SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

--------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 1999
Commission File No. 0-24429

Cognizant Technology Solutions Corporation
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)

Delaware 13-3728359
- ---------------------------------- ------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)

500 Glenpointe Centre West, Teaneck, New Jersey 07666
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)

(201) 801-0233
---------------------------------
(Registrant's Telephone Number,
Including Area Code)

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes: X No:
--- ---

Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of July 31, 1999:

Class Number of Shares
----- ----------------

Class A Common Stock, par value 3,514,611
$.01 per share

Class B Common Stock, par value
$.01 per share 5,645,450

COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

TABLE OF CONTENTS
-----------------

Page
----
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements................ 1

Condensed Consolidated Statements of Income (Unaudited)
for the Three Months and Six Months Ended June 30, 1999
and 1998................................................... 2

Condensed Consolidated Statements of Financial Position
(Unaudited) as of June 30, 1999 and December 31, 1998 ..... 3

Condensed Consolidated Statements of Cash Flows
(Unaudited) for the Six Months Ended June 30, 1999
and 1998................................................... 4

Notes to Condensed Consolidated Financial Statements
(Unaudited)................................................ 5

Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition.............. 9

PART II. OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders........ 17

Item 5. Other Information.......................................... 17

Item 6. Exhibits and Reports on Form 8-K........................... 18

SIGNATURES.......................................................... 19

(i)

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements
(unaudited)

- 1 -

COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in thousands, except per share data)

Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1999 1998 1999 1998
---- ---- ---- ----

Revenues......................................... $ 17,900 $ 8,493 $ 35,035 $ 15,022
Revenues - related party......................... 3,598 4,175 6,889 7,884
-------- -------- -------- --------
Total revenues................................ 21,498 12,668 41,924 22,906

Cost of revenues................................. 11,149 7,326 21,860 13,255
-------- -------- -------- --------
Gross profit..................................... 10,349 5,342 20,064 9,651

Selling, general and administrative
expenses...................................... 5,776 3,225 10,790 5,930
Depreciation and amortization expense............ 710 535 1,341 1,015
-------- -------- -------- --------
Income from operations........................... 3,863 1,582 7,933 2,706

Other income:
Interest income............................... 247 48 522 79
Other income/(expense) - net.................. (29) 74 33 57
-------- -------- -------- --------
Total other income....................... 218 122 555 136
-------- -------- -------- --------

Income before provision for income taxes......... 4,081 1,704 8,488 2,842
Provision for income taxes....................... (1,526) (638) (3,174) (1,064)
-------- -------- -------- --------
Net income....................................... $ 2,555 $ 1,066 $ 5,314 $ 1,778
======== ======== ======== ========

Basic earnings per share......................... $ 0.28 $ 0.15 $ 0.58 $ 0.26
======== ======== ======== ========
Diluted earnings per share....................... $ 0.27 $ 0.15 $ 0.55 $ 0.25
======== ======== ======== ========

Weighted average number of common
shares outstanding - Basic.................... 9,157 6,943 9,154 6,779
======== ======== ======== ========
Dilutive Effect of Shares Issuable as of
Period-End Under Stock Option Plans.............. 405 230 439 224
======== ======== ======== ========

Adjustment of Shares Applicable to Exercised
Stock Options During the Period.................. 3 -- 10 --
======== ======== ======== ========

Weighted average number of common
shares outstanding - Diluted.................. 9,565 7,173 9,603 7,003
======== ======== ======== ========

Comprehensive Income:
Net Income....................................... $ 2,555 $ 1,066 $ 5,314 $ 1,778

Foreign Currency Translation Adjustments......... (8) -- (13) 2
-------- -------- -------- --------
Other Comprehensive Income/(Loss), net of Tax:... $ (8) $ -- $ (13) $ 2
======== ======== ======== ========

Comprehensive Income............................. $ 2,547 $ 1,066 $ 5,301 $ 1,780
======== ======== ======== ========

The accompanying notes are an integral part of the condensed consolidated
financial statements.

- 2 -

COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited)
(in thousands, except par values)

JUNE 30, DECEMBER 31,
1999 1998
------- -----------

ASSETS

Current assets:
Cash and cash equivalents......................................... $ 29,359 $ 28,418
Trade accounts receivable, net of allowance of $274
for each period presented...................................... 10,811 9,230
Trade accounts receivable-related party........................... 1,854 1,877
Unbilled accounts receivable...................................... 892 1,088
Other current assets.............................................. 2,148 1,754
---------- ----------
Total current assets.......................................... 45,064 42,367
---------- ----------

Property and equipment, net of accumulated depreciation of $5,288 and
$4,121, respectively............................................ 8,334 6,270
Goodwill, net......................................................... 1,671 1,830
Other assets.......................................................... 1,304 1,212
---------- ----------
Total assets.................................................. $ 56,373 $ 51,679
========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................. $ 1,077 $ 1,744
Accrued and other current liabilities............................. 9,252 11,207
---------- ----------
Total current liabilities..................................... 10,329 12,951

