QS Research · Michael Burry's Scion Capital analyst template · 2006
COGNIZANT TECHNOLOGY SOLUTIONS CORP (CTSH)
As of 2026-11-11 · 12/15 boxes filled from SEC filings and market data
Report price $65.00 (close 2026-11-10)
Conclusion: LONG
Conviction medium · base case +52% · downside -24% · upside +63%
CTSH trades at 11.3x TTM P/E and 7.2x EV/EBITDA on $29.06B EV with zero net debt, 16.6% ROIC vs 7.8% WACC and an 8.1% FCF yield, while the independent peer-median P/E anchor of 17.2x gives $98.94 (+52%). The market is discounting real deceleration: Q3 2026 organic growth was roughly 1% after acquisitions and resales, Q3 bookings fell 7% y/y, and FY2026 constant-currency revenue guidance was cut to 4.0%-4.4% on 2026-10-29. Against that, Q3 adjusted operating margin rose 30 bp to 16.3%, FY2026 adjusted EPS is guided to $5.72-$5.79, Project Leap targets ~$200M of 2026 savings, and the $2.1B buyback authorization plus 7.62% net buyback yield support per-share value. The upside case assumes a rerating to 18.3x peer P/E only because the dated 2026-10-29 Q3 release and guidance show margin/EPS delivery; without it the multiple stays near today's level. Downside assumes a 10% earnings decline and a 15% multiple compression to 9.6x, giving about -23.5%, so the risk/reward meets the long rule at the anchored base.
Key numbers
- Share price: $65.00
- Market cap: $29.06B
- Latest financial period: TTM to Sep 30, 2026
- Revenue (TTM): $21.89B
- EV / EBITDA (TTM): 7.2x
- P/E (TTM): 11.3x
- FCF yield: 8.1%
- Price / book: 1.97x
- Earnings-quality flags (TTM): none flagged
- EV / FCF (TTM): 12.3x
- Revenue growth (latest fiscal year): +7.0%
- ROIC (TTM): 16.6%
- WACC: 7.8%
- Economic profit spread: +8.8 pts
The 15 boxes
- ✓ 1. Long-form business notes
Cognizant is a global IT services and consulting business that delivered $21.11B of revenue in FY2025 and $21.89B on a TTM basis to Sep 2026, after flat years in FY2022-FY2024 ($19.43B, $19.35B, $19.74B). Operating income grew from $2.11B in FY2020 to $3.39B in FY2025 and $3.44B TTM, but FY2025 net income ($2.23B) was flat versus FY2024 ($2.24B) even as operating income rose — the XBRL facts do not break out the reconciling items. The model is delivery-heavy and India-centric (the 10-K says the substantial majority of employees are in India while contracts are typically in client-local currency), with short-terminable, performance-linked contracts and pricing pressure from both global competitors and clients' in-house GCCs. Between the FY2020 and FY2025 filings the language has shifted decisively toward AI/GenAI as both an offering and a substitution risk, while capital return has accelerated — $2.21B of buybacks in the TTM to Sep 2026 and diluted shares down from 541.0M (FY2020) to 463.0M (TTM).
- ✓ 2. Competitive advantage
Cognizant looks like a scaled, asset-light services business with real switching costs at large clients and a mid-teens operating margin that has drifted up (12.7% FY2020 to 16.1% FY2025, 15.7% TTM to Sep 2026), but no evident pricing power: its own 10-K calls the market "highly competitive," lists thirteen named direct competitors plus in-house client GCCs, and names competitive pricing as a principal competitive factor. The durable assets it claims are its brand, its 351,600-person global delivery model (256,900 in India) and partner/AI credentials; the moat is scale and embeddedness, not licenses or IP. Net income has not followed operating income up (FY2025 $2.23B vs FY2024 $2.24B), so the advantage is not showing up cleanly at the bottom line.
- ✓ 3. 10-Q takeaways
Q3 2026 revenue was $5,664 million, up $249 million or 4.6% (4.8% constant currency) from Q3 2025, but acquisitions added ~210bps and third-party product resales ~190bps of that. GAAP operating margin fell to 15.4% from 16.0% after $51 million of Project Leap charges, while Adjusted Operating Margin rose to 16.3% from 16.0%. The jump in Q3 2026 net income to $627 million from $274 million is mostly the absence of Q3 2025's one-time $390 million non-cash OBBBA tax charge, not operating leverage; Adjusted Diluted EPS was $1.49 versus $1.39. Guidance (Oct 29, 2026) was revised down on constant-currency revenue to 4.0%-4.4% for FY2026, with Q4 revenue guided to $5.49-$5.57 billion, a deceleration from Q3's 4.6%.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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