Everyone. I'm Surendra Thinn, the Technology and Information Services Analyst here at Jefferies. With me, I have Jatin Dalal, Chief Financial Officer of Cognizant. Welcome. Thank you. Thank you for having us here. It's great having you. I'd like to maybe start with some discussion of recent news. In the past couple of weeks, you've announced two mega deals, right? These are contracts valued at over $500 million each. That's correct. Yeah. Can you maybe elaborate on the wins? Maybe are these new wins? Maybe the industries? And are you displacing anyone? How should we think about what these deals mean? Sure. If you recall, in Q1, when we announced the results, we spoke about one mega deal that we had signed in Q1. We have now won two more mega deals. So far, three mega deals during the course of the year. It has been a good win or a good journey on large deals momentum. Particularly, the deal that we won in Q1 was new business, big transformative outcome that we will achieve for our customer. Compared to that, both of these deals are more consolidation-type mega deals, where we are winning a greater wallet share from an existing customer whom we are already servicing. To that extent, there is a large renewal component as part of these two mega deals. Of course, it has an addition, but that addition will come through over a period of time as the existing contracts with others sort of taper off, and then we take off. That is the nature of the two mega deals that we have signed. One is in sort of technology and communication space, and the other is in the health space. That's helpful. As you start to sign some of these deals and these contracts, do we think about them, or is there like an AI element to them, or is there something that we're starting to change versus how maybe these contracts were structured a while back? Yeah, absolutely. I think the component of AI and the productivity that we are able to demonstrate to customers by making AI as a core component of our architectural principles for this large deal is, I think, a degree of differentiation that we are able to present to our customers. AI is front and center of some of these mega deals that we are signing. In our definition of the impact that we can make with AI, we have defined three vectors. This is really the vector one, which is the productivity vector that we can leverage to deliver far more with AI with lesser resources. Nobody hands you a mega deal, right? You have to go out. You have to compete. What allowed you to win in this situation? Was there a differentiating factor? Was price a consideration here, where you came in as maybe on a lower price? How should we think about your ability to win? Sure. I would say there are a few factors at play here. First is the architecture that I spoke about. I think compelling deal architecture of a mega deal is probably front and center of our ability to win it. The second is having executed some of our deals. You know we won 17 such deals in 2023, and we won 29 such deals in 2024. You must be executing those well because none of these deals get awarded without a reference call back to at least four or five customers with whom you have won the deal. The third factor is also price, meaning nobody hands over a mega deal compared to a small piece of work at the same sort of commercial rate. You do have to sort of invest upfront in terms of what you can achieve in terms of outcome during the course of the deals. Therefore, the margins are a little muted in the beginning of such large deals, and then we tend to recover it over the life of the deal. Specifically, given that these are deal announcements that came after your last quarter's results, were they already to some extent incorporated in guidance, or what does that mean for revenue and margin guidance for this year? I would say on the revenue side, we do have a point of view, a pipeline, and we factor it in. The fact that we spoke about these two deals in our earnings call of quarter one, we had a high probability of winning that. That was already sort of a high probability large wins. To that extent, it was part of our guidance range that we provided. Even from a margin standpoint, as I mentioned, some of these deals come with a slightly lower margin. We have guided for 20-40 basis points expansion through 2025. In quarter one, we were already a 40 basis point expansion. There is some of this factored in as part of the year's margin expansion or margin trajectory. Therefore, there would be quarterly variation to margins. Overall, the range that we shared is what we think we can deliver to. That's helpful. More broadly, you've been focused on kind of winning these large deals the past couple of years. Given all of the success you've had, how should we think about the pipeline at this point? Are you depleting some of the pipeline? Is there just as much? How should we think about that? I mean, when you win a large deal, to that extent, the pipeline certainly comes down. We see a healthy set of opportunities led by what we have executed in the past. To that extent, I don't foresee a deceleration of any sort from here on large deals. I think we'll continue to win large deals even during the course of the year. In quarter one, we announced four large deals. The whole of last year, we had 29 such large deals. Yes, we win large deals, as we have demonstrated in the past, and I feel confident that we will replenish the pipeline with new opportunities. Got it. Maybe switching from large deals to maybe the smaller deals, I think the definition is less than $50 million. They could be $5 million or $10 million deals as well. Can you talk about the demand that we're seeing on the lower end of that spectrum, maybe in the $10 million range? Because that's where a lot of the discretionary spend seems to be. Are we kind of at a cyclical low here where it's been challenged for a while? Any signs of a rebound? The smaller deals have gone, I think, three phases now. In 2023, we saw a significant decline in smaller deals, and that was a sort of manifestation of discretionary spend going away from the industry. 