Deferred income taxes................................................. 7,903 6,103
Due to related party.................................................. 2 9
---------- ----------
Total liabilities............................................. 18,234 19,063
---------- ----------

Commitments and Contingencies

Stockholders' equity:
Preferred stock, $.10 par value, 15,000 shares authorized,
none issued....................................................... -- --
Class A common stock, $.01 par value, 100,000 shares authorized,
3,514 shares and 3,505 shares issued and outstanding at
June 30, 1999 and December 31, 1998, respectively................. 35 35
Class B common stock, $.01 par value, 15,000 shares authorized,
5,645 shares issued and outstanding at June 30, 1999 and
December 31, 1998, respectively................................. 57 57
Additional paid-in-capital............................................ 24,788 24,566
Retained earnings..................................................... 13,283 7,969
Cumulative translation adjustment..................................... (24) (11)
---------- ----------
Total stockholders' equity.................................... 38,139 32,616
---------- ----------
Total liabilities and stockholders' equity.................... $ 56,373 $ 51,679
========== ==========

The accompanying notes are an integral part of the condensed consolidated
financial statements.

- 3 -

COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)

FOR THE SIX MONTHS ENDED JUNE 30,
---------------------------------

1999 1998
---------- ----------

Cash flows from operating activities:
Net income......................................................... $ 5,314 $ 1,778
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.............................. 1,341 1,015
Provision for doubtful accounts............................ -- (62)
Deferred income taxes...................................... 1,800 1,252
Changes in assets and liabilities:
Accounts receivable........................................ (1,558) (1,478)
Other current assets....................................... (198) (1,297)
Other assets............................................... (92) 631
Accounts payable........................................... (667) (624)
Accrued and other liabilities.............................. (1,955) 3,506
-------- --------
Net cash provided by operating activities.......................... 3,985 4,721
-------- --------
Cash flows from investing activities:
Purchase of property and equipment................................. (3,247) (1,830)
-------- --------
Net cash used in investing activities.............................. (3,247) (1,830)
-------- --------

Cash flows from financing activities:
Proceeds from issued shares/contributed capital, net............... 223 22,532
Payments to related party.......................................... (7) (6,623)
-------- --------
Net cash provided by financing activities.......................... 216 15,909
-------- --------

Effect of Currency Translation..................................... (13) --
-------- --------

Increase in cash and cash equivalents ............................. 941 18,800
Cash and cash equivalents, beginning of year....................... 28,418 2,715
-------- --------
Cash and cash equivalents, end of period................... $ 29,359 $ 21,515
======== ========

Supplemental disclosures of cash flow information:
Cash paid during the period for income taxes................... $ 1,314 $ --

The accompanying notes are an integral part of the condensed consolidated
financial statements.

- 4 -

COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(Dollar Amounts in Thousands)

NOTE 1 - INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:

The accompanying unaudited condensed consolidated financial statements
included herein have been prepared by Cognizant Technology Solutions Corporation
(the "Company") in accordance with generally accepted accounting principles and
Article 10 of Regulation S-X under the Securities and Exchange Act of 1934, as
amended and should be read in conjunction with the Company's consolidated
financial statements (and notes thereto) included in the Company's 1998 Annual
Report on Form 10-K. In the opinion of the Company's management, all adjustments
considered necessary for a fair presentation of the accompanying condensed
consolidated financial statements have been included, and all adjustments are of
a normal and recurring nature. Operating results for the interim period are not
necessarily indicative of results that may be expected to occur for the entire
year. Certain prior period amounts have been reclassified to conform with the
1999 presentation.

NOTE 2 - COMPREHENSIVE INCOME:

The Company's Comprehensive Income consists of net income and foreign
currency translation adjustments (see unaudited Condensed Consolidated
Statements of Comprehensive Income). Accumulated balances of Cumulative
Translation Adjustments, as of June 30, 1999 and 1998 are as follows:

Cumulative
Translation
Adjustment
Balance December 31, 1998............................. $ (11)
Period Change......................................... (13)
-------
Balance June 30, 1999................................. $ (24)
=======

Balance December 31, 1997............................. $ (2)
Period Change......................................... 2
-------
Balance June 30, 1998................................. $ 0
=======

NOTE 3 - INITIAL PUBLIC OFFERING:

On June 24, 1998, the Company consummated its Initial Public Offering
("IPO") of 2,917,000 shares of its Common Stock at a price of $10.00 per share,
2,500,000 of which were issued and sold by the Company and 417,000 of which were
sold by Cognizant Corporation ("Cognizant"), the Company's then majority owner
and controlling parent company. The net proceeds to the Company from the IPO
were approximately $22.4 million after $845 of direct

- 5 -

expenses. In July 1998, IMS Health Incorporated ("IMS Health") (the accounting
successor to Cognizant) sold 437,550 shares of Class B Common Stock, which were
converted to Class A Common Stock, pursuant to an over allotment option granted
to the underwriters of the IPO. Of the total net proceeds received by the
Company upon the consummation of its IPO, approximately $6.6 million was used to
repay the related party balance then owed to Cognizant. The related party
balance resulted from certain advances to the Company from Cognizant used to
purchase the minority interest of the Company's Indian subsidiary and to fund
payroll and accounts payable. Concurrent with the IPO, the Company reclassified
the amounts in mandatorily redeemable common stock to stockholders' equity as
the redemption feature was voided.

