Cognizant Technology Solutions Corporation

Hello, ladies and gentlemen. Welcome to the Cognizant Technology Solutions second quarter 2026 earnings conference call. All lines have been placed on mute to prevent 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 that 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 the 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. Please go ahead.

Thank you, operator, and good morning, everyone. Welcome to Cognizant's second quarter 2026 earnings call. I am joined today by Ravi Kumar, Chief Executive Officer, and Jatin Dalal, our Chief Financial Officer. By now, you should have received a copy of the earnings release and 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. We delivered a solid second quarter with organic revenue growth at the high end of our expectations and year-over-year adjusted operating margin expansion. Nearly all our healthy sequential growth was driven by our organic business. We accelerated our evolution as an AI builder by building new capabilities, launching new platforms, and deploying frontier talent as we begin to unlock entirely new business categories and client value pools. Looking at the quarter's highlights, revenue grew 4.1% year-over-year in constant currency, led by strong performance in North America, as large deals signed over the past year moved into full execution. Financial services grew nearly 12% year-over-year in constant currency, its second consecutive quarter of 10-plus percent growth. Trailing 12-month bookings increased 5%. We signed seven large deals, each with a TCV of more than $100 million, including three new logos. As we expanded adjusted operating margins year over year for the sixth straight quarter, demonstrating continued profitable revenue growth. From an AI indicator's perspective, our revenue and adjusted operating income per associate increased 4.6% and 7.1% respectively. Starting this quarter, we are excluding trainees who are not fully deployed for both the current and the comparable prior periods. Over 40% of our software development is now AI assisted. We have over 8,000 AI engagements. And we view strength in financial services, which includes some of the world's most technically sophisticated companies, as a leading indicator for other industries. Our research reveals that financial services is well ahead with AI initiatives and advanced AI adoption. We are helping clients tackle significant technology debt by using AI to compress modernization timelines that are shifting towards outcome-based pricing. We also now see financial services clients leveraging AI for growth imperatives with new discretionary spend cycles. We completed our previously announced acquisition of Astria, a global IT managed services provider with deep expertise in data center infrastructure, enterprise networks, digital workplace services, and AI first managed operations. Momentum is already building. Astria will continue its work with Google, to deliver services across its corporate engineering environment, including global ID ops, workplace collaboration, infrastructure, and platform services. We delivered these results against a cautious demand environment while growing at the top of our peer group. While we expect that caution to persist in the near term, AI is driving fundamental change in our industry that we believe creates significant long-term growth opportunities. The key question is why Growing AI capability has not yet translated into more enterprise value. Our research shows two-thirds of the global 2,000 have not yet realized measurable AI productivity gains. One in four have paused AI deployments and billions of dollars in potential value remain unrealized. The opportunity to address this gap is enormous. We estimate the one trillion system integration market can expand into five to six trillion enterprise operations market with 4.5 trillions of operational labor exposed to AI. Services firms are structurally positioned to capture this opportunity. As models proliferate and inference costs decline, models stop being the differentiator and value shifts to the applied layer, which is context, governance, and business processes. This layer addresses how each enterprise applies AI, what it learns from it, how effectively it retains, reuses, and compounds that learning and how well it protects the proprietary intelligence that constitutes its alpha. That is why we launched the Cognizant AI Delivery Operating System, a continuously learning delivery system that combines human expertise, organizational knowledge, client context and AI intelligence. It has three pillars, our engineering harness which coaches engineers in real time, our business operations harness which feeds best practices into a shared organizational system and our intelligence spine which connects intelligence across physical and edge environments. All of this is supported by our context engineering capabilities, which is the ability to assemble an enterprise's work graphs, guardrails, and tribal knowledge. Working with Cisco, we are using context fabric to build a digital signature of the account management role, forming the foundation for an account manager's digital twin and broader identification solutions. This AI solution with digital twin at its core holds the potential to streamline daily operations and support on time in full complete delivery, significantly improving customer satisfaction. For a large North American bank, we piloted a solution for their fraud dispute management and KYC operational workflows. Context was engineered through a custom solution that combines static knowledge from customer and operations interactions and documents with dynamic business context source through enterprise application APIs. The fraud dispute management multi-agent Pilot Solution has demonstrated the potential to reduce manual effort by more than 50%, while the KYC