The paragraph is an introduction to Cognizant Technology Solutions' First Quarter 2025 Earnings Conference Call, led by Tyler Scott, the Vice President of Investor Relations. Tyler notes the availability of the earnings release and investor supplement on the company's website. The speakers for the call include CEO Ravi Kumar and CFO Jatin Dalal. Tyler reminds listeners that the call may contain forward-looking statements subject to risks and uncertainties. Additionally, non-GAAP financial measures will be discussed, with reconciling information available in the earnings release. Ravi Kumar then begins by expressing satisfaction with the company's strong start to the year, highlighting revenue growth and improved adjusted operating margins due to their strategic focus and operational discipline.

The company is building a resilient and durable business capable of thriving in varying market conditions and providing opportunities to clients amid complexities. In the first quarter, revenue increased by 8.2% year-over-year in constant currency to $5.1 billion, fueled by the Belcan acquisition and organic growth in Health Sciences and Financial Services. Health Sciences led with a revenue increase of over 11%, driven by broad-based growth in payer, provider, and life sciences. Financial Services grew for the third consecutive quarter by 6.5%, with significant discretionary spending on cloud, data modernization, and AI innovation. The company secured four large deals, including one valued at over $500 million, with bookings up 3% from the previous year, ensuring a strong outlook.

The company reported a strong first quarter, with an improved adjusted operating margin and a 10% growth in adjusted EPS year-over-year. Despite a challenging macro environment, the company is optimistic about future opportunities in technology deployment, focusing on productivity, efficiency, and cost savings. Its investments in AI and engineering capabilities position it well for success, particularly as it integrates recent acquisitions to enhance its expertise in areas like autonomous technologies and chip-to-cloud engineering. These efforts aim to drive a transformation in IT services, leveraging AI for increased productivity and innovation.

The paragraph discusses Cognizant's strategic focus on AI development, highlighting its leading efforts since 2023. The company has identified three vectors for AI development: enhancing productivity to reduce technical debt, industrializing AI through customization and integration, and expanding partnerships with companies like NVIDIA to accelerate AI adoption. Cognizant reports an increase in AI-generated code contributing to productivity and cost savings, and it is involved in numerous AI engagements. Their collaboration with NVIDIA aims to advance AI in five key areas, including digital twins and enterprise AI agents.

The paragraph discusses the potential of "agentification" within the Vector 3 opportunity to significantly expand labor pools and spending. Early experiments in sectors like financial services, retail, and healthcare demonstrate its capacity to address major challenges such as efficiency and regulatory issues. With the use of AI labs and the strengthening of the Neuro suite, the company has achieved a milestone in LLM uncertainty estimation, enhancing the safety and consistency of multi-agent systems. This development supports innovation and productivity. The company's consistent execution of strategic priorities has led to growth and success in their initiatives, emphasizing the importance of industry expertise and operational evolution for future wins.

The company has refined its strategic goals to focus on amplifying talent, scaling innovation, and accelerating growth. They are enhancing their workforce for the AI era by establishing a large learning center in Chennai, India, and expanding into smaller cities. Their Synapse initiative aims to train 1 million individuals globally. In innovation, their BlueBolt initiative has generated over 385,000 ideas, with 69,000 implemented. They've introduced an AI-powered solution for mid-market banks with ServiceNow and received multiple awards at Google Cloud Next 2025 for their work in data modernization and AI-driven retail solutions.

During the quarter, the company was recognized on Fortune's 2025 list of America's Most Innovative Companies for the third consecutive year. To drive growth, the company is focusing on innovation in AI and embedded engineering. Key initiatives include launching the One Medicine Platform with Boehringer Ingelheim to streamline drug development, collaborating with OMRON to integrate IT and OT in new manufacturing products for industrial and automotive clients, and expanding its partnership with Manulife John Hancock Retirement to enhance digital ecosystems using AI. Additionally, the company is strengthening its Global Capability Centers (GCC) strategy by establishing new centers equipped with AI tools, including a new GCC with Citizens Financial at the Hyderabad campus, which will focus on enhancing enterprise technology and data capabilities.

The paragraph discusses the company's growth opportunities in the GCC space, highlighting its expertise and capabilities in industries served by technology strength in India and the U.S. It notes new growth opportunities, including opening an aerospace and defense hub in Toulouse and being named GE Aerospace Supplier of the Year. Despite economic uncertainties, the company is proud of its performance, momentum, and investments in AI and technology-led engineering. They focus on employee and client satisfaction, operational efficiency, and cost discipline to drive profitability and sustain progress towards growth targets. The company's quarter results exceeded expectations with revenue growth and expanded adjusted operating margins, leading to a 10% growth in adjusted EPS.