NOTE 4 - RELATED PARTY TRANSACTIONS:

In July 1998, IMS Health sold 437,550 shares of Class B Common Stock
pursuant to an over allotment option granted to the underwriters of the IPO. As
of June 30, 1999, IMS Health owned approximately 61.6% of the outstanding Common
Stock of the Company and held approximately 94.1% of the combined voting power
of the Company's Common Stock.

IMS Health currently provides the Company with certain administrative
services including payroll and payables processing, e-mail, tax planning and
compliance, and permits the Company to participate in IMS Health's insurance and
employee benefit plans. Costs for these services for all periods prior to the
IPO were allocated to the Company based on utilization of certain specific
services. All subsequent services were performed under an intercompany services
agreement with IMS Health. Total costs in connection with these services were
approximately $175 and $850 for the six-month periods ended June 30, 1999 and
1998, respectively.

NOTE 5 - ADOPTION OF STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS:

In March 1998, the American Institute of Certified Public Accountants (the
"AICPA") issued Statement of Position ("SOP") 98-1, "Accounting For The Costs of
Computer Software Developed Or Obtained For Internal Use." SOP 98-1 provides
guidance on costs to be capitalized and when capitalization of such costs should
commence. SOP 98-1 applies to costs incurred after adoption, including costs for
software projects that are in progress at the time of the adoption. The Company
has evaluated the impact of this SOP on its financial position and results of
operations. The implementation of SOP 98-1 effective January 1, 1999 did not
have a material effect on the Company's financial statements.

In April 1998, the AICPA issued SOP 98-5, "Accounting For The Costs Of
Start-up Activities." SOP 98-5 requires all costs of start-up activities to be
expensed as incurred. SOP 98-5 is effective for financial statements for the
years beginning after December 15, 1998. The Company has evaluated the impact of
this SOP on its financial position and results of operations. The implementation
of SOP 98-5 effective January 1, 1999 did not have a material effect on the
Company's financial statements.

- 6 -

In July 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of the FASB
Statement No. 133, an Amendment of FASB Statement No. 133". SFAS No. 137 defers
the effective date of FASB No. 133, which establishes accounting and reporting
standards for derivative instruments embedded in other contracts, (collectively
referred to as derivatives) and for hedging activities. FASB No. 133 requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. If
certain conditions are met, a derivative may be specifically designated as (a) a
hedge of the exposure to changes in the fair value of a recognized asset or
liability or an unrecognized firm commitment, (b) a hedge of the exposure to
variability in cash flows attributable to a particular risk, or (c) a hedge of
the foreign currency exposure of a net investment in a foreign operation, an
unrecognized firm commitment, an available for sale security and a forecasted
transaction. As a result of FASB No. 137, the Company will be required to
implement SFAS No. 133 for all fiscal quarters of fiscal years beginning after
June 15, 2000. The Company expects the adoption of this pronouncement will not
have a material effect on the Company's financial statements.

NOTE 6 - SEGMENT INFORMATION

The Company delivers full life cycle solutions to complex software
development and maintenance problems through the use of a seamless on-site and
offshore consulting project team. These solutions include application
development and maintenance services, Year 2000 and Eurocurrency compliance
services, testing and quality assurance services and re-hosting and
re-engineering services. The Company has adopted SFAS No. 131, "Disclosures
About Segments of an Enterprise and Related Information." Information about the
Company's operations and total assets in North America, Europe and Asia for the
six month period ended June 30, 1999 and 1998 are as follows:

Three Months Ended Six Months Ended
------------------ ----------------
1999 1998 1999 1998
---- ---- ---- ----

REVENUES (1)
North America..................... $ 16,513 $ 10,468 $ 32,658 $ 19,012
Europe............................ 4,877 2,184 9,041 3,794
Asia.............................. 108 16 225 100
--------- --------- --------- ----------
Consolidated...................... $ 21,498 $ 12,668 $ 41,924 $ 22,906
========= ========= ========= ==========

OPERATING INCOME (1)
North America..................... $ 2,967 $ 1,307 $ 6,184 $ 2,245
Europe............................ 876 273 1,706 450
Asia.............................. 20 2 43 11
--------- --------- --------- ----------
Consolidated...................... $ 3,863 $ 1,582 $ 7,933 $ 2,706
========= ========= ========= ==========

As of June 30,
IDENTIFIABLE ASSETS 1999 1998
---- ----
North America..................... $ 36,028 $ 31,050
Europe............................ 3,602 996
Asia.............................. 16,743 8,011
--------- ---------
Consolidated...................... $ 56,373 $ 40,057
========= =========

(1) Revenues and resulting operating income are attributed to regions based upon
customer location.

