Cognizant Technology Solutions (CTSH) investor relations material

AI strategy and industry transformation

• AI is driving efficiency in traditional IT services, causing some contract-level deflation, but overall industry and company revenues remain stable with continued organic growth guidance of 3%-4% this year.

• AI enables both modernization of legacy work (e.g., mainframe modernization) and creation of entirely new opportunities, such as agentic workflows and vulnerability management.

• The total addressable market (TAM) is expanding from $1 trillion in traditional IT to $5-$6 trillion with AI-driven probabilistic systems.

• Dual-engine growth is anticipated: traditional business remains strong while new AI-driven services are expected to accelerate in the future.

• AI adoption is progressing in phases: productivity-led improvements (Vector 1), infrastructure readiness (Vector 2), and AI-native workflow redesign (Vector 3).

Platform and IP-enabled business model evolution

• The business is shifting from skill-based delivery to a model combining human skills, AI agents, and proprietary platforms.

• TriZetto, a flagship healthcare IP, has been made 'headless' to allow agentic workflows, increasing monetization opportunities.

• Platforms are expected to drive higher gross and operating margins due to their scalable nature and superior returns.

• New agentic solutions, such as digital nurses and wealth management agents, represent emerging revenue streams with significant future growth potential.

• The focus on platforms and operations is supported by targeted M&A and early-stage innovation investments.

Revenue models and client engagement

• Clients are experimenting with various AI consumption models: human effort billing, blended inference, and outcome-based fixed pricing.

• Token economics and cost optimization are becoming central, with tailored language models deployed to balance cost and value.

• Enterprises are expected to maintain a mix of deterministic (70%) and probabilistic (30%) systems over the next 3-5 years, with the company positioned to serve both.

• The pace of technology change is outstripping enterprise value realization, creating a gap that service providers aim to bridge.