. And I'm extremely proud that we arrived two years early with top-tier revenue growth. Throughout 2025, we executed with speed and discipline, consistently meeting or beating the high end of our expectations each quarter as our investments began shaping Cognizant into an AI builder capable of scaling agentic AI across our clients' landscapes. Looking at additional milestones that demonstrate a successful execution on our three strategic priorities. In 2025, we promoted more than 35,000 associates. We signed 28 deals, each with TCV above $100 million, with a combined TCV up nearly 50% versus last year. This includes five mega deals with TCV of $500 million or greater. Our net promoter scores reached a record high in 2025 from when I started three years ago. We expanded the breadth and depth of our partnerships across the hyperscaler and AI-native landscapes. We signed and have since closed our acquisition of 3Cloud, adding more than 1,200 Azure specialists and engineers to industrialize our deep expertise in Azure data and AI and application innovation. We returned $2 billion to shareholders through dividends and share repurchase. Our progress is reflected in our total shareholder return, which was top two within our peer group both 2025 and the three-year period beginning 2023 through 2025. Finally, with Belcan, we completed key integration milestones and continue to build a healthy synergy pipeline in the aerospace and defense industries. Last week, we announced Belcan secured a position on the Missile Defense Agency's SHIELD program, the Indifinite Delivery Indifinite Quantity Contract with a ceiling value of $150 billion, positions us to compete for a broad range of task orders supporting innovative defense capabilities. As we enter 2026, our strategy is focused on solving the AI velocity gap, the gap between massive AI infrastructure spending in the past few years and business value realization for our clients. While AI technology is now mature enough to offer transformative value, the methodologies and tools to harness it are only just emerging and the value to enterprises hasn't drifted yet. In fact, our latest New Work, New World research released last month reveals that AI today is capable of unlocking $4.5 trillion in US labor value in the future. Cognizant's mission is to be the AI builder bridging this gap to enterprise value by converting the technology to measurable returns on investments for our clients. We are approaching this opportunity through our three-vector strategy. To capture vector one demand, as we call it, we're applying AI-led productivity to augment and accelerate traditional software cycles. As we shared at our investor day, we see a massive multi-trillion dollar opportunity to help clients accelerate the elimination of technology debt, build classical software in newer ways with AI platforms, and repurpose savings towards innovation. And to capture what we call vector two and three, We are building entirely new cycles of agentic capital and digital labor that goes beyond the reach of legacy software, creating a much larger total addressable spend. Closing this velocity gap, the AI velocity gap, requires new methodologies and evolving beyond the traditional IT services role of the last two decades. In the 90s, we were bespoke systems builders. We wrote custom software code and we owned the outcomes. In the two decades that followed, our role evolved into a system integrator. We orchestrated classical software owned by various software providers. But classical software, which was written around the microprocessor, was deterministic and built on rigid logic and fixed rules. Today's AI-led software, which is written around the frontier models, is probabilistic and contextual. This shift allows us to own the stack again and deliver to outcomes. We believe reinvention and reimagination of business is will be driven by value at the intersection of AI-led agentic capital and classical software. To capture this demand, our AI builder stack acts as the connective tissue that addresses four layers of the ecosystem, AI compute, cloud, model access, and human capital services. Let me share some key elements. First is our trademarked BASIS framework, a proprietary blueprint that guides clients in architecting new business processes, specifically for deploying and orchestrating autonomous agents. This is a fundamental shift from writing rigid logic to designing behavior, persona, intent, and outcomes. Second is our pioneering science of context engineering, a methodology for mapping a client's unique work graph, giving AI the situational awareness it needs to produce reliable business outcomes. Context engineering bundles an organization's operating principles, tribal knowledge, work patterns, friction sources, and historical and cultural imperatives. so that AI intelligently binds to the enterprise's heterogeneous context, creating highly productive agentic capital. Third is our AI partnership ecosystem, which we continue to strengthen. On NVIDIA Stack, we are offering solutions across the full lifecycle, from building and fine-tuning models to standing up agentic applications and deploying them as microservices. With Anthropic, Google Cloud, Microsoft Azure, and OpenAI, we are using their frontier models and agentic tooling to build layers of application value to accelerate AI adoption for our clients. With Adobe and Typeface, we are modernizing the enterprise marketing function and enabling cutting-edge customer experiences and content by moving manual workflows to agentic orchestration. With Cloud Code, Cognition, GitHub, and WinSurf, we are industrializing software creation through advanced code generation. With WorkFabric, We are scaling the emerging discipline of context engineering. With Writer and Unifor, we are partnering to deploy specialized domain-specific AI platforms. With Palantir, we