It has been about a month since the last earnings report for Cognizant (CTSH). Shares have added about 8.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Cognizant due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Cognizant Q3 Earnings Beat Estimates, Revenues Up Y/Y

Cognizant Technology Solutions reported non-GAAP earnings of $1.25 per share in third-quarter 2024, which beat the Zacks Consensus Estimate by 9.65% and increased 7.8% year over year.

Revenues of $5 billion beat the consensus mark by 0.82%. The top line increased 3% year over year and 2.7% at constant currency (cc). Acquisitions contributed 150 basis points (bps) to top-line growth.

On a trailing 12-month basis, bookings declined 2% year over year to $26.2 billion, which represented a book-to-bill of approximately 1.3 times. Six deals, each more than $100 million in TCV, were signed. This included four deals in Health Sciences, one in financial services and one in CMT.

Cognizant is heavily investing in AI, with a commitment of $1 billion to enhance platforms and capabilities.

CTSH’s Top-Line Details

Financial services revenues (29.5% of revenues) increased 0.7% year over year (up 0.5% at cc) to $1.486 billion. The growth is primarily due to improved discretionary spending and strong execution.

Health Sciences revenues (30% of revenues) increased 7.8% year over year (up 7.6% at cc) to $1.514 billion. The growth is driven by strong offerings and recent large deal wins.

Products and Resources revenues (24.3% of revenues) increased 5% year over year (up 4.6% at cc) to $1.22 billion.

Communications, Media and Technology revenues (16.2% of revenues) were $816 million, which decreased 3.7% from the year-ago quarter (up 4.1% at cc).

Region-wise, revenues from North America increased 3.8% year over year and at cc and contributed 74% to total revenues.

Revenues from Europe fell 0.3% year over year (down 1.9% at cc) and contributed 19.2% to total revenues. Revenues from the U.K. declined 0.8% (down 2.9% at cc). Continental Europe revenues increased 0.2% (down 0.8% at cc).

The Rest of the World revenues increased 4.3% year over year (up 4.2% at cc) and contributed 6.8% to total revenues.

CTSH’s Operating Details

Selling, general & administrative expenses, as a percentage of revenues, expanded 20 bps year over year to 16.5%.

Total headcount at the end of the third quarter was 340,100 compared with 336,300 in the previous quarter.

Voluntary attrition - Tech Services on a trailing-12-month basis increased to 14.6%, down from 16.2% for the period ended Sept. 30, 2023.

Cognizant reported a GAAP operating margin of 14.6%, expanding 60 bps on a year-over-year basis.

The company incurred $33 million in costs related to the NextGen program, negatively impacting the GAAP operating margin by 70 bps.

Non-GAAP operating margin (adjusted for NextGen charges) of 15.3% contracted 20 bps year over year.