In the first quarter, the company's revenue grew 8.2% year-over-year to $5.1 billion, driven by strong organic growth in Health Sciences and Financial Services, along with a significant contribution from acquisitions like Belcan. The company did not face major impacts from macroeconomic uncertainty and did not experience significant customer cancellations. However, in April, some clients showed slower decision-making and reduced discretionary spending, particularly in Health Sciences and certain segments. Despite this, demand in Financial Services remains strong. The company is positioned to capitalize on opportunities as clients focus on cost optimization and productivity, seeking partners like Cognizant for cost savings and innovation support. In Health Sciences, growth remains broad-based despite potential changes in government healthcare programs. Financial Services has demonstrated resilience, particularly in North America.

In the first quarter, the company experienced revenue growth driven by Belcan, despite a weak demand environment in the Products and Resources segment due to discretionary spending pressure. The Communications, Media, and Technology segment had stable but flat revenue. North America led regional growth with a 10% year-over-year increase, supported by Belcan and large deals, while Europe grew by 3%, driven by life sciences and financial services. The rest of the world saw a 7% increase, particularly in communications, media, technology, and financial services. However, first-quarter bookings declined by 7% year-over-year due to fewer large deals in the rest of the world, although new and expansion bookings grew and made up over 50% of the quarterly bookings.

The paragraph discusses the company's financial performance, specifically highlighting a 3% year-over-year growth in bookings to $26.7 billion. It mentions a positive transaction impact from selling an office complex in India for $70 million. Adjusted operating margins improved by 40 basis points, reaching 15.5%, supported by cost savings and currency depreciation, although offset by higher compensation costs. The company achieved a utilization rate of 85%. Despite an increase in days sales outstanding (DSO) to 81 days, the first quarter free cash flow reached $393 million, including proceeds from the property sale, which will be reinvested in India. Capital returns to shareholders totaled $364 million, and the quarter ended with $2 billion in cash and short-term investments. For 2025, the company projects revenue growth between 3.5% and 6% in constant currency, with an expected 5% to 6.5% growth for the second quarter.

The paragraph discusses an update to the company's financial guidance, noting an increase in the reported range by approximately $200 million due to favorable foreign currency rates against the US dollar. Despite constant currency guidance remaining unchanged, revenue guidance varies based on demand environment assumptions. The adjusted operating margin is expected to expand, driven by cost discipline and productivity-led bookings. The company aims to enhance operational efficiency through AI, automation, and optimization. The adjusted tax rate remains at 24% to 25%, while EPS guidance has increased, reflecting currency benefits and a lower share count, indicating a 5% to 8% growth. Free cash flow is expected to exceed 90% of net income.

In the paragraph, the company discusses its plan to return approximately $1.7 billion to shareholders in 2025, which includes $1.1 billion in share repurchases and $600 million in dividends. This plan includes an additional $500 million in share repurchases announced at their Investor Day. The strategy is designed to maintain flexibility for potential M&A opportunities, expecting a slight decrease in the average diluted share count to about 491 million. They are preparing to repurchase shares actively and express confidence in their growth opportunities and leadership. During a Q&A session, Tien-Tsin Huang from JPMorgan congratulates the company on its recent success and inquires about the shift in the quality of bookings and projects. Ravi Kumar responds, highlighting the productivity gains from leveraging AI and the company's leadership in originating and winning new deals.

The paragraph discusses the positive momentum in large and mega deals, particularly in the financial services and commercial healthcare industries. There is a resurgence in discretionary growth work in financial services due to anticipated deregulation, resulting in a year-on-year positive growth of 6.5%. Innovation-led projects, especially those involving AI, are increasing. The company is excited about a strong pipeline of mega deals worth $500 million and above, with expectations of crossing the finishing line on a couple in the next quarter. The paragraph ends with Jatin Dalal's intention to discuss pricing and margin expectations for these deals.

The paragraph discusses the factors contributing to winning business deals, including the strength of the solution, past execution on similar deals, and AI-driven productivity. The quality of solutioning and the integration of AI productivity are pivotal, influencing initial margins and the management of a business portfolio over time. Ravi Kumar highlights their unique position in leveraging AI productivity in client work, enhancing market competitiveness. Tien-Tsin Huang notes improved utilization rates, questioning future possibilities for further advancements in productivity and utilization, with Ravi Kumar acknowledging the increase from 82% to 85% utilization.

The paragraph discusses a company's strategy for managing human capital costs as they increase their hiring of fresh graduates to construct a workforce pyramid. It highlights the company's focus on integrating AI productivity to manage costs and improve talent utilization, particularly of experienced staff. The company plans to blend freshers into the workforce in conjunction with experienced staff, aiming to enhance productivity and utilization rates while preparing for future capacity needs. A question from analyst Ramsey El-Assal addresses concerns about a decision-making slowdown in April, seeking clarity on whether this impact is isolated to specific clients or geographies. Jatin Dalal responds positively, highlighting ongoing opportunities in financial services and stable demand in the communication, media, and technology sectors.

The paragraph discusses the impact of policies and tariffs on different business segments, highlighting that the health and products/resources sectors are experiencing varying levels of caution and impact due to these factors. The dialogue then shifts to Belcan's minimal exposure to U.S. government contracts, emphasizing that most of Belcan's work is in engineering, which is less affected by government actions compared to enabling technology. It concludes with a brief mention of Belcan's focus on commercial aerospace work, which hasn't been impacted. The paragraph also notes an acceleration in organic constant currency growth for the quarter.