2024 was a more stable year, and it remained in range bound, and it was not declining as fast. I think quarter four was the first time that we saw some sort of momentum back into smaller deals. Quarter one has been just back to more status quo, except BFSI. BFSI, as an industry, has been handing out more discretionary projects than what they were doing four quarters back. To that extent, we definitely see momentum in the BFSI sector. Across the board, I would say it's more status quo. I guess at this point in time, what are the challenges here from the client perspective that's kind of holding them back? Maybe what would a client be looking for to kind of get back on that, "Hey, I do need to spend on some of these more discretionary type projects?" Because there's been such a big focus on some of these bigger cost takeout or transformation type deals. Sure. I would say, I mean, discretionary projects come back when there is a certain amount of environmental stability and economic horizon looks far more stable to companies. The second reason they come back is if you have not spent on the change for a long time, at some point in time, the environment is changing so much and so fast that your IT systems must catch up with it. I think we are at a point, at least on the second side, second question, where 2023 and 2024 both have been relatively very slow years on discretionary spend, as you know. We seem to be at a cusp where some of this should come back, but there is an overhang of macro, which is holding it back, is our assessment. Hopefully, once macro is better, we should see some of that back. Got it. When we think about the near term here, there's been other considerations, right? We think about the tariff volatility. We think about maybe second order effects. Just any evolution in demand, or maybe a better question would be inclined behavior over, let's say, the last 90 days? Just any color that you can provide there? I mean, what we have seen since our earnings call is relatively more of the same. BFSI continues to drive discretionary spend, and most of the other sectors have remained range bound where they were. We haven't seen a significant uptick or adverse outcome or adverse behavior in any of the sectors. I think last 90 days have been more or less similar if you count end March, beginning April as a sort of a turning point from some of the macro standpoint. And any perhaps geographic differences to think about? Meaning that when we think about it from a tariff perspective, whether it's Mexico or Latin America, we've seen some companies there get hit pretty hard in terms of the revisions that they've had to make. Whereas you guys are much more US, you've got more Europe. Are there considerations there that we should be thinking about? I wouldn't think so. I think the considerations from Tharay's standpoint are more sector-driven than geography-driven. Geographically, we see very similar sort of reactions by our customers because these are some of the global factors and not just local factors. From a sector standpoint, we see BFSI pretty much unimpacted by any of the current uncertainties. We see communication media technology also relatively unimpacted, although there is no discretionary back there, but there is no direct impact that we see. The one which is most impacted with discussions around changing tariffs, etc., is manufacturing, retail, and consumer. The one which is for different reasons slightly impacted is health, which is the new priority of the new administration, which is impacting some of the health customers in the U.S. Got it. Maybe thinking about it from, as you pointed out, a verticals perspective, obviously BFSI seems to be doing well. It's the status quo. They've started to spend after a couple of tough years. What are they actually spending it on at this point? Are they just accelerating some of the maybe the proof of concept projects that they were doing? Are they looking at bigger changes at this point? What are you kind of seeing within the BFSI vertical? I think BFSI vertical is really on the discretionary side. Are the changes which were led by compliance-related changes which were not caught up? They were time-sensitive, and they are being executed. I do not think there is one specific regulation or compliance standard. It is just that BFSI was really not spending on change for a long time, and they had to catch up for all the changes around themselves. That is one change. Other is there is definitely some amount of discretionary spend going on in what we call the vector two of AI spend, which is making organizations ready for AI. What I mean by that is forever our data structures have been built for a very specific query, very traditional way of keeping data. Data has been very tightly protected for all the right reasons. There has been a layer of encryption at rest. There is a layer of encryption in motion. Now, all of that has its own challenges when you conceptualize an AI-led answer to a company's question because the AI needs to sort of access data in a very transparent manner. There is definitely a lot of work happening on making the organization ready for a new AI project, and for which you have to step back and do work on your data structures, which you've built in with different purpose and objectives in mind versus leveraging it for AI. I've got a lot of questions on AI here, but just to finalize the thought of the other couple of verticals, it sounds like there may be some policy uncertainty that might drive demand in healthcare. You've got some big wins there. Assume that'll continue to