CTSH
Cognizant Technology Solutions CORP
NASDAQ
8-K: Cognizant Reports Strong Q4 and Full-Year 2024 Results, Exceeds Guidance
Sentiment:
Earnings Release
5 February 2025 4:05 PM
Cognizant's Q4 revenue reached $5.1 billion, a 6.8% year-over-year increase, driven by strategic investments and key acquisitions.
Better than expected
Cognizant's Q4 revenue growth exceeded the high end of its guidance range.
The company's Adjusted Operating Margin of 15.7% in the fourth quarter was above its guidance.
Summary
- Cognizant announced its Q4 and full-year 2024 financial results, showcasing revenue growth and margin expansion.
- Q4 revenue reached $5.1 billion, a 6.8% increase year-over-year, or 6.7% in constant currency.
- Full-year revenue was $19.7 billion, up 2.0% year-over-year, or 1.9% in constant currency.
- The full-year operating margin increased to 14.7%, up 80 basis points year-over-year, while the adjusted operating margin was 15.3%, up 20 basis points.
- Trailing 12-month bookings increased by 3% year-over-year to $27.1 billion, with a book-to-bill ratio of approximately 1.4x.
- The company returned $1.2 billion to shareholders through share repurchases and dividends in 2024.
- Cognizant's Q1 2025 dividend increased by 3% to $0.31 per share.
- The company's 2025 revenue growth guidance is 3.5% to 6.0% in constant currency, with an adjusted operating margin guidance of 15.5% to 15.7%.
Sentiment
Score: 8
Explanation: The document presents a positive outlook with strong financial results, strategic partnerships, and growth guidance. While there are some challenges, the overall tone is optimistic and confident.
Positives
- Revenue growth in Q4 and full year 2024.
- Expansion of operating margin.
- Strong bookings growth.
- Significant capital return to shareholders.
- Positive revenue growth guidance for 2025.
- Successful completion of the NextGen program, improving cost structure.
- Strategic partnerships and client wins, including McDonald's and Gilead Sciences.
- Recognition as a leader in various analyst ratings and company recognitions.
Negatives
- Voluntary attrition in Tech Services increased to 15.9% compared to 13.8% in the previous year.
- Operating cash flow decreased from $2.33 billion in 2023 to $2.124 billion in 2024.
- Free cash flow decreased from $2.013 billion in 2023 to $1.827 billion in 2024.
- Financial Services revenue decreased by 1.0% year-over-year.
Risks
- General economic conditions could impact results.
- The competitive and rapidly changing nature of the markets could affect performance.
- The ability to successfully use AI-based technologies is crucial.
- Competition for talent could impact employee recruitment and retention.
- Cyberattacks pose legal, reputational, and financial risks.
- Changes in the regulatory environment could create challenges.
Future Outlook
Cognizant anticipates revenue between $20.3 and $20.8 billion for 2025, representing a growth of 3.5% to 6.0% in constant currency. The company also expects an adjusted operating margin between 15.5% and 15.7% and adjusted diluted EPS in the range of $4.90 to $5.06.
Management Comments
- Ravi Kumar S, CEO, expressed gratitude to employees and highlighted the effectiveness of the company's strategy, citing a record 29 large deals closed during the year.
- Ravi Kumar S, CEO, noted the accelerated investments in AI-led platforms and the strengthening of the portfolio through acquisitions.
- Jatin Dalal, CFO, stated that the company ended the year strong, delivering an adjusted operating margin above guidance and free cash flow representing more than 150% of net income.
- Jatin Dalal, CFO, expects the improved cost structure from the NextGen program to sustain strategic investments for profitable growth.
Industry Context
Cognizant's focus on AI, cloud security, and digital transformation aligns with current industry trends. The company's partnerships with Siemens, ServiceNow, CrowdStrike, and Zscaler demonstrate its commitment to providing comprehensive solutions to clients.
Comparison to Industry Standards
- Cognizant's revenue growth and margin expansion are competitive within the IT services industry.
- Accenture, a major competitor, reported strong growth in its most recent quarter, driven by similar trends in digital transformation and cloud services.
- Infosys and Tata Consultancy Services (TCS) are also focusing on AI and digital solutions, indicating a broader industry shift.