- 7 -

The Company, operating globally, provides software development and
maintenance services for medium and large businesses. North American operations
consist primarily of software development and maintenance consulting services in
the United States and Canada. European operations consist primarily of software
development and maintenance services principally in the United Kingdom and
Germany. Asian operations consist primarily of software development and
maintenance consulting services principally in India.

In the second quarter of 1999, sales to one related party customer
accounted for 16.7% of revenues and one third-party customer accounted for 19.7%
of revenues. In the second quarter of 1998, sales to one related party customer
accounted for 33.0% of revenues and one third-party customer accounted for 13.2%
of revenues.

NOTE 7 - CONTINGENCIES

The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the outcome of such
claims and legal actions, if decided adversely, is not expected to have a
material adverse effect on the Company's business, financial condition and
results of operations. Additionally, many of the Company's engagements involve
projects that are critical to the operations of its customers' business and
provide benefits that are difficult to quantify. Any failure in a customer's
computer system could result in a claim for substantial damages against the
Company, regardless of the Company's responsibility for such failure. Although
the Company attempts to contractually limit its liability for damages arising
from negligent acts, errors, mistakes, or omissions in rendering its software
development and maintenance services, there can be no assurance that the
limitations of liability set forth in its contracts will be enforceable in all
instances or will otherwise protect the Company from liability for damages.
Although the Company has general liability insurance coverage, including
coverage for errors or omissions, there can be no assurance that such coverage
will continue to be available on reasonable terms or will be available in
sufficient amounts to cover one or more large claims, or that the insurer will
not disclaim coverage as to any future claim. The successful assertion of one or
more large claims against the Company that exceed available insurance coverage
or changes in the Company's insurance policies, including premium increases or
the imposition of large deductible or co-insurance requirements, could have a
material adverse effect on the Company's business, results of operations and
financial condition.

- 8 -

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.

GENERAL

The Company delivers full life cycle software development and maintenance
technology consulting services to its customers through the use of a seamless
on-site and offshore project team. These services include application
development and maintenance services, Year 2000 and Eurocurrency compliance
services, testing and quality assurance services and re-hosting and
re-engineering services.

The Company began its software development and maintenance services
business in early 1994, as an in-house technology development center for The Dun
& Bradstreet Corporation and its operating units. In 1996, the Company, Erisco,
Inc. ("Erisco"), IMS International Inc. ("IMS"), Nielsen Media Research, Inc.,
Pilot Software Inc. and Sales Technologies, Inc. and certain other entities,
plus a majority interest in Gartner Group, Inc. were spun-off from The Dun &
Bradstreet Corporation to form Cognizant. In 1997, the Company purchased the
24.0% minority interest in its Indian subsidiary from a third party for $3.4
million, making the Indian subsidiary wholly owned by the Company. In June 1998,
the Company completed its IPO. On June 30, 1998, a majority interest in the
Company, Erisco, IMS and certain other entities were spun-off from Cognizant to
form IMS Health Incorporated ("IMS Health").

The Company's services are performed on either a time-and-materials or
fixed-price basis. The Company expects that an increasing number of its future
projects will be fixed-price rather than time-and-materials (which has
historically been the basis for its contracts). Revenues related to
time-and-materials contracts are recognized as the service is performed.
Revenues related to fixed-price contracts are recognized using the
percentage-of-completion method of accounting, under which the sales value of
performance, including earnings thereon, is recognized on the basis of the
percentage that each contract's incurred cost to date bears to the total
estimated cost. Estimates are subject to adjustment as a project progresses to
reflect changes in expected completion costs or dates. The cumulative impact of
any revision in estimates of the percentage of work completed is reflected in
the financial reporting period in which the change in the estimate becomes
known, and any anticipated losses are recognized immediately. Since the Company
bears the risk of cost over-runs and inflation associated with fixed-price
projects, the Company's operating results may be adversely affected by changes
in estimates of contract completion costs and dates.

The statements contained in this Quarterly Report on Form 10-Q that are not
historical facts are forward-looking statements (within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended) that involve risks and
uncertainties. Such forward-looking statements may be identified by, among other
things, the use of forward-looking terminology such as "believes," "expects,"
"may," "will," "should" or "anticipates" or the negative thereof or other
variations thereon or comparable terminology, or by discussions of strategy that
involve risks and uncertainties. From time to time, the Company or its
representatives have made or may make forward-looking statements, orally or in
writing. Such forward-looking statements may be included in various filings made
by the Company with the Securities and Exchange Commission, or press releases or
oral statements made by or with the approval of an authorized executive officer
of the Company. These forward-looking statements, such as statements regarding

