Cognizant Technology Solutions CTSH · USD

Our chief executive officer is our chief operating decision maker. Our CODM regularly reviews the performance of our business by four industry-based operating segments, which are our four reportable business segments: Health Sciences, Financial Services, Products and Resources, and Communications, Media and Technology.We have an industry-led go-to-market strategy, with client partners, account executives and client relationship managers aligned to the specific industries they serve. Our CODM is regularly provided segment revenues and operating profit, including budget‑to‑actual variances in segment revenue, to formulate industry-focused strategic priorities, allocate financial resources, set targets and key performance indicators, and evaluate the results of such strategies. These strategic priorities, targets and key performance indicators are translated and applied to each client account, rolling up to respective industry-based operating segments. Our hiring and deployment plans are devised according to the strategic priorities and targets set for the client accounts.In the first quarter of 2025, we made certain changes to the internal measurement of segment operating profit for the purpose of evaluating segment performance and resource allocation. The primary reason for the change was to reflect a more complete cost of delivery. Specifically, segment operating profit now includes an allocation of certain corporate costs, which were previously included in "unallocated costs." We have reported 2025 segment operating profits using the new allocation methodology and have recast the 2024 results to conform to the new methodology. While we have recast the 2024 results to conform to the new methodology, it is impracticable for us to recast our 2023 segment operating results as the detailed information required for the allocation of such costs to the segments is not reasonably available.Revenue from each client is attributed to the operating segment that is most closely aligned with the client's business we serve. Segment operating profit represents income from operations excluding certain unallocated corporate costs. Our CODM is not regularly provided with segment expenses. A portion of depreciation and amortization expense, certain corporate costs, the impact of the settlements of the cash flow hedges, the gain on the sale of property and equipment and expenses related to our NextGen program are not allocated to individual segments.

We are involved in various claims and legal proceedings arising in the ordinary course of business. We accrue a liability when a loss is considered probable and the amount can be reasonably estimated. When a material loss contingency is reasonably possible but not probable, we do not record a liability, but instead disclose the nature and the amount of the claim, and an estimate of the loss or range of loss, if such an estimate can be made. Legal fees are expensed as incurred. While we do not expect that the ultimate resolution of any existing claims and proceedings (other than the specific matters described below, if decided adversely), individually or in the aggregate, will have a material adverse effect on our financial position, an unfavorable outcome in some or all of these proceedings could have a material adverse impact on results of operations or cash flows for a particular period. This assessment is based on our current understanding of relevant facts and circumstances. As such, our view of these matters is subject to inherent uncertainties and may change in the future.On January 15, 2015, Syntel sued TriZetto and Cognizant in the USDC-SDNY. Syntel’s complaint alleged breach of contract against TriZetto, and tortious interference and misappropriation of trade secrets against Cognizant and TriZetto, stemming from Cognizant’s hiring of certain former Syntel employees. Cognizant and TriZetto countersued on March 23, 2015, for breach of contract, misappropriation of trade secrets and tortious interference, based on Syntel’s misuse of TriZetto confidential information and abandonment of contractual obligations. Cognizant and TriZetto subsequently added federal DTSA and copyright infringement claims for Syntel’s misuse of TriZetto’s proprietary technology. The parties’ claims were narrowed by the court and the case was tried before a jury, which on October 27, 2020 returned a verdict in favor of Cognizant in the amount of $855 million, including $570 million in punitive damages. On April 20, 2021, the USDC-SDNY issued a post-trial order that, among other things, affirmed the jury’s award of $285 million in actual damages, but reduced the award of punitive damages from $570 million to $285 million, thereby reducing the overall damages award from $855 million to $570 million. The USDC-SDNY subsequently issued a final judgment consistent with the April 20th order.

We have a Credit Agreement providing for a $650 million Term Loan and a $1,850 million unsecured revolving credit facility, which are each due to mature in October 2027. We are required under the Credit Agreement to make scheduled quarterly principal payments on the Term Loan. During the third quarter of 2024, we borrowed $600 million under our revolving credit facility to partially fund the acquisition of Belcan. We repaid $300 million during the fourth quarter of 2024 and the remaining $300 million during the first quarter of 2025.The Credit Agreement requires interest to be paid, at our option, at either the Term Benchmark, Adjusted Daily Simple RFR or the ABR Rate (each as defined in the Credit Agreement), plus, in each case, an Applicable Margin (as defined in the Credit Agreement). Initially, the Applicable Margin is 0.875% with respect to Term Benchmark loans and RFR loans and 0.00% with respect to ABR loans. Subsequently, the Applicable Margin with respect to Term Benchmark loans and RFR loans will be determined quarterly and may range from 0.75% to 1.125%, depending on our public debt ratings or, if we have not received public debt ratings, from 0.875% to 1.125%, depending on our Leverage Ratio, which is the ratio of indebtedness for borrowed money to Consolidated EBITDA, as defined in the Credit Agreement. Since the issuance of the Term Loan, the Term Loan has been a Term Benchmark loan. The Credit Agreement contains customary affirmative and negative covenants as well as a financial covenant. The financial covenant is tested at the end of each fiscal quarter and requires us to maintain a Leverage Ratio not in excess of 3.50:1.00, or for a period of up to four quarters following certain material acquisitions, 3.75:1.00. We were in compliance with all debt covenants and representations of the Credit Agreement as of December 31, 2025.Short-term DebtAs of each of December 31, 2025 and 2024, we had $33 million of short-term debt related to current maturities of our Term Loan, with a weighted average interest rate of 4.7% and 5.3%, respectively.