will integrate its foundry and artificial intelligence platform to support the integration of AI with our TriZero business. And finally, with Salesforce and ServiceNow, we are embedding our agentic networks directly into our clients' primary enterprise workflows. The fourth layer of our AI builder stack is our own proprietary IP across platform services and research. For example, FlowSource elevates our engineering velocity while Neuro IT Ops harnesses AI to proactively manage and self-heal hybrid environments. Our AI training data services have helped curate billions of high-precision data points for global clients. With Trizeto, we are accelerating and improving healthcare management. Our recently launched CareAdvanced AI offerings help streamline clinical workflows, reduce administrative burden, and empower care teams with faster and more accurate insights. And our award-winning AI labs, which was awarded its 61st patent, continues to feed our continued investments in AI platforms and products. To industrialize our AI builder stack, we have formed three units to sharpen our go-to-market muscle. First, our market-facing AI units are the hunters or value-seekers working to capture the $4.5 trillion in labor value our research identified. Second, our integrated AI solution unit acts as an architectural core, bringing various components of the AI stack together with strategic partnerships, cognizant methodologies, and AI platforms to address specific reinvention needs of businesses. And finally, our centralized AI platforms and products unit is a factory packaging custom IP into repeatable solutions. Underpinning our AI builder stack is our talent strategy. Over the last two and a half years, over 340,000 of our associates have completed AI scaling. We are shifting from traditional linear staffing model to an asynchronous autonomous software engineering model. In this framework, our associates are trained to delegate complex, high-value macro tasks to agentic networks while they micro-steer to outcomes using platforms like Cognition, Gemini, Cloud, GitHub, and others, orchestrating through cognizant flow source. We are in the process of developing a hyperproductive, high velocity delivery model for agents to asynchronously assist human software developers and agent managers. In addition, we are broadening our talent base with non-STEM talent and early career programs. This includes aggressively recruiting interdisciplinary skills at the intersection of industry domain and technology. We added over 16,000 associates in India in 2025. In 2026, we are targeting 2,000 campus hires in the U.S. and approximately 20,000 in India. We are seeing this AI builder strategy translate into demand across our core practices. For example, our proprietary platforms like FlowSource and Neuroengineering are helping clients unlock technology debt, helping to fuel 8% year-over-year in both the fourth quarter and year in our digital engineering practices. Similarly, our clients rethink their operations through an agentic lens. Demand for our BPO business, powered by deep immersion of digital labor, grew 9% year-over-year in the quarter of the year. Our AI data trading services launched early last year is gaining traction with our clients to build fine-tuned AI models at speed and scale. And demand for data and cloud modernization remains healthy with revenue across both practices increasing. areas growing mid-single digits organically, outpacing total company growth. Let me share a few client examples of our strategy in action. First, with a financial services client, we signed an incremental billion-dollar partnership where we are leveraging our AI platforms, including our NeuroSuite and FlowSource, to help accelerate speed to market, drive product innovation, and deliver enhanced productivity. With Cisco, the global leader in food distribution, we're transforming their complex customer interaction ecosystem into agentic capital. Previously, customer requests from product credits to order substitutions could have prolonged resolution window. Now, by deploying orchestrated agents, we have collapsed that cycle to 90 seconds. Cisco is harvesting this AI-generated savings to fund its next phase of agentification. In the healthcare sector, we moved from pilots to production-grade automation. For a major U.S. regional player, our AI intake platform reduced enrollment cycle times from as many as seven days to minutes. On their claims side, our clinical engine now adjudicates 96% of nurse note reviews autonomously, cutting human review times from eight hours to 20 minutes. We are scaling this expertise globally through a new strategic collaboration with Bupa Hong Kong, where our GenAI-led business process as a service solution modernizes claim and fraud, waste and abuse detection, marking our largest BPO win in the region. And we announced a multi-year expansion with Kohler, a leader in kitchen and bath products. Building on our successful five-year partnership, we are bringing our cloud management capabilities and AI solutions like NeuroID Ops to advance Kohler's digital ecosystem and drive AI-driven innovations. As we look towards 2026, we are well positioned to continue our momentum. Our ambition is to lead as an AI builder and maintain our position in our industry's winner's circle. In closing, I'm proud of all that we have accomplished over the last three years, which helped us reach our industry's winner's circle two years ahead of plan. As the next decade of contextual computing unlocks new waves of nonlinear enterprise productivity and agentic software cycles, I believe there is a significant opportunity to create shared value for our clients, our associates, and our shareholders. The foundation is set. I believe the boldest chapters of our story are still ahead. Thank you again for joining us. I'll now turn the call over to Jatin.