- 9 -

anticipated future revenues, contract percentage completions, capital
expenditures, and other statements regarding matters that are not historical
facts, involve predictions. The Company's actual results, performance or
achievements could differ materially from the results expressed in, or implied
by, these forward-looking statements. Potential risks and uncertainties that
could affect the Company's future operating results include, but are not limited
to: (i) the significant fluctuations of the Company's quarterly operating
results caused by a variety of factors, many of which are not within the
Company's control, including (a) the number, timing, scope and contractual terms
of software development and maintenance projects, (b) delays in the performance
of projects, (c) the accuracy of estimates of costs, resources and time to
complete projects, (d) seasonal patterns of the Company's services required by
customers, (e) levels of market acceptance for the Company's services, and (f)
the hiring of additional staff; (ii) changes in the Company's billing and
employee utilization rates; (iii) the Company's ability to manage its growth
effectively, which will require the Company (a) to increase the number of its
personnel, particularly skilled technical, marketing and management personnel,
and (b) to continue to develop and improve its operational, financial,
communications and other internal systems, both in the United States and India;
(iv) the Company's limited operating history with unaffiliated customers; (v)
the Company's reliance on key customers and large projects; (vi) the highly
competitive nature of the markets for the Company's services; (vii) the
Company's ability to successfully address the continuing changes in information
technology, evolving industry standards and changing customer objectives and
preferences; (viii) the Company's reliance on the continued services of its key
executive officers and leading technical personnel; (ix) the Company's ability
to attract and retain a sufficient number of highly skilled employees in the
future; (x) the Company's ability to protect its intellectual property rights;
(xi) general economic conditions; (xii) year 2000 compliance of vendors'
products and related issues, including impact of the year 2000 problem on
customer buying patterns, and (xiii) the outcome of the impact of year 2000. The
Company's actual results may differ materially from the results disclosed in
such forward-looking statements.

- 10 -

RESULTS OF OPERATIONS

The following table sets forth certain results of operations as a
percentage of total revenue:

THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- -------------------------
1999 1998 1999 1998
---- ---- ---- ----

Total revenues......................... 100.0% 100.0% 100.0% 100.0%
Cost of revenues....................... 51.9 57.8 52.1 57.9
------- ------- ------- -------
Gross profit........................ 48.1 42.2 47.9 42.1
Selling, general and administrative
expense................................ 26.9 25.5 25.7 25.9
Depreciation and amortization expense.. 3.2 4.2 3.3 4.4
------- ------- ------- -------
Income from operations.............. 18.0 12.5 18.9 11.8
Other income (expense):
Interest income..................... 1.1 0.4 1.2 0.3
Other income (expense).............. (0.1) 0.6 0.1 0.3
------- ------- ------- -------
Total other income (expense) 1.0 1.0 1.3 0.6
------- ------- ------- -------
Income before provision for income
taxes............................... 19.0 13.5 20.2 12.4
Provision for income taxes............. (7.1) (5.1) (7.5) (4.6)
------- ------- ------- -------
Net income ............................ 11.9% 8.4% 12.7% 7.8%
======= ======= ======= =======

Three Months Ended June 30, 1999 Compared to Three Months Ended June 30, 1998

Revenue. Revenue increased by 69.7%, or $8.8 million, from $12.7 million
during the three months ended June 30, 1998 to $21.5 million during the three
months ended June 30, 1999. This increase resulted primarily from a $11.0
million increase in software development, maintenance and Eurocurrency
compliance services partially offset by an approximately $2.2 million decrease
in Year 2000 Compliance Services. The percentage of revenues derived from
unrelated parties increased from 67.0% during the three months ended June 30,
1998 to 83.3% during the three months ended June 30, 1999. This increase
resulted primarily from the Company's continued efforts to pursue unaffiliated
third-party customers and the impact of the spin-off in June 1998 of a majority
interest in the Company, Erisco, IMS and certain other entities to form IMS
Health. For statement of operations purposes, revenues from related parties only
include revenues recognized during the period in which the related party was
affiliated with the Company. In the second quarter of 1999, sales to one related
party customer accounted for 16.7% of revenues and one third-party customer
accounted for 19.7% of revenues. In the second quarter of 1998, sales to one
related party customer accounted for 33.0% of revenues and one third-party
customer accounted for 13.2% of revenues.

Gross profit. The Company's cost of revenues consists primarily of the cost
of salaries, payroll taxes, benefits, immigration and travel for technical
personnel, and the cost of sales commissions. The Company's cost of revenues
increased by 52.2%, or $3.8 million, from $7.3 million during the three months
ended June 30, 1998 to $11.1 million during the three months ended June 30,
1999. The increase was due primarily to the increased cost resulting from the
increase in the number of the Company's technical professionals from
approximately 1,200 employees at June 30, 1998 to approximately 1,635 employees
at June 30, 1999. The Company's gross profit increased by 93.7%, or
approximately $5.0 million, from approximately $5.3 million during the three
months ended June 30, 1998 to approximately $10.3 million during the three
months ended June 30, 1999. Gross profit margin increased from 42.2% of revenues
during the three months ended June 30, 1998 to 48.1% of revenues during the
three months ended June 30, 1999. The increase in such gross profit margin was
primarily attributable to the increased third-

- 11 -

party revenue, which generally has higher margins, and a higher utilization
level of technical professionals during the three months ended June 30, 1999
compared to the three months ended June 30, 1998.