Effective January 1, 2025, we adopted the new income tax disclosure standard (Income Taxes (Topic 740): Improvements to Income Tax Disclosures) on a prospective basis. Accordingly, the tables presenting our income tax provision and effective tax rate reconciliation will reflect the new standard for 2025, while the 2024 and 2023 disclosures will continue to follow the previous disclosure requirements.Income before provision for income taxes shown below is based on the geographic location to which such income was attributed for years ended December 31:(in millions)202520242023United States$1,189 $906 $813 Foreign2,290 2,032 1,974 Income before provision for income taxes$3,479 $2,938 $2,787 The provision for income taxes consisted of the following components for the years ended December 31:(in millions)202520242023Current:Federal$216 State139 Federal and state$426 $522 Foreign576 Foreign642 485 Total current provision931 1,068 1,007 Deferred:Federal302 State4 Federal and state(229)(354)Foreign21 Foreign(126)15 Total deferred income tax (benefit)327 (355)(339)Total provision for income taxes$1,258 $713 $668 We are involved in two separate ongoing disputes with the ITD in connection with previously disclosed share repurchase transactions undertaken by CTS India in 2013 and 2016 to repurchase shares from its shareholders (non-Indian Cognizant entities) valued at $523 million and $2.8 billion, respectively. The 2016 transaction was undertaken pursuant to a plan approved by the High Court in Chennai, India, and resulted in the payment of $135 million in Indian income taxes - an amount we believe includes all the applicable taxes owed for this transaction under Indian law. In March 2018, the ITD asserted that it is owed an additional 33 billion Indian rupees ($367 million at the December 31, 2025 exchange rate) on the 2016 transaction. We deposited 5 billion Indian rupees, representing 15% of the disputed tax amount related to the 2016 transaction, with the ITD. Additionally, certain time deposits of CTS India were placed under lien in favor of the ITD, representing the remainder of the disputed tax amount.In April 2020, we received a formal assessment from the ITD on the 2016 transaction, which is consistent with the ITD's previous assertions. Our appeal was ruled on unfavorably by the CITA in March 2022 and by the ITAT in September 2023. We filed an appeal against the order of the ITAT with the High Court.

Our 2023 Incentive Plan provides for the issuance of a total of 25.0 million shares of Class A common stock to eligible employees, less (i) the number of shares granted under the 2017 Incentive Plan between March 24, 2023 and June 6, 2023, plus (ii) any shares subject to awards under the prior 2017 and 2009 Incentive Plans that are forfeited after June 6, 2023. The 2023 Incentive Plan does not affect any awards outstanding under the prior plans. The Purchase Plan provides for the issuance of up to 50.0 million shares of Class A common stock to eligible employees. As of December 31, 2025, we have 20.2 million and 9.8 million shares available for grant under the 2023 Incentive Plan and the Purchase Plan, respectively.The allocation of total stock-based compensation expense between cost of revenues, selling, general and administrative expenses and restructuring charges as well as the related income tax benefit were as follows for the three years ended December 31:(in millions)202520242023Cost of revenues$26 $26 $30 SG&A expenses155 150 153 Restructuring charges— (1)(7)Total stock-based compensation expense$181 $175 $176 Income tax benefit$37 $38 $34 Restricted Stock Units and Performance Stock UnitsWe granted RSUs that vest in quarterly or annual installments over periods of up to four years to employees, including our executive officers. A summary of the activity for RSUs granted under our stock-based compensation plans as of December 31, 2025 and changes during the year then ended is presented below:Number ofUnits(in millions)Weighted AverageGrant DateFair Value(in dollars)Unvested at January 1, 20252.8 $73.47 Granted2.4 81.98 Vested(2.1)74.93 Forfeited(0.4)78.48 Unvested at December 31, 20252.7 $79.08 The total vesting date fair value of vested RSUs was $164 million, $172 million and $176 million for the years ended December 31, 2025, 2024 and 2023, respectively. The weighted-average grant date fair value of RSUs granted in 2025, 2024 and 2023 was $81.98, $77.66 and $65.95, respectively. As of December 31, 2025, $149 million of total remaining unrecognized stock-based compensation cost related to RSUs is expected to be recognized over the weighted-average remaining requisite service period of 1.5 years.We granted PSUs that vest over periods up to four years to employees, including our executive officers. The vesting of PSUs is contingent on meeting certain financial performance targets, market conditions and continued service.

