Cognizant Technology Solutions CTSH today announced significant enhancements to its Cognizant Neuro AI platform, designed to help enterprises swiftly identify, prototype, and develop AI use cases that improve decision-making and unlock new revenue opportunities. 

According to a study by Cognizant and Oxford Economics, 76% of enterprises aim to leverage AI for revenue growth but face challenges in scaling these initiatives. 

The upgraded platform, featuring tools like Opportunity Finder and advanced large language model assistants, streamlines data analysis across industries, from healthcare and finance to agriculture, empowering businesses to assess and act on various use cases effectively.

CTSH’s Strong Portfolio Boosts Prospect

Cognizant’s focus on enhancing enterprise decision-making and driving new opportunities through advanced AI solutions has been a major growth driver.

Expanding portfolio has been a key catalyst. In the second quarter of 2024, Cognizant introduced Cognizant Neuro Edge, a platform enabling businesses to leverage AI and generative AI at the edge, enhancing decision-making and operational stability while reducing data costs and privacy risks.

Cognizant also announced an agreement with Texas Dow Employees Credit Union (“TDECU”) to leverage its AI-driven Neuro IT Operations platform for enhancing operational efficiency, resilience and customer experience in TDECU’s transformation journey.

CTSH Benefits From Expanding Clientele

Cognizant’s expanding partner base, which includes the likes of Microsoft MSFT, Gentherm, Alphabet’s GOOGL cloud business Google Cloud and Victory Capital Holdings VCTR has been noteworthy.

In second-quarter 2024, CTSH maintained its momentum by securing large contracts. It signed five agreements with a total contract value of $100 million or more. In the first half of 2024, the company completed 13 similar deals, significantly surpassing its levels from 2023.

In the second quarter, Cognizant launched its first set of healthcare large language model solutions on Alphabet’s Google Cloud’s generative AI technology. These solutions target high-cost workflows in marketing operations, call center operations and provider management.

Cognizant’s collaboration with Microsoft has been noteworthy, as it aims to leverage generative AI and Copilot to drive innovation across industries, transforming enterprise operations and enhancing employee experiences.

In July, CTSH signed a five-year strategic agreement with Victory Capital Holdings to provide IT infrastructure, security and data & analytics support for its next phase of digital transformation.

Cognizant’s Q3 Outlook Looks Dull

Cognizant’s strong portfolio, along with an expanding partner base, reflects solid top-line growth potential over the long run. However, it continues to expect the challenging macro environment to hurt spending rates in the Financial Services segment.

CTSH shares have risen 2.5% in the year-to-date period compared with the broader Zacks Computer & Technology sector’s return of 26.9%.

Cognizant expects third-quarter 2024 revenues between $4.89 billion and $4.96 billion, indicating a decline of 0.2% to an increase of 1.3% (an increase of 1.5% on a cc basis). The Zacks Consensus Estimate for third-quarter revenues is pegged at $5 billion, indicating year-over-year growth of 2.17%.

The consensus mark for earnings is pegged at $1.15 per share, unchanged in the past 30 days. The figure indicates a year-over-year decline of 0.86%.

Conclusion

Cognizant’s shares are cheap, as suggested by a Value Score of B.

The forward 12-month Price/Sales ratio for CTSH stands at 2, lower than the industry’s 11.80.

However, the sluggish prospect makes CTSH a risky bet for growth-oriented investors, as suggested by a Growth Score of F.

Cognizant currently has a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point in the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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