Cognizant Earnings: Financial Services on the Mend and Health Services Growth Strong

Cognizant posted a solid third quarter, with results coming in slightly above our expectations as the industry is seeing a steady improvement in customer spending, especially in financial services, which is gaining greater wallet share growth as customers reorient themselves with more discretionary projects. This is encouraging as financial services tends to be the greatest revenue contributor for IT services firms, including for Cognizant. Furthermore, we continue to consider Cognizant’s financial services banking platform as best-of-breed, making its recovery a very welcome one—even if gradual. We are reiterating our $94 fair value estimate for the firm as we see it well set to win its fair share in AI workloads throughout its segments. Shares are up 4% in after-hours trading but still leave significant upside, in our view.