probably grow at a healthy pace. We think about products and resources, and we get into the manufacturing, some auto, those kinds of things. Do we kind of need to see some of the policy uncertainty go away? Is that what kind of then maybe starts to drive demand back there? Are the clients kind of stuck in this paralysis mode until we kind of figure out what the tariff situation is going to look like. That's right. I think right now, most manufacturing, retail, consumer customers we talk with are deciding their sort of approach to the final regulation. Until that gets decided, I think they will probably remain on sidelines on IT spend. Okay. Switching to AI, and I think the implications for kind of the broader business and the strategy, you've been one of the most aggressive investors in AI. How is that changing the products and services or your view of what you want to provide to the end markets? Sure. I think it's a great next frontier of opportunity for IT services company. I mean, I've been in the industry for more than two decades. I mean, our business model is fairly simple. We have an excellent distribution channel in Fortune 1000 customers. Every few years, there is a new value driver which drives the growth in the industry. For example, 2008 was infrastructure-related spend. 2014 was digital. 2016, 2017 was cloud. We have not had another value driver for the industry. We think GenAI or AI is that next driver which will create the momentum for the sector. We remain very bullish on GenAI or AI as an opportunity. We have invested ahead of time in terms of conceptualizing where our opportunity is and how we are positioning ourselves for that opportunity and how we remain ahead of the curve in terms of application of this powerful technology for, of course, for the productivity benefits for our customer, but more importantly, to help them reimagine how they conduct their business, how they take care of their customer experience, how do they take care of their corporate functions, and so on and so forth. We remain very bullish on this. With all of this spend, obviously you want to be a thought leader. You want your seat at the table here. What determines who wins in this game as we kind of look forward? Who wins and who loses, and why? What would be the factors that determine? I think in our industry, what matters is that you have an early mover advantage is important. The second is your ability to successfully bring domain and technology together. I think Cognizant is very well placed on that cross-junction of domain and technology. I know this is very common for people to say, "So let me just double-click it a little bit more." Cognizant at a $20 billion revenue size, our largest businesses are application and BPO. Application is where the customers' organization's workflow are captured, be it in a package implementation experience or service like Oracle, SAP, Salesforce, any of them, or any of the SaaS platforms or customers. There is a deep knowledge of customers' workflow here. We are the large players on BPO side, which means we know how to react in a specific customer situation. We know responses. We understand responses for specific questions. We understand decision-making for the type of work that we do. All of that, if we are investing ahead of the curve on GenAI solutions and we marry that with our contextual knowledge of customers' business, I think we have a formidable proposition for our customer. That is what we think makes us well placed. That is our belief as we look at this large opportunity in front of us. Got it. When we think about just the pace of change here, right? I mean, it's unprecedented of how things are moving, advancing in terms of the technology. Lots of improvements made faster than people are anticipating. How are you managing through this? Is the pace of change itself a risk? I think pace of change is exciting. I mean, a lot of times you see a technology, and it takes a while for it to become mainstream. I mean, those who are in the room and can go back 15 years, first time we talked about cloud was maybe in 2011. It took like five years before it really became mainstream. The good thing is probably collectively as a value chain, billions of dollars of investment is happening on each stage of value chain on AI. And hence, the pace of change that you see is far faster than we ever saw in any of the other technological shifts. For example, an agentic framework or multi-agentic framework seemed like a buzzword and whether when it will be real, maybe six months back. Now, I don't think any one of us sitting in the room can consider multi-agentic framework as a thing of the future. I mean, you will find companies which are implementing it in September. I think it's exciting. We feel very energized that the pace of adoption is significantly faster than any other technology. Therefore, the opportunity for early movers is gigantic for us to leverage on. It's quite interesting because when I think about it, the agentic framework, I think, is what you call vector three. Vector one is productivity. Vector two of AI is getting the enterprise ready. That's architecturally changing the structure of that enterprise. Then the third is the agentic framework. It sounds like we're quickly moving into that framework because it seems like everybody's focused on productivity right now, but we don't even have the infrastructure in place. How do we get past all of the excitement or buzz around the agentic framework if firms aren't ready yet? I think it will happen still sequentially through there because I don't think any enterprise can change the last 30-40 years of investment in the way the IT estates have been created over the years for different purposes and objectives, including the fact that they should be secure from every angle possible. The change is going to be over a period