Selling, general and administrative expenses. Selling, general and
administrative expenses consist primarily of salaries, employee benefits,
travel, promotion, communications, management, finance, administrative and
occupancy costs. Selling, general and administrative expenses, including
depreciation and amortization, increased by 72.5%, or $2.7 million, from $3.8
million during the three months ended June 30, 1998 to $6.5 million during the
three months ended June 30, 1999, and increased as a percentage of revenue from
29.7% to 30.2%. The increase in such expenses was primarily due to expenses
incurred to expand the Company's sales and marketing activities and increased
infrastructure expenses to support the Company's revenue growth.

Income from Operations. Income from operations increased 144.2%, or $2.3
million, from $1.6 million during the three months ended June 30, 1998 to $3.9
million during the three months ended June 30, 1999, representing 12.5% and
18.0% of revenues, respectively. The increase in operating margin was primarily
due to the increased third-party revenue, which generally has higher margins,
and the higher utilization level of technical professionals mentioned above.

Other Income. Other income consists primarily of interest income and
foreign currency exchange gains. Interest income increased by approximately
$199,000 from approximately $48,000 during the three months ended June 30, 1998
to approximately $247,000 during the three months ended June 30, 1999. The
increase in such interest income was attributable primarily to increased
interest income resulting from the investment of the net proceeds generated from
the Company's IPO and generally higher operating cash balances. The Company
recognized a net foreign currency exchange loss of approximately $29,000 during
the three months ended June 30, 1999, as a result of the effect of changing
exchange rates on the Company's transactions.

Provision for Income Taxes. Up to the date of the IPO, the Company had been
included in the consolidated federal income tax returns of The Dun & Bradstreet
Corporation and Cognizant Corporation. The Company's provision for income taxes
in the consolidated statements of income reflects federal and state income taxes
calculated on the Company's stand alone basis. The provision for income taxes
increased from approximately $638,000 in the three months ended June 30, 1998 to
$1.5 million in the three months ended June 30, 1999, with an effective tax rate
of 37.4% in 1998 and 1999.

Net Income. Net income increased from approximately $1.1 million for the
three months ended June 30, 1998 to $2.6 million for the three months ended June
30, 1999, representing 8.4% and 11.9% as a percentage of revenues, respectively.

SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998

Revenue. Revenue increased by 83.0%, or $19.0 million, from $22.9 million
during the six months ended June 30, 1998 to $41.9 million during the six months
ended June 30, 1999. This increase resulted primarily from a $20.6 million
increase in software development,

- 12 -

maintenance and Eurocurrency compliance services partially offset by an
approximately $1.6 million decrease in Year 2000 Compliance Services. The
percentage of revenues derived from unrelated parties increased from 65.6%
during the six months ended June 30, 1998 to 83.6% during the six months ended
June 30, 1999. This increase resulted primarily from the Company's continued
efforts to pursue unaffiliated third-party customers and the impact of the
spin-off in June 1998 of a majority interest in the Company, Erisco, IMS and
certain other entities to form IMS Health. For statement of operations purposes,
revenues from related parties only include revenues recognized during the period
in which the related party was affiliated with the Company. During the six
months ended June 30, 1999, sales to one related party customer accounted for
16.4% of revenues and one third-party customer accounted for 20.0% of revenues.
During the six months ended June 30, 1998, sales to one related party customer
accounted for 34.4% of revenues and two third-party customers accounted for
13.8% and 10.5% of revenues, respectively.

Gross profit. The Company's cost of revenues increased by 64.9%, or $8.6
million, from $13.3 million during the six months ended June 30, 1998 to $21.9
million during the six months ended June 30, 1999. The increase was due
primarily to the increased cost resulting from the increase in the number of the
Company's technical professionals from approximately 1,200 employees at June 30,
1998 to approximately 1,635 employees at June 30, 1999. The Company's gross
profit increased by 107.9%, or approximately $10.4 million, from approximately
$9.7 million during the six months ended June 30, 1998 to approximately $20.1
million during the six months ended June 30, 1999. Gross profit margin increased
from 42.1% of revenues during the six months ended June 30, 1998 to 47.9% of
revenues during the six months ended June 30, 1999. The increase in such gross
profit margin was primarily attributable to the increased third-party revenue
and higher utilization levels of technical professionals discussed above.

Selling, general and administrative expenses. Selling, general and
administrative expenses, including depreciation and amortization, increased by
74.7%, or $5.2 million, from $6.9 million during the six months ended June 30,
1998 to $12.1 million during the six months ended June 30, 1999, but decreased
as a percentage of revenue from 30.3% to 28.9%. The dollar increase in such
expenses was primarily due to expenses incurred to expand the Company's sales
and marketing activities and increased infrastructure expenses to support the
Company's revenue growth.

