On July 31, 2024, Cognizant Technology Solutions Corp (CTSH, Financial) released its 8-K filing for the second quarter of 2024. Cognizant, a global IT services provider headquartered in Teaneck, New Jersey, reported revenue of $4.85 billion, surpassing the high end of its guidance range. The company employs nearly 300,000 people globally, with approximately 70% based in India.
Performance and Challenges
Cognizant's Q2 2024 revenue of $4.85 billion represents a slight year-over-year decline of 0.7%, but it exceeded the analyst estimate of $4.80 billion. The company's operating margin improved significantly to 14.6%, up from 11.8% in Q2 2023. Adjusted operating margin also expanded to 15.2%, a 100 basis point increase year-over-year. Despite these achievements, the company faces challenges such as a slight decline in bookings on a trailing twelve-month basis and a decrease in total headcount.
Financial Achievements
Key financial achievements for Cognizant in Q2 2024 include:
- Revenue of $4.85 billion, above the high end of guidance.
- Operating margin of 14.6%, up from 11.8% in Q2 2023.
- Adjusted operating margin of 15.2%, up from 14.2% in Q2 2023.
- GAAP diluted EPS of $1.14, compared to $0.91 in Q2 2023.
- Adjusted diluted EPS of $1.17, compared to $1.10 in Q2 2023.
Income Statement Highlights
| Q2 2024 | Q2 2023 | |
|---|---|---|
| Revenue | $4.85 billion | $4.89 billion |
| GAAP Operating Margin | 14.6% | 11.8% |
| Adjusted Operating Margin | 15.2% | 14.2% |
| GAAP Diluted EPS | $1.14 | $0.91 |
| Adjusted Diluted EPS | $1.17 | $1.10 |
Balance Sheet and Cash Flow
As of June 30, 2024, Cognizant reported total assets of $18.58 billion, slightly up from $18.48 billion at the end of 2023. The company's cash and cash equivalents stood at $2.19 billion, down from $2.62 billion at the end of 2023. Total liabilities decreased to $4.68 billion from $5.26 billion at the end of 2023, reflecting a reduction in accrued expenses and other current liabilities.
Commentary and Analysis
“In the second quarter, we delivered revenue above the high end of our guidance range, expanded adjusted operating margin, and maintained our large deal momentum,” said Ravi Kumar S, Chief Executive Officer. “Progress against our strategic priorities is opening new opportunities with clients and allowing us to operate with greater agility. We believe our performance this quarter and the improved organic growth outlook for the full year demonstrate how our execution against these priorities is beginning to translate to our results and support long-term shareholder value."
Chief Financial Officer Jatin Dalal added, “Sequential revenue growth of 2.1% in constant currency, driven by our Financial Services and Health Sciences segments, was the strongest in two years. Our NextGen program has helped us fund investments in support of revenue growth and deliver 70 basis points of adjusted operating margin expansion in the first half of 2024. We enter the third quarter with improved revenue momentum and remain committed to driving operational excellence."
Guidance and Future Outlook
For the third quarter of 2024, Cognizant expects revenue to be in the range of $4.89 to $4.96 billion, representing a year-over-year change of -0.2% to 1.3%. For the full year 2024, the company has narrowed its revenue guidance to a range of $19.3 to $19.5 billion, reflecting a year-over-year change of -0.5% to 1.0%. The full-year adjusted operating margin is expected to be between 15.3% and 15.5%, with adjusted EPS in the range of $4.62 to $4.70.
Overall, Cognizant Technology Solutions Corp (CTSH, Financial) has demonstrated resilience and operational efficiency in Q2 2024, exceeding revenue expectations and improving margins. However, the company must navigate challenges such as declining bookings and headcount reductions to sustain its growth trajectory.
Explore the complete 8-K earnings release (here) from Cognizant Technology Solutions Corp for further details.