The allocation of total stock-based compensation expense between cost of revenues, selling, general and administrative expenses and restructuring charges as well as the related income tax benefit were as follows for the three years ended December 31:(in millions)202520242023Cost of revenues$26 $26 $30 SG&A expenses155 150 153 Restructuring charges— (1)(7)Total stock-based compensation expense$181 $175 $176 Income tax benefit$37 $38 $34

On January 1, 2026, we acquired 100% ownership in 3Cloud, one of the largest independent Microsoft Azure services providers and a global leader in Azure-dedicated AI enablement solutions and products. On December 31, 2025, we placed cash consideration of $733 million in escrow, which was deemed to be restricted cash and included in "Other noncurrent assets" in our consolidated statement of financial position. See Note 18.There were no acquisitions completed during the year ended December 31, 2025. Acquisitions completed during each of the years ended December 31, 2024 and 2023 were not individually or in the aggregate material to our operations. Accordingly, pro forma results have not been presented. The primary items that generated goodwill are the acquired assembled workforces and synergies between the acquired companies and us, neither of which qualify as an identifiable intangible asset.2024On January 22, 2024, through the execution of a share purchase agreement, we acquired 100% ownership in Thirdera, an Elite ServiceNow Partner specializing in advisory, implementation and optimization solutions related to the ServiceNow platform.On August 26, 2024, through the execution of a merger agreement, we acquired 100% ownership in Belcan, a leading global supplier of engineering research & development services for the commercial aerospace, defense, space, marine and industrial verticals. We paid $1,195 million in cash, net of cash acquired, and issued 1,470,589 shares of our Class A common stock, valued at $113 million, in connection with our acquisition of Belcan.The allocations of purchase price to the fair value of the aggregate assets acquired and liabilities assumed were as follows: (in millions)ThirderaBelcanTotalWeighted Average Useful LifeCash$8 $55 $63 Trade accounts receivable21 173 194 Other current assets11 22 33 Property and equipment and other noncurrent assets2 22 24 Operating lease assets— 55 55 Non-deductible goodwill180 614 794 Tax-deductible goodwill164 — 164 Customer relationship assets73 539 612 11.0 yearsOther definite-lived intangible assets1 — 1 1.0 yearsIndefinite-lived intangible assets— 45 45 Operating lease liabilities, current— (8)(8)Other current liabilities(29)(72)(101)Deferred income tax liabilities, net(3)(34)(37)Operating lease liabilities, noncurrent— (48)(48)Purchase price$428 $1,363 $1,791 For the year ended December 31, 2024, revenues from acquisitions completed in 2024, since the dates of acquisition, were $384 million.

Cybersecurity risk management is an integral part of our overall enterprise risk management program. Our cybersecurity risk management program, which is managed by Cognizant’s Corporate Security team, is designed to identify, assess and manage risks from cybersecurity threats and provides a framework for handling cybersecurity threats and incidents. The program is also aligned with the risk assessment framework established by the enterprise risk management team. Our cybersecurity risk management framework includes steps for assessing the severity of a cybersecurity threat (including an escalation process for potentially material cybersecurity threats and incidents to an internal committee comprised of members of senior management), identifying the source of a cybersecurity threat (including whether the cybersecurity threat is associated with a third-party service provider), implementing cybersecurity countermeasures and mitigation strategies. The internal committee is responsible for assessing the materiality of cybersecurity threats and incidents and informs designated members of executive leadership and of the Board of Directors of material cybersecurity threats and incidents.Cognizant's cybersecurity risk management program is guided by industry-recognized security frameworks, including NIST SP 800-37 (Risk Management Framework), NIST SP 800-30 (Risk Assessment Guide), and NIST SP 800-53 (Security and Privacy Controls). In addition, Cognizant maintains global and regional information security certifications such as ISO 27001, UK Cyber Essentials Plus, and ENS, which collectively help demonstrate Cognizant's commitment to a robust, independently validated security program. Cognizant considers the NIST Cybersecurity Framework (CSF 2.0) in designing our cybersecurity program and engages an independent third party to assess program maturity. Additionally, we also engage third-party cybersecurity experts to conduct penetration testing among other items. Key findings from the third-party assessments are summarized and communicated to the Company's senior leadership and the Audit Committee, and remediation actions are implemented to enhance our overall cybersecurity program.We require our vendors to comply with privacy and cybersecurity requirements, and we perform risk assessments of vendors, including their ability to protect data from unauthorized access. We include data protection and security content as part of annual training required of employees.