Key Takeaways
- Cognizant shares fell today after third-quarter bookings dropped 7% and it guided to 3.0% to 4.5% fourth-quarter revenue growth.
- Revenue and earnings topped estimates, but four firms had raised their price targets in the days before the report.
- Accenture and Infosys are still signing big deals, and EPAM’s report next week will show whether the slowdown is Cognizant’s alone.
- The stock now trades well below its five-year average forward P/E.
Cognizant Technology Solutions (CTSH) stock sank today, even though its third-quarter revenue and earnings came in ahead of expectations.
The problem was bookings, which fell 7% from a year earlier. That’s a question for the whole group. EPAM Systems (EPAM) rose with Cognizant on good news from Accenture (ACN) earlier this month, and Infosys (INFY) competes with Cognizant for the same large deals.
What exactly happened
- Revenue rose 4.6% to $5.7 billion, above the midpoint of Cognizant’s own guidance range.
- Adjusted EPS rose 7.2% to $1.49.
- Bookings over the last 12 months still rose 4%, to $28.7 billion.
- Fourth-quarter revenue is guided to rise just 3.0% to 4.5%.
CEO Ravi Kumar S framed it as a shift in what clients want: “The AI market is moving from capability to value realization.”
My read: clients want proof AI pays before they sign big new contracts, and that can make bookings lumpy for a while.
TIKR tracks 29 analysts on Cognizant Technology Solutions. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Cognizant Technology Solutions, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Cognizant Technology Solutions’ Analyst Ratings
The rally ran ahead of the bookings
The stock gained 12% in the week to Oct. 16, none of it from Cognizant’s own numbers. Then four firms raised their targets in the days before the report, Guggenheim’s to $80. The consensus target has climbed to $68, from $60 in late July.
Accenture and Infosys are still signing big deals
Accenture’s new bookings rose 4% to $22.2 billion in its quarter to Aug. 31, and it guided to 3% to 6% local-currency revenue growth for fiscal 2027. Its December report will show whether that held up.
Infosys signed $5.2 billion of large deals in its quarter to Sept. 30, yet guided to just 1% to 2% revenue growth for its fiscal year to March 2027. So the deals are out there, and turning them into growth is hard for everyone.
EPAM reports next week, after guiding to 1.7% third-quarter revenue growth at the midpoint. Its fourth-quarter outlook will show whether clients are holding back across the group.
The selloff looks overdone
Cognizant traded at 11x forward earnings at yesterday’s close, against a five-year average of 15x.
Today’s drop takes it just under 11x.
My take: one weak bookings quarter is a thin reason for a stock to get this cheap. I think the market is pricing in far more trouble than the numbers show.
Of course, if fourth-quarter bookings fall again, and EPAM and Accenture report the same, “value realization” will start to look a lot like clients spending less.
So what is Cognizant stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