Income from Operations. Income from operations increased 193.2%, or $5.2
million, from $2.7 million during the six months ended June 30, 1998 to $7.9
million during the six months ended June 30, 1999, representing 11.8% and 18.9%
of revenues, respectively. The increase in operating margin was primarily due to
the increased third-party revenue higher utilization levels of technical
professionals discussed above.

Other Income. Interest income increased by approximately $443,000 from
approximately $79,000 during the six months ended June 30, 1998 to approximately
$522,000 during the six months ended June 30, 1999. The increase in such
interest income was attributable primarily to increased interest income
resulting from the investment of the net proceeds generated from the Company's
IPO and generally higher operating cash balances. The Company recognized a net
foreign currency exchange gain of approximately $33,000 during the six months
ended June 30, 1999, as a result of changes in exchange rates on the Company's
transactions.

Provision for Income Taxes. The provision for income taxes increased from
approximately $1.1 million in the six months ended June 30, 1998 to $3.2 million
in the six months ended June 30, 1999, with an effective tax rate of 37.4% in
1998 and 1999.

- 13 -

Net Income. Net income increased from approximately $1.8 million for the
six months ended June 30, 1998 to $5.3 million for the six months ended June 30,
1999, representing 7.8% and 12.7% as a percentage of revenues, respectively.

LIQUIDITY AND CAPITAL RESOURCES

Historically, the Company's primary sources of funding had been cash flow
from operations and intercompany cash transfers with its majority owner and
controlling parent company IMS Health, accounting successor to Cognizant. In
June 1998, the Company consummated its IPO of 2,917,000 shares of its Class A
Common Stock at a price to the public of $10.00 per share, of which 2,500,000
shares were issued and sold by the Company and 417,000 shares were sold, at that
time, by Cognizant Corporation. The net proceeds to the Company from the
offering were approximately $22.4 million after $845,000 of direct expenses. The
funds received by the Company from the IPO were invested in short-term,
investment grade, interest bearing securities, after the Company used a portion
of the net proceeds to repay approximately $6.6 million of non-trade related
party balances to Cognizant Corporation. The Company has used and will continue
to use the remainder of the net proceeds from the offering for (i) expansion of
existing operations, including the Company's offshore software development
centers; (ii) continued development of new service lines and possible
acquisitions of related businesses; and (ii) general corporate purposes
including working capital.

Net cash provided by operating activities was approximately $4.0 million
during the six months ended June 30, 1999 as compared to net cash provided by
operating activities of $4.7 million during the six months ended June 30, 1998.
The decrease results primarily from decreased level of accrued liabilities and
increased other assets partially offset by increased net income and an increase
in deferred taxes. Accounts receivable increased from $11.1 million at December
31, 1998 to $12.7 million at June 30, 1999. The Company monitors turnover, aging
and the collection of accounts receivable through the use of management reports
which are prepared on a customer basis and evaluated by the Company's finance
staff.

The Company's investing activities used net cash of $3.2 million for the
six months ended June 30, 1999 as compared to net cash used of $1.8 million for
the same period in 1998. The increase in 1999 compared to 1998 primarily
reflects increased purchases of equipment to expand the Company's offshore
development infrastructure.

The Company's financing activities provided net cash of approximately
$216,000 for the six months ended June 30, 1999 as compared to net cash provided
by financing activities of approximately $15.9 million for the same period in
1998. Net cash provided by financing activities as of June 30, 1998 includes net
proceeds from the IPO after the settlement of approximately $6.6 million of
non-trade related-party balances to Cognizant Corporation.

As of June 30, 1999, the Company had no significant third-party debt.

The Company had working capital of $34.7 million at June 30, 1999 and $29.4
million at December 31, 1998.

The Company believes that its available funds and the cash flows expected
to be generated from operations, will be adequate to satisfy its current and
planned operations and needs through at least the next 12 months.

- 14 -

FOREIGN CURRENCY TRANSLATION

The assets and liabilities of the Company's Canadian and European
subsidiaries are translated into U.S. dollars at current exchange rates and
revenues and expenses are translated at average monthly exchange rates. The
resulting translation adjustments are recorded in a separate component of
stockholders' equity. For the Company's Indian subsidiary, the functional
currency is the U.S. dollar since its sales are made primarily in the United
States, the sales price is predominantly in U.S. dollars and there is a high
volume of intercompany transactions denominated in U.S. dollars between the
Indian subsidiary and its U.S. affiliates. Non-monetary assets and liabilities
are translated at historical exchange rates, while monetary assets and
liabilities are translated at current exchange rates. A portion of the Company's
costs in India are denominated in local currency and subject to exchange
fluctuations, which has not had any material adverse effect on the Company's
results of operations.

EFFECTS OF INFLATION

The Company's most significant costs are the salaries and related benefits
for its programming staff and other professionals. Competition in India and the
United States for professionals with advanced technical skills necessary to
perform the services offered by the Company have caused wages to increase at a
rate greater than the general rate of inflation. As with other IT service
providers, the Company must adequately anticipate wage increases, particularly
on its fixed-price contracts. There can be no assurance that the Company will be
able to recover cost increases through increases in the prices that it charges
for its services in the United States and elsewhere.

