Cognizant Technology Solutions (CTSH) 8-K Cognizant Technology Solutions Reports Record Second Quarter Results; Raises Full-year Guidance

	FOR:	Cognizant Technology Solutions Corporation
		500 Glenpointe Centre West
		Teaneck, NJ 07666
	CONTACT:	Gordon Coburn
		Chief Financial Officer
		201-678-2712
FOR IMMEDIATE RELEASE
		Investors: Kirin Smith/Ian Bailey
		Press: Brian Maddox/Scot Hoffman
		Financial Dynamics
		212-850-5600
		shoffman@fd-us.com

COGNIZANT TECHNOLOGY SOLUTIONS REPORTS RECORD SECOND QUARTER RESULTS; RAISES FULL-YEAR GUIDANCE

Teaneck, NJ – July 26, 2004 – Cognizant Technology Solutions Corporation (NASDAQ: CTSH), a leading provider of IT services, today announced its financial results for the second quarter ended June 30, 2004.

Highlights for the second quarter include:

• Quarterly revenue increased to $138.7 million, up 16% sequentially and 59% from the year ago quarter

• Operating margin of 20.0% compared to 19.8% sequentially and 19.6% in the year-ago period

• Diluted quarterly EPS of $0.17

Revenue for the second quarter increased to $138.7 million, up 16% from $119.7 million in the first quarter of 2004, and up 59% from $87.4 million in the second quarter of 2003. Net income for the second quarter increased to $23.8 million, or $0.17 per diluted share compared to $19.8 million, or $0.14 per diluted share (on a split-adjusted basis) in the first quarter of 2004. Operating margin for the quarter increased to 20.0%, compared to 19.8% in the first quarter of 2004 and 19.6% in the second quarter of 2003.

“The second quarter was exceptionally strong as we reported substantially better than expected results with solid growth across all of our key verticals,” stated Lakshmi Narayanan, President and CEO of Cognizant. “Application development services continued to show strong momentum, growing 77% year-over-year as a result of Cognizant’s success at winning complex development projects. Our focus on building long-term customer relationships has led to increased client penetration and opportunities to cross-sell our services to existing and new strategic customers, enabling Cognizant to grow faster than any of our peers in the industry. Additionally, approximately 90% of revenue came from clients with whom we have worked for at least one year. We also continue to strengthen our position as a highly differentiated provider of offshore outsourcing services as reflected in our ongoing ability to broaden and deepen our relationships with existing clients while maintaining a high win-rate against our competitors.”

2004 Outlook

• 3Q 2004 expected revenue of at least $150.0 million

• 3Q 2004 expected diluted EPS of $0.17

• FY 2004 expected revenue of at least $565.0 million

• FY 2004 expected diluted EPS of $0.66

• 3Q and FY 2004 expected operating margin to remain in the 19% to 20% range

“In addition to our strong revenue and margin performance during the quarter, we are particularly pleased with our cash flow metrics, including a decline in DSO to 59 days and generation of over $30 million of cash from operations,” said Gordon Coburn, Chief Financial Officer of Cognizant. “Based on the strength of our new business pipeline and the continuing interest from prospective customers, we remain very optimistic about our growth opportunities for the remainder of 2004 and believe that Cognizant is well-positioned to benefit from its leadership position and the ongoing momentum in the offshore outsourcing market.”

Conference Call

Cognizant will host a conference call on July 26th, at 10:00 a.m. (ET) to discuss the Company’s quarterly results. To listen to the call please dial (888) 652-6834 domestic and (706) 679-3288 internationally. The call will also be broadcast live via the Internet at Cognizant’s web site, www.cognizant.com. Please go to the web site at least fifteen minutes prior to the call to register, download and install any necessary audio software. A replay will be made available on the web site at www.cognizant.com or by calling (800) 642-1687 for domestic callers and (706) 645-9291 for international callers and entering “8657040” from two hours after the end of the call until 11:59 p.m. (ET) on August 2, 2004.

About Cognizant Technology Solutions

Cognizant Technology Solutions Corporation (Nasdaq: CTSH) is a leading provider of IT services. Focused on delivering strategic information technology solutions that address the complex business needs of its clients, Cognizant provides applications management, development, integration, and re-engineering, infrastructure management, business process outsourcing, and a number of related services such as enterprise consulting, technology architecture, program management and change management through its onsite/offshore outsourcing model.

Cognizant’s more than 12,000 employees are committed to partnerships that sustain long-term, proven value for customers by delivering high-quality, cost-effective solutions through its development centers in India and Ireland, and onsite client teams. Cognizant maintains P-CMM and SEI-CMM Level 5 assessments from an independent third-party assessor and was recently ranked #1 in Forbes’ Hot Shots 200 Up & Comers and ranked as the top information technology company in BusinessWeek’s Hot Growth Companies. Further information about Cognizant can be found at http://www.cognizant.com.

This press release includes statements which may constitute forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the accuracy of which are necessarily subject to risks, uncertainties and assumptions as to future events that may not prove to be accurate. Factors that could cause actual results to differ materially from those expressed or implied include general economic conditions and the factors discussed in our most recent Form 10-K and other filings with the Securities and Exchange Commission. Cognizant undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

-tables to follow-

COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share data)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2004			2003			2004			2003
Revenues	$	138,719		$	87,446		$	258,463		$	159,387
Revenues -related party		—			—			—			2,575
Total revenues		138,719			87,446			258,463			161,962
Cost of revenues		75,558			47,199			140,568			88,158
Gross profit		63,161			40,247			117,895			73,804
Selling, general and administrative expenses		31,543			20,352			58,725			36,763
Depreciation and amortization expense		3,828			2,767			7,693			5,389
Income from operations		27,790			17,128			51,477			31,652
Other income (expense):
Interest income		815			320			1,655			741
Other income (expense), net		(80	)		98			221			(99	)
Split-off costs (non tax deductible)		—			—			—			(2,010	)
Total other income (expense)		735			418			1,876			(1,368	)
Income before provision for income taxes		28,525			17,546			53,353			30,284
Provision for income taxes		(4,724	)		(4,044	)		(9,764	)		(6,604	)
Net income	$	23,801		$	13,502		$	43,589		$	23,680
Basic earnings per share	$	0.18		$	0.11		$	0.34		$	0.19
Diluted earnings per share	$	0.17		$	0.10		$	0.31		$	0.18
Weighted average number of common shares outstanding		130,117			123,771			129,499			123,202
Weighted average number of common and dilutive shares outstanding		141,164			132,478			141,407			132,229

COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited)
(In thousands)

	June 30,		December 31,
	2004		2003
Assets
Current Assets
Cash and cash equivalents	$	197,027	$	194,221
Investments in short-term bank deposits		36,146		-
Trade accounts receivable, net of allowances of $1,166 and $989, respectively		76,353		52,253
Unbilled accounts receivable		13,685		9,543
Current tax asset		23,208		14,066
Other current assets		13,786		8,414
Total Current Assets		360,205		278,497
Property and equipment — net		58,110		58,438
Goodwill		5,647		4,477
Other Intangible assets — net		15,065		16,436
Other assets		3,656		2,741
Total Assets	$	442,683	$	360,589
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable	$	9,169	$	9,423
Accrued and other current liabilities		63,456		53,213
Total Current Liabilities		72,625		62,636
Deferred income taxes		20,509		23,883
Total Liabilities		93,134		86,519
Stockholders’ Equity		349,549		274,070
Total Liabilities and Stockholders’ Equity	$	442,683	$	360,589

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