CTSH · 10-Q · 2026Q3 · Full report

Operating Margin Drivers

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

Q3 2026 GAAP operating margin fell 60 basis points year over year to 15.4%, while adjusted operating margin increased 30 basis points to 16.3%. Project Leap savings, net of AI capability investments, and favorable foreign exchange supported margins; increased compensation and acquisition dilution offset some of those benefits, while $51 million of Project Leap costs reduced GAAP margin. Depreciation of the Indian rupee, net of hedges, added approximately 120 basis points to Q3 operating margin, while cash-flow hedge settlements reduced it by approximately 65 basis points.

Key facts

• Nine-month 2026 GAAP operating margin included $135 million of Project Leap costs and benefited from the $81 million partial reversal of the 2019 India Defined Contribution Obligation liability; both were excluded from adjusted margin. source
• Cognizant changed its segment operating-profit measurement in Q1 2026 to include allocated corporate costs, including acquired-intangible amortization, and recast 2025 results to conform. source
• Cognizant's GAAP operating margin was 15.4% in Q3 2026 versus 16.0% in Q3 2025; adjusted operating margin was 16.3% versus 16.0%. source
• Q3 2026 operating margins benefited from Project Leap savings net of AI investments and favorable foreign-exchange movements, partly offset by increased compensation costs and acquisition dilution; GAAP margin also included $51 million of Project Leap costs excluded from adjusted margin. source
• Cognizant's Q3 2026 CMT segment margin benefited from increased profitability of several large customers, partly offset by acquisition dilution; Financial Services margin was negatively affected year over year by the timing of third-party product sales. source
• In 2026, CMT segment margin benefited from increased profitability of several large customers, partly offset by acquisition dilution; third-party product sale timing benefited Health Sciences margin and hurt Financial Services margin year over year. source
• Q3 2026 segment operating margins across all segments benefited from Project Leap savings net of AI investments and favorable FX, partly offset by higher compensation costs. source
• Cognizant's 2026 GAAP and adjusted operating margins benefited from Project Leap savings net of AI investments and FX movements, partly offset by compensation costs, acquisition dilution and third-party product sales mix. source