of time. Wherever that change happens, I think AI-led transformation will follow quickly. Assuming that's a success, it will give impetus to the next level of change. You are right. I don't think every function is going to have a multi-agentic framework in the next one year in any large organization. At the same time, I'm sure there is at least one or two such success stories which would be there in the next six to nine months in every organization that will provide the impetus for fast followers within those organizations. Maybe can you touch on your partnerships and how that's maybe changing your go-to market strategy here? It seems that it's more discussion about making sure that you have the right partnerships in place and what you guys are doing there. Absolutely. I shared before that every part of the AI value chain is investing their dollars on their part, be it Nvidia or be it Microsoft or Google. Large SIs like us who are investing our own dollars. We spoke about a $1 billion investment maybe 18 months before now. Right, we were thinking about it even then. The success will come when everything comes together for the end customer. It is imperative for the eventual success that each partner in the value chain is working very, very closely to create something which is magical for the customer eventually. Yes, I think it is a big driver for collective success. Therefore, you would see Cognizant really remaining at the forefront of that partnership. Maybe kind of one more question on AI here. Does that change your revenue model at this point or maybe your margin profile as you start to look three years, five years into the future? Yeah. I think three to five years, certainly the revenue profile will change. I think we would have a pricing for human agents or human engineers, and we will have a pricing for virtual agents or virtual engineers that work for our customers because it's imperative the way the world is going that we will have a combination of both that would be serving our customers. Yes, five years from now, we would be slightly different profile than what we have been in the last two decades. It's for good thing. I mean, many of you, many of our investors have always asked, "Where is the nonlinear revenue growth for you?" Here is the great opportunity for nonlinear revenue growth for us. That's helpful. When we think about how you're fitting into the client picture, we also get a question around this idea that as AI advances, what about a client's willingness to internally just use the technology themselves to try to maybe disintermediate you or do that work first and only then that they come to you? Can you talk a little bit how you would respond to that? Because one of the arguments that's being made is demand is muted right now because a lot of people are trying to do more of the work internally. You are right. I think in the beginning of every technological shift, you would see that customers would want to familiarize the organization themselves before they are large-scale implementing it. Therefore, there is higher propensity for some of the internal projects to also take place in parallel to experimenting with third-party service providers like us. Eventually, and my answer is not specific to AI. My answer is specific to the large sort of technological shifts that we have seen in the past. Eventually, the benefit that a company like Cognizant brings to any of our customers is collective learning and best practice. The benefit that we have is that every time we work with our customer, we become better. I may have X capability today, but if I meet you after a week, I would be X plus. That ability to bring the best practices across industry is where our value add is. That is why customers buy from us. I do not think that is going to go away in an AI world where we would learn. AI is all about learning, as we know, a better way of getting to outcomes. Therefore, I do think, yes, initially there could be different paths. Eventually, I do think there is a real value play for a company like Cognizant. Got it. It sounds like it's hard for clients to have the expertise in-house because at the end of the day, you see it across all clients. So you build the best practices. Is that kind of the messaging here? Yeah. I think, yeah, we bring the best of the world or best of the best, what I would say. Okay. We have just a couple of minutes left. Talked a lot about organic growth and strategy. Can we talk a little bit about just M&A at this point? How important is that to your growth in this type of environment? Last year, you made an important acquisition with Belkin. Maybe just discuss about where you guys are within your broader M&A cycle. Sure. As a capital allocation, as a strategic framework, we keep 50% of our cash flow for M&A. This year, particularly, we have allocated a larger chunk for shareholder return. Therefore, nearly 75% of free cash flow will be returned to shareholders. Normally, we keep 50% for M&A, 25% for buyback, 25% for dividend. The reason we keep that is there are still many pockets where we think that we have white spaces and we could potentially add a market access like oil and gas or add a regional access like, let's say, Nordics or add to our capability. AI is a big play. Even many others like digital engineering, analytics, SAP, some of this could be very good bolt-on opportunities for us, which could help us, of course, add inorganic revenue in that year, but help us grow organically eventually better. That's the fulcrum of why we do M&A. Yes, these are some of our top-of-the-mind thoughts on them. Okay. Sounds like there's a healthy pipeline that you're looking at. That's correct. Okay. That actually takes us to time. I really appreciate the time here and coming all the way to London. Thank you. Thank you very much for your time. Thank you. Thank you.