Morningstar

Cognizant Earnings: Vendor Consolidation Trend Benefits Growth

In our view, the stock’s price does not yet fully reflect Cognizant’s favorable position in the AI era.

In this photo illustration, the Cognizant Technology Solutions Corporation logo is seen displayed on a smartphone screen.
Thomas Fuller/SOPA Images via Getty
Securities in This Article
Cognizant Technology Solutions Corp Class A
(CTSH)

Key Morningstar Metrics for Cognizant Technology Solutions

What We Thought of Cognizant Technology Solutions’ Earnings

Cognizant Technology Solutions CTSH finished 2025 strong, with fourth-quarter revenue up 5% and full-year revenue up 7%. Full-year operating margin expanded 140 basis points to 16%, its highest level since 2018. These positive results were mainly driven by increased fixed-price contracts and effective headcount scaling.

Why it matters: Cognizant benefits from vendor consolidation, as more enterprise clients expand their spending with IT suppliers boasting the most competitive artificial intelligence solutions. Clients’ conviction in Cognizant supported the trailing 12-month bookings growing to an all-time high of $28.4 billion.

  • Financial services led growth, thanks to the adoption of AI-based use cases such as fraud detection and claim processing. The sector’s full-year revenue expansion of 7% reached a new high since 2016. We expect other industry groups to replicate this dynamic as new AI applications mature.

The bottom line: We maintain our $84 per share fair value estimate for narrow-moat Cognizant. Shares were up 3% following the earnings announcement but remain moderately undervalued. In our view, the stock’s current price does not yet fully reflect Cognizant’s favorable position in the AI era.

  • We are glad to see Cognizant continue to make breakthroughs with large customers. Deals with $100 million or higher contract value were up 50% in 2025, which not only reinforces high switching costs but also underpins our 5% annual revenue growth forecast over the next five years.
  • With fixed-price contracts now accounting for half of Cognizant’s total business, it is in a better position to share AI-led productivity gains with clients, which should support an average of 20 basis points of operating margin improvement between 2025 and 2030.

Coming up: Management’s 2026 guidance of 4.0%-6.5% constant-currency revenue growth and 15.9%-16.1% adjusted operating margin both match our expectations. An expanded AI product library should allow Cognizant to post another year of top-tier growth performance.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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