- Cognizant's strategic acquisitions, such as Belcan and Thirdera, are in line with industry trends of consolidating capabilities and expanding market reach.
Stakeholder Impact
- Shareholders will benefit from increased dividends and share repurchases.
- Employees will have opportunities for growth through skilling programs and new technology advancements.
- Customers will gain access to enhanced solutions and improved services.
- Suppliers may see increased demand due to Cognizant's growth.
- Creditors can expect continued financial stability.
Next Steps
- Cognizant will continue to focus on AI-led platforms and strategic acquisitions.
- The company will leverage its partnerships to drive enterprise security transformation.
- Cognizant plans to enhance its digital banking experience through collaborations.
- The company will focus on optimizing IT operations and driving automation for clients.
Key Dates
- February 5, 2025: Date of the earnings release and conference call to discuss Q4 2024 results.
- February 18, 2025: Shareholders of record date for the Q1 2025 cash dividend.
- February 19, 2025: End date for accessing the replay of the conference call.
- February 26, 2025: Payment date for the Q1 2025 cash dividend.
Keywords
CTSH
Cognizant Technology Solutions CORP
NASDAQ
Sector: TBD
Filings with Classifications
Better than expected
30 April 2025 9:37 PM
Quarterly Report
- Revenue increased by 7.5% year-over-year, indicating strong business performance.
- Operating margin improved, reflecting enhanced profitability and efficiency.
- Diluted EPS and adjusted diluted EPS both saw significant growth, benefiting shareholders.
Better than expected
30 April 2025 4:02 PM
Quarterly Report
- The company's revenue and adjusted operating margin exceeded expectations, indicating a strong start to the year.
Worse than expected
18 April 2025 8:12 AM
Definitive Proxy Statement
- The 2022-2024 PSUs paid out at a low 28.1% of target due to a challenging macroeconomic environment.
- Cognizant's stock price has been in a long-term slump, with the stock at $81 in 2018 and only $80 in late 2024.
Better than expected
5 February 2025 4:05 PM
Earnings Release
- Cognizant's Q4 revenue growth exceeded the high end of its guidance range.
- The company's Adjusted Operating Margin of 15.7% in the fourth quarter was above its guidance.
Better than expected
30 October 2024 4:04 PM
Quarterly Report
- The company's revenue growth was at the high end of its guidance range, indicating better than expected performance.
- The company signed more large deals year-to-date than in the full year 2023, indicating better than expected sales performance.
Worse than expected
31 July 2024 5:36 PM
Quarterly Report
- The company's revenue decreased by 0.7% year-over-year, indicating worse than expected results.
Capital raise
31 July 2024 5:36 PM
Quarterly Report
- The company announced an agreement to acquire Belcan for approximately $1.3 billion in cash and stock.
- Cash consideration is expected to be funded through a mix of cash on hand and debt.
Better than expected
31 July 2024 4:03 PM
Quarterly Report
- The company exceeded its revenue guidance for the quarter.
- The company's operating margin and adjusted operating margin improved year-over-year.
- The company's full year revenue guidance improved at the midpoint.
Capital raise
10 June 2024 7:05 AM
Merger Announcement
- The cash portion of the acquisition is expected to be funded through a mix of cash on hand and debt.
- Cognizant intends to increase its share repurchase plan to maintain current share count guidance of 497 million for the full year 2024.
Worse than expected
1 May 2024 5:40 PM
Quarterly Report
- The company's revenue decreased by 1.1% year-over-year, indicating a worse performance than the previous year.
- GAAP diluted EPS decreased by 3.5% year-over-year, indicating a worse performance than the previous year.
Worse than expected
14 February 2024 12:16 PM
Annual Results
- The company's revenue decreased by 0.4% in 2023, indicating worse than expected results.
- The company's operating margin decreased to 13.9% from 15.3% in 2022, indicating worse than expected results.
Worse than expected
6 February 2024 4:08 PM
Quarterly Report
- The company's full-year revenue declined by 0.4% year-over-year, indicating worse than expected performance.
- The company's Q4 revenue declined by 1.7% year-over-year, indicating worse than expected performance.
- The company's 2024 revenue growth guidance is between -2% and 2% in constant currency, indicating worse than expected performance.
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