Cognizant (CTSH) Q2 FY26 earnings call: guidance and Q&A

Cognizant is actively evolving into an 'AI builder,' addressing the significant market opportunity where two-thirds of Global 2000 companies have yet to realize measurable AI productivity gains. The company estimates the system integration market, currently $1 trillion, could expand to $5-$6 trillion by embedding AI into business operations, with $4.5 trillion of operational labor exposed to AI. This shift positions services firms to capture substantial value by moving beyond traditional system integration to designing bespoke AI systems and leveraging applied AI at the context, governance, and business process layers.

To facilitate AI adoption and value realization, Cognizant launched its AI Delivery Operating System. This continuously learning system integrates human expertise, organizational knowledge, client context, and AI intelligence through three pillars: an engineering harness, a business operations harness, and an intelligent spine. A key component is 'context engineering,' which involves assembling enterprise work graphs, guardrails, and tribal knowledge. For instance, working with Cisco, they are building a digital twin for account managers, and for a large North American bank, a multi-agent pilot for fraud dispute management showed potential to reduce manual effort by over 50%.

Ravi Kumar outlined four significant shifts driving Cognizant's transformation: becoming an AI builder, rearchitecting the talent model, shifting economics from labor to outcomes, and moving from delivering projects to underwriting results. Progress includes the launch of a dedicated AI market unit and the introduction of new certified roles: 'frontier certified engineers' and 'frontier business operators.' The company plans to scale these teams to 5,000 and 10,000 respectively, leveraging its existing 10,000 cloud-certified architects and extensive training programs like Cognizant SkillSpring.

Cognizant's platform strategy focuses on engineering platforms for AI-native software development and business platforms that combine technology, data, AI, and industry expertise. TriZetto, their healthcare platform business, serves as a strong proof point, generating over $1.1 billion in annual revenue and growing faster than the overall company with substantially higher margins. TriZetto's evolution from a software product to a broad healthcare platform ecosystem demonstrates how platforms can drive deep client relationships, recurring revenue, and superior growth and profitability, serving as a blueprint for expansion into other industries.

The company is positioning itself in the emerging domain of 'physical AI,' which involves intelligence governing physical environments and autonomous operations. Cognizant launched its 'solver in physical AI platform as a service,' leveraging its decade-long expertise in training AI and machine learning models for large technology companies. The public sector is also becoming a meaningful business, with wins such as modernizing Iowa's IT infrastructure, expanding work with the UK Home Office, and securing additional work with His Majesty's Revenue and Customs valued at over $215 million.

Cognizant is actively evaluating a potential primary offering and secondary listing in India. The company is collaborating closely with external stakeholders and regulators and plans to make a decision once there is clarity on the revised regulatory framework. Management reiterated its commitment to acting in the best interest of shareholders and will provide updates as appropriate.