RISKS ASSOCIATED WITH THE YEAR 2000

Historically, certain computer programs have been written using two digits
rather than four to define the applicable year, which could result in the
computer recognizing a date using "00" as the year 1900 rather than 2000. This
in turn, could result in major system failures or miscalculations, and is
generally referred to as the "Year 2000 Problem". The Company believes that it
has sufficiently assessed its state of readiness with respect to its Year 2000
compliance. As the assessment was completed using internal personnel, costs and
time for such personnel were not specifically tracked. The Company, however,
estimates that such costs were immaterial. There were no external costs incurred
by the Company relating to its Year 2000 assessment. Costs incurred to date to
address the Year 2000 problem have been immaterial and the Company does not
believe that Year 2000 compliance will result in material investments by the
Company in the future. The Company does not anticipate that the Year 2000
Problem will have any material adverse effects on the business operations or
financial performance of the Company. The Company does not believe that it has
any material exposure to the Year 2000 Problem with respect to its own
information systems and believes that all of its business-critical systems
correctly define the Year 2000 and subsequent years. There can be no assurance,
however, that the Year 2000 Problem will not adversely affect the Company's
business, operating results and financial condition.

Contingency planning has been essentially completed in all of the Company's
operations in order to address the most likely effects on the Company from
external risks. These plans will address facilities and equipment,
telecommunications infrastructure, and internal administrative

- 15 -

processes. In addition, these plans will take into account human resource and
communications issues that relate to the Company's employees. As more
information emerges about services upon which the Company is critically reliant,
these plans will be adjusted accordingly.

The purchasing patterns of customers and potential customers may be
affected by issues associated with the Year 2000 Problem. As companies expend
significant resources to correct their current data storage solutions, these
expenditures may result in reduced funds to undertake projects such as those
offered by the Company. There can be no assurance that the Year 2000 Problem
will not adversely affect the Company's business, operating results and
financial condition. Conversely, the Year 2000 Problem may cause other companies
to accelerate purchases, thereby causing an increase in short-term demand and a
consequent decrease in long-term demand for the Company's services.

RECENT ACCOUNTING PRONOUNCEMENTS

- 16 -

PART II. OTHER INFORMATION

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

The Annual Meeting of Stockholders of the Company was held on May 25, 1999.

There were present at the meeting in person or by proxy stockholders
holding an aggregate of 3,348,640 shares of Class A Common Stock and an
aggregate of 56,454,500 shares of Class B Common Stock. The results of the vote
taken at such meeting with respect to each nominee for director were as follows:

Common Stock Nominees For Withheld
--------------------- --- --------

Wijeyaraj Mahadeva 59,801,520 1,620
Anthony Bellomo 59,801,366 1,774
Victoria Fash 59,688,670 114,470
Robert W. Howe 59,801,566 1,574
John Klein 59,801,566 1,574
Venetia Kontogouris 59,801,570 1,570

A vote was taken on the proposal to adopt the 1999 Incentive Compensation
Plan. Of the shares present at the meeting in person or by proxy, 57,865,712
shares were voted in favor of such proposal, 820,114 shares were voted against
such proposal and 7,021 shares abstained from voting.

A vote was taken on the proposal to adopt the Employee Stock Purchase Plan.
Of the shares present at the meeting in person or by proxy, 58,671,418 shares
were voted in favor of such proposal, 15,139 shares were voted against such
proposal and 6,920 shares abstained from voting.

Finally, a vote was taken on the proposal to ratify the appointment of
PricewaterhouseCoopers LLP as the independent accountants of the Company for the
fiscal year ending December 31, 1999. Of the shares present at the meeting in
person or by proxy, 59,797,942 shares were voted in favor of such proposal,
1,073 shares were voted against such proposal and 4,125 shares of Common Stock
abstained from voting.

ITEM 5. Other Information.

On April 13, 1999, Paul Cosgrave, a member of the Board of Directors of the
Company (the "Board") since 1998, resigned from the Board. Concurrent with the
effectiveness of such resignation, the Board elected Robert W. Howe to the Board
in order to fill the vacancy created by Mr. Cosgrave's resignation.

- 17 -

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits.

10.1 1999 Incentive Compensation Plan

10.2 Employee Stock Purchase Plan

27.1 Financial Data Schedule for the period ended June 30, 1999.

(b) Reports on Form 8-K.

No reports on Form 8-K were filed during the quarter for
which this report on Form 10-Q is filed.

- 18 -

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

Cognizant Technology Solutions Corporation

DATE: August 10, 1999 By: /s/ Wijeyaraj Mahadeva
----------------------------
Wijeyaraj Mahadeva,
Chairman of the Board and Chief Executive
Officer (Principal Executive Officer)

DATE: August 10, 1999 By: /s/ Gordon Coburn
----------------------------
Gordon Coburn,
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)

- 19 -