process can significantly improve decision efficacy, reducing the risk of fines and fees. Last quarter, I described how AI is reforging our industry's first principles and driving four significant shifts. First, becoming an AI builder rather than a traditional systems integrator. Owning the full stack required to design bespoke AI systems. Second, rebuilding a talent model by shifting from a traditional pyramid towards interdisciplinary teams working at the intersection of domain, operations, and technology. Third, shifting our economics from labor to outcomes. Our mix of fixed price and transaction-based work has grown for three consecutive years, creating a more durable business. And fourth, moving from delivering projects to underwriting results. Let me share our progress across these four shifts, starting with the first one, becoming an AI builder by strengthening our proprietary IP and ecosystem. This year, we launched a dedicated AI market unit, an elite team of business designers, industry strategists, and frontier engineers focusing on converting AI investments into realized value. We're already seeing early traction. For example, a large payer client chose us to help build an agentic development practice for its biggest division through parts of frontier engineers and AI agents. We cut manual effort by 60% for a mid-sized payer while improving the claims throughput. And we compressed the AI development cycles from months to days for a leading European online fashion retailer, advancing agentic workflows across supply chain inventory, returns, and customer experience. On the partnership front, we established a dedicated Gemini enterprise practice as a Google Cloud diamond partner, and we joined OpenAI's Debe consortium. We also expanded our partnership with Anthropic, becoming one of the small number of global premier partners in the cloud partner network. An example of this partnership at work is Travelport, where we partnered with Anthropic on a strategic AI transformation aimed at modernizing Travelport's software development and embedding AI across Travelport's travel, retailing, and distribution platforms. And with A plus C Global Media, we partnered with Snowflake to deploy custom intelligent Agents that transform complex advertising operations and legal workflows. By automating document validation and enabling natural language queries, we helped accelerate decision making and significantly improved time-intensive processes. For our second shift, we are re-architecting our talent model into an AI-augmented early career talent led by more senior player coaches. We introduce two new certified roles, frontier certified engineers who audit workflows and build intelligent regions and frontier business operators who manage blended human digital teams to deliver outcomes. We plan to scale this cognizant forward team to 5,000 frontier certified engineers and 10,000 frontier business operators. We currently have 10,000 cloud certified architects, the most of any organization globally. and we power one of the largest pools of Codex and Gemini Enterprise trained badges. Last quarter, we introduced Cognizant Skillspring, an AI-native platform that embeds agent-driven tutoring directly into daily workflows and gives associates real-time visibility into their AI proficiency and token usage. It is gaining significant momentum with our associates as learning time has doubled and AI usage has tripled. We have also opened this platform to early prospective clients. Our third and fourth shifts move Cognizant from a labor-based model to an agentic and platform-enabled model and from delivering outcomes to underwriting results. This is why we established a new AI products and platform group earlier this year to unify Cognizant's proprietary offerings and scale innovation across the portfolio. Our platform strategy has two dimensions. First, our engineering platforms, which provide the foundation for everything we build. including accelerators, agent frameworks, and AI engineering tools that power our AI-native software development lifecycle and agent development lifecycle. They're increasingly powered by their own agentic workforce. Together they compress the software cycle, improve productivity, and accelerate business outcomes for clients. Second, and building on that foundation, our business platforms combine technology, data, AI, and deep industry expertise to create differentiated client value. Purpose-built for the industries we serve, they embed industry-trained agents directly into critical workflows. TriZetto is the strongest proof point of our platform strategy. Our healthcare platform business generates more than $1.1 billion in annual revenue and through the first half of 2026 grew faster than the overall company while delivering substantially higher margins. What began as a software product has evolved into a broad healthcare platform ecosystem. TriZero demonstrates how platforms can drive deep client relationships, create recurring revenue streams, and deliver growth and profitability that exceeds traditional services. It's a blueprint for how we intend to scale platform-led growth across other industries. In healthcare claims, we built a pioneering auto-adjudication solution that uses large language models to digitize adjudication knowledge and rules, enabling agentic AI to analyze claims, apply complex business rules, and reach decisions with human validation wherever it's needed. It positions us to take a share in this large, high-volume category. Other platform-led modernization wins include a global claims and risk administration leader, leveraging NeuroAI, FlowSource, and our three cloud-enhanced Microsoft expertise. We signed a five-year agreement to accelerate processing times and upgrade core infrastructure. And Quotality, a global data and analytics company, has deployed Cartesian's neuro business process workflow across multiple