The paragraph discusses the company's recent growth driven primarily by the healthcare and financial services sectors, which have experienced significant upswings. Over the past two years, the company completed 29 and 17 $100 million deals, respectively, and is now seeing the financial benefits as these deals ramp up. There is notable momentum in Europe and Australia, with specific mention of a successful deal with Telstra. Additionally, the company’s annual contract value (ACV) has increased year-on-year, with the size of its large deals growing. The book-to-bill ratio is at 1.3 over the trailing 12 months, and there has been an increase in net new deals, suggesting strong future growth prospects.

The paragraph discusses the stability of the labor market within the company, noting that attrition rates are slightly down and stable between quarters. There is no significant pressure from attrition affecting wages or project delivery. An increase in employee fulfillment, characterized by high acceptance rates of job offers and a significant number of returning employees, is also highlighted. This fulfillment is beneficial for handling smaller, discretionary projects that require experienced staff. The paragraph ends with the operator introducing the next question from Jim Schneider of Goldman Sachs.

The paragraph discusses the company's financial outlook for the year, emphasizing their comfort with current cost-cutting strategies and backlog coverage. Jatin Dalal explains the guidance spectrum, stating that the lower end reflects a worsening environment, the midpoint accounts for current impacts and deal wins, and the higher end assumes improvement. He highlights a healthy book-to-bill ratio of 1.3x and strong net new or expansion deals, which provide coverage for the year as they aim for the midpoint of their guidance.

The paragraph discusses the factors influencing the company's gross and operating margins, emphasizing the challenges of maintaining pricing power in the current environment. The company is focusing on cost discipline, utilization, productivity through Generative AI, and workforce adjustments to improve margins. They are also exploring opportunities to optimize general and administrative costs. Ravi Kumar adds that the company is optimistic about increasing annual contract value (ACV), securing mega deals, and achieving a higher proportion of new business over renewals. He notes significant improvements in acquiring new clients and success in innovative AI projects, which are expected to lead to substantial future opportunities.

In the paragraph, Ravi Kumar emphasizes the importance of consistency and sustainability in achieving success, acknowledging that one successful quarter is not enough to declare long-term victory. He expresses confidence in the company's ability to maintain its position by consistently performing well over multiple quarters. Ravi highlights the company's focus on both slow and fast velocity, vendor consolidation, productivity, and innovation, particularly in financial services. He believes that by maintaining consistent relative organic growth, leveraging tailwinds from the external market, and having a broad-based portfolio, the company can sustain its success in the competitive landscape.

The company has shifted to operating on four key service pillars: tech services, BPO services, infra-led cloud transformation, and engineering services. Previously dependent on healthcare and financial services, they have expanded to include more industries and regions beyond North America, where they claim a leading position. This diversification is intended to provide stability and resilience. They are confident in sustaining their growth trajectory and entering a "Winner's circle." Bryan Keane inquires about a slight deceleration in organic growth for the second quarter, suggesting it's due to environmental uncertainty observed in April, which is reflected in their guidance. Additionally, a gap between organic revenue growth and headcount growth may relate to utilization or benefits from GenAI.

The paragraph discusses the company's performance and workforce changes, highlighting a significant utilization improvement from 80% to 85%. This was achieved despite a reduction of approximately 14,000 employees compared to last year, including a 6,000 increase from a company acquisition, Belcan. Despite fewer employees, the company still achieved a 4% organic growth, attributing part of this to improved resource utilization. Additionally, in response to a question about the pace of conversion for larger cost takeout deals, it is noted that while some deals were delayed to the next quarter, the current environment, characterized by uncertainty, might encourage clients to close these deals due to heightened cost and productivity concerns.

The paragraph discusses the opportunity for cost reduction and innovation in an uncertain market, particularly through technology rather than labor. It emphasizes that uncertain market conditions present an ideal time for technology-led arbitrage and cost takeout deals. The Financial Services sector is highlighted as currently experiencing rejuvenated spending and deregulation, which are positive for business. Additionally, the paragraph acknowledges potential fluctuations in deal timing and aims to set a new baseline for technology deployment costs. The paragraph concludes with a prompt for further discussion on client pricing and competitive behaviors.

In the paragraph, Jatin Dalal discusses the importance of reducing the total cost of ownership for customers rather than focusing solely on rate card negotiations when pricing large deals. He emphasizes that the ability to effectively deploy generative AI (GenAI) into solutions and overall deal architecture can lead to superior pricing. Dalal also notes that there are varying levels of technology and capabilities in the market, and he believes their company has an early advantage in this area. The paragraph ends with Ravi Kumar and the operator concluding Cognizant Technology Solutions' first quarter 2025 earnings conference call.

This summary was generated with AI and may contain some inaccuracies.