Intelligent Core
In this edition of the Smart Investor newsletter, we spotlight the stock of a company powering AI and cloud transformation across global industries. But first, let’s dive into the latest portfolio news and updates.
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Portfolio News and Updates
❖ Morgan Stanley (MS) sailed past analyst consensus on Q2 revenue and earnings, posting strong year-over-year growth. The Institutional Securities division recorded all-time highs in both prime brokerage revenues and average client balances. The investment leader reported strong increases in security trading revenues, led by equity, which offset a slight decline in investment banking. The Wealth Management division also generated record net revenues, with the growth driven by new asset growth and robust fee-based flows. Total client assets in Wealth and Investment Management rose to $8.2 trillion, a new high for Morgan Stanley. The firm also achieved record fee-based advisory flows. Despite the strong beats across major metrics, Morgan Stanley’s stock was mostly stable to slightly down following the report, reflecting high expectations already priced in – as well as profit taking after a 40%+ run up from April lows.
❖ BlackRock (BLK), through its Global Infrastructure Partners (GIP) unit, is leading a consortium that is set to invest approximately $10 billion in Saudi Aramco’s Jafurah shale gas infrastructure – primarily pipelines and facilities. This investment aligns with Aramco’s goal of boosting gas production capacity, while enhancing the long-term scope, stability, and predictability of BLK’s revenue streams. The deal strengthens BlackRock’s relationship with Aramco and the Saudi market – strategically positioning the firm for future deals across the region.
❖ GE Aerospace (GE) posted a nearly flawless earnings report, beating revenue and EPS estimates and posting a robust backlog and surging cash flows. The company revealed significant advancements in technology, including AI-enabled tools, and plans to increase capacity by 40% by the end of the decade. Despite tariff and macro uncertainties, along with other headwinds, GE raised its 2025 revenue and EPS guidance, while increasing its outlook through 2028. With a nearly 60% rally year-to-date, the stock seems unstoppable, well-supported by analyst enthusiasm.
❖ Taiwan Semiconductor Manufacturing, aka TSMC (TSM), reported strong revenue growth along with record EPS and ROE. TSMC’s net income jumped 60.7% YoY, while revenue climbed 38.6%. The robust results were driven mainly by surging AI-fueled demand for TSMC’s 3-nanometer and 5-nanometer wafer technology. TSMC said demand for AI chips was “getting stronger and stronger,” which led it to raise its revenue guidance for Q3 and the full year. The company also noted that Nvidia – TSMC’s largest client – secured government approval to resume H20 AI chip sales to China – a positive development for TSMC, as China remains a critical global semiconductor market. However, the company said it is being more conservative in its forecasts – citing the possible impact of tariffs and “a lot of other uncertainties.”
❖ Interactive Brokers (IBKR) stock soared following its Q2 2025 results release. The leading automated brokerage platform delivered an across-the-board positive surprise, with substantial beats on both earnings and revenue, fueled by explosive client growth and surging trading activity. IBKR set new records in quarterly commissions, net interest income, total net revenue, and pretax income, which topped $1 billion for the third straight quarter. The pretax profit margin held at an industry-leading 75%. New account openings remained strong, with total client balances rising 34% year-over-year. Following the results, several Wall Street firms – including Piper Sandler, Bank of