Cognizant Technology Solutions (CTSH) Q4 2023 earnings summary

Executive summary

• Q4 2023 revenue was $4.758B, down 1.7% YoY reported and 2.4% in constant currency; FY revenue was $19.353B, down 0.4% reported and 0.3% in constant currency.

• FY adjusted diluted EPS was $4.55; adjusted operating margin was 15.1%, while Q4 adjusted operating margin reached 16.1%.

• FY bookings rose 9% to $26.3B, with a ~1.4x book-to-bill ratio; FY free cash flow was $2.013B and $1.7B was returned to shareholders.

Financial highlights

• Q4 GAAP diluted EPS was $1.11 and adjusted diluted EPS was $1.18; GAAP operating margin was 15.2% and adjusted margin was 16.1%.

• FY GAAP diluted EPS was $4.21 and adjusted diluted EPS was $4.55; GAAP operating margin was 13.9% and adjusted margin was 15.1%.

• Q4 GAAP net income was $558M; FY GAAP net income was $2.126B.

• FY operating cash flow was $2.330B and free cash flow was $2.013B, versus $2.568B and $2.236B, respectively, in FY 2022.

Outlook and guidance

• FY 2024 revenue guidance is $19.0B–$19.8B, or -1.8% to +2.2% reported and -2.0% to +2.0% in constant currency; it includes up to ~100 bps of inorganic contribution.

• FY 2024 adjusted operating margin guidance is 15.3%–15.5%, representing 20–40 bps expansion; adjusted diluted EPS guidance is $4.50–$4.68.

• Q1 2024 revenue guidance is $4.68B–$4.76B, down 2.7%–1.2% reported or 3.0%–1.5% in constant currency YoY.

• FY 2024 adjusted effective tax rate guidance is 24%–25%; estimated net interest income is ~$40M and assumed share count is 497M.