business operations processes. It resulted in over 40% improvement in research task turnaround times and faster and higher quality resolution of their customers. We are also moving beyond delivery to underwriting results. We signed a major engagement with a leading insurance brokerage, committing to more than 50% productivity improvement over five years through AI and operating model redesign. We won on the strength of our domain expertise, reimagining the core workflows and accelerated delivery using AI tools from our partner ecosystem. As we execute these four shifts, our AI builder model expands where we create value across three categories. First, a traditional work done dramatically, more productively. Second, old things in new ways. And third, entirely new things that didn't exist before AI. First, a traditional work done more productively. This includes autonomous software engineering, or vector one work, which over the past two years has driven both consolidation and productivity-led engagements. A great example of our success in this area is Novartis, which selected Cognizant earlier this year for a five-year engagement to transform its global idea operations. Building on a relationship that spans more than 20 years, we expect to leverage our neuro-AI platform to create a unified AI-powered operating model that combines automation, full-stack observability, and agentic capabilities. This is where our AI builder strategy is aimed, helping clients move from Labor Intensive Operations to Intelligent Self-Service and Increasingly Autonomous Technology Environments. Second, old things in new ways. Here we see a significant pipeline across secure AI services, mainframe modernization, SAP S4 HANA migration, and SaaS reimagination. Longstanding enterprise challenges that AI can now solve far faster for a fraction of the cost. Cybersecurity is a clear example AI is turning security from a cost center into a remediation opportunity as machines expose vulnerabilities at unprecedented speed. We are positioned for this moment by combining frontier models with our 5,000 person security practice and all the leading frontier program partners including CrowdStrike, Palo Alto Networks, Gscaler, Anthropic, OpenAI, Microsoft, and Red Hat. We see a strong pipeline forming across these partnerships. Entirely new things made possible by AI, including context engineering, reinvention of business flows, identification of business operations, and physical AI. With physical AI as intelligence begins to govern physical environments, we believe a new domain of autonomous operations will open. We launched a sovereign physical AI platform as a service to position Cognizant ahead of this iPhone moment for robotics and infrastructure. This builds directly on a capability we've built over the past decade. More than 10,000 of our associates have trained AI and machine learning models for the world's largest technology companies. We are now repurposing that expertise for the enterprise through our AI model training and data services. For example, for a global automotive manufacturer, we train models on the company's products, technical data, and visual content to achieve accuracy generic models cannot match. Automate complex processes and unlock value from knowledge the company already owned. Public sector is emerging as a meaningful business as our organic and inorganic investments gain traction. In Q2, Cognizant Government Solutions built on our Belcan acquisition secured a landmark engagement with the state of Iowa to modernize its ID infrastructure. We have a growing pipeline across defense, federal and state government including AI infrastructure and citizen experience While Trizado expands the opportunity to health agencies, including our work supporting the Department of Veteran Affairs in partnership with Signature Performance. This builds on our long-lasting UK public sector practice. For example, with the Home Office, we developed and support the foundational data platform behind the UK's migration and border systems. In Q2, we won expanded home office work across software engineering, testing, delivery, and managed services for critical caseworking systems, improving caseworker productivity and reducing manual intervention. And for His Majesty's revenue and customs, we recently won an additional work to help configure low-code services in support of build and DevOps functions that is valued at more than $250 million over the life of the deal, including option years. Our AI builder strategy is also gaining traction outside the U.S. For example, a global pharma company in Europe selected Cognizant as a sole partner to build and scale its enterprise data, AI, and agentic AI capability through a three-year agreement covering 68 projects initially. As the client's official AI builder, Cognizant will translate their agentic AI vision into a production-grade governed enterprise platform spanning all business domains globally. and Cognizant helped a large European bank to identify its mortgage processes by building a mortgage operations agent which brings multiple specialized agents together to support complex decision-making, analyze business rule outcomes, proposing remediation paths and generating clear and actionable insights. To conclude, we're in the midst of a profound transformation with a clear vision for the industry's future and confidence in the expansive AI-led opportunity ahead. Our actions. Deploying interdisciplinary talent, shifting to outcome-based platforms, and opening new value pools are designed to drive sustainable growth. As we redefine Cognizant, we remain focused on our growth, on our goals of delivering top-tier growth, consistent margin expansion, and EPS growth ahead of revenue. Thank you to our associates, clients, and shareholders for your continued dedication, partnership, and trust. With that, I'll turn the call over to Jatin.