Cognizant Technology Solutions (CTSH) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue was $4.85 billion, down 0.7% year-over-year but up 2.1% sequentially in constant currency, exceeding guidance and marking the highest sequential growth since 2022.

• Adjusted operating margin improved to 15.2%, up 10 bps sequentially and 100 bps year-over-year; GAAP operating margin was 14.6%.

• Diluted EPS rose to $1.14 from $0.91 year-over-year; adjusted EPS increased to $1.17 from $1.10.

• Free cash flow rebounded to $183 million from a negative $32 million in Q2 2023.

• Announced $1.3 billion Belcan acquisition to expand ER&D, aerospace, and defense capabilities, expected to close in Q3 2024.

Financial highlights

• Q2 revenue: $4.85 billion, down 0.7% year-over-year, $30 million above guidance high end; 2.1% sequential growth in constant currency.

• Adjusted operating margin: 15.2%; GAAP operating margin: 14.6%.

• Q2 diluted GAAP EPS: $1.14; adjusted EPS: $1.17.

• Free cash flow: $183 million; cash and short-term investments: $2.2 billion; net cash: $1.6 billion.

• Trailing 12-month bookings: $26.2 billion, 1.4x book-to-bill, up 5% year-over-year.

Outlook and guidance

• Q3 2024 revenue expected between $4.89–$4.96 billion, flat to 1.5% growth in constant currency.

• Full-year 2024 revenue guidance: $19.3–$19.5 billion, -0.5% to +1% year-over-year.

• Adjusted operating margin guidance: 15.3%–15.5% for full year.

• Adjusted EPS guidance raised to $4.62–$4.70.

• Guidance excludes impact from pending Belcan acquisition; NextGen program costs expected to total $325 million, with $95 million in 2024.