CTSH · Earnings call · 2026Q3T · Full report

Operating Margin Drivers

COGNIZANT TECHNOLOGY SOLUTIONS CORP · 2026-10-29 · Importance 25 · Surprise 32

Third-quarter adjusted operating margin was 16.3%, up 30 basis points year over year excluding approximately $51 million of Project Leap costs. Project Leap savings and favorable currency more than offset higher compensation costs and investments in AI partnerships, integrated offerings, and M&A. Management said gross margin improved significantly and expected further gross margin expansion in the fourth quarter. It cited pricing, new AI services, a more offshore revenue mix, and high utilization as margin-supporting factors.

Key facts

• In Q3 2026, adjusted operating margin was 16.3%, up 30 basis points year-over-year excluding approximately $51 million of Project Leap costs.
• Cognizant's adjusted operating margin increased year-over-year to 16.3%, its seventh consecutive quarter of year-over-year expansion.
• Cognizant's Q3 2026 adjusted operating margin was the highest in four years.
• Cognizant projected full-year margin expansion.
• Cognizant said its margin expansion had continued for seven quarters in a row.
• Cognizant said it was confident it would have gross and operating margin expansion in 2027.
• Project Leap savings and favorable currency more than offset higher compensation costs and investments in AI partnerships, integrated offerings, and M&A in Q3 2026.