$CTSH · COGNIZANT TECHNOLOGY SOLUTIONS CORP
Cognizant filed its Q3 FY2026 10-Q, reporting revenue of $5.664B (+4.6% YoY), GAAP net income of $627M ($1.39 diluted EPS), and Adjusted Diluted EPS of $1.49. Operating margin contracted to 15.4% from 16.0% a year ago. The company recorded $51M in restructuring charges tied to Project Leap, a new AI-led efficiency program. Long-term debt rose to $1.552B from $543M at year-end 2025.
- Q3 revenue $5.664B, +4.6% YoY, with operating margin compressing to 15.4% from 16.0% a year ago.
- GAAP net income surged to $627M from $274M in Q3 2025, driven by a $376M lower tax provision (prior year included a $390M OBBBA charge).
- Adjusted Diluted EPS of $1.49 vs $1.39 in Q3 2025, a 7.2% increase.
- Restructuring charges of $51M in Q3 and $135M YTD tied to Project Leap, a new AI-led efficiency program.
- Long-term debt nearly tripled to $1.552B from $543M at year-end 2025; cash declined to $1.515B from $1.901B.
Extended-hours trading shows CTSH at $59.10, down 10.94% from the regular close of $66.36. The sharp sell-off suggests the market is disappointed despite the headline net income surge — likely focused on the operating margin compression, the new restructuring program, and the significant debt increase.
The ~11% after-hours plunge signals the market is punishing margin erosion and a new restructuring program more than rewarding the headline 129% net income jump, which was largely tax-driven.
Cognizant's 4.6% revenue growth trails peers like Accenture in the IT services space, while the new Project Leap restructuring signals cost-cutting urgency amid AI disruption. The margin compression to 15.4% from 16.0% reflects the sector-wide pricing pressure and talent cost inflation.
India-Mauritius tax treaty amendment entered into force August 2026 and could increase Cognizant's effective tax rate since CTS India is a subsidiary of its Mauritius entity. Project Leap restructuring carries execution risk with $135M in charges YTD and uncertain ultimate benefits.