CTSH
Cognizant
Dividend / Cash flow
★ Quality 20/100Price today
$62.31
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What this business is made of
The business
An army of Indian engineers rented by the hour; the cheap guy always finds a rival.
Cognizant sells IT services and consulting: systems modernization, business process management, and outsourcing for banking, healthcare, and retail. It charges per project and via multi-year managed-service contracts, billing $21.1B in 2025. The 34% gross margin gives away the business: labor-intensive, mostly in India.
Its edge is switching costs and long relationships with clients who've already woven Cognizant into their critical operations. But there's no real moat: it goes head-to-head with Accenture, Infosys, and TCS, all with the same labor-arbitrage model. When your edge is being cheap, someone can always be cheaper.
Revenue history
From $18.5B to $21.1B in 4 years. The business grows steadily.
Where each $100 of sales goes
Revenue $21.1B · FY2025
Of every $100 in sales, $89 goes to costs and operations; $11 is left as net profit (11% margin).
Catalysts and risks
Revenue grew to $21.1B in 2025, recovering growth after years stuck around ~$19.4B.
FCF of $2.6B on $2.2B of net income: it turns profit into real cash, backing the dividend.
Clean balance sheet — $1.9B cash against $0.5B debt — leaves room for buybacks and bolt-on acquisitions.
Generative AI directly threatens the billable-hours model: it automates exactly what Cognizant sells.
Structural growth of 3%: it's a mature business competing on price, not differentiation.
Dependence on banking and healthcare — an IT spending cut from those clients hits revenue immediately.
Charlie's note
“A decent business at a sensible price, not a gem. AI could eat the hours model or multiply its productivity — nobody knows yet. At 5.56x FCF you get paid to wait; just make sure you don't confuse cheap with good.”
Analysis · June 2026
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