Cognizant Tips as it Seeks Balance Between Revenue Growth and Margin Expansion; Lowering FVE to $96

Cognizant proved this quarter that it is more aggressively attacking margin headwinds than its IT services peers—boasting operating margin expansion the quarter, a stark contrast to its peers who have experienced difficult margin contraction. Nonetheless, Cognizant's margin boosting levers are moderating revenue growth, as second-quarter top-line results came in at the lower end of management's guidance. While we agree with Cognizant that striking a balance between margin expansion and revenue growth is important, we think there is something to be said about the importance of customer acquisition—as stickiness of IT services should lead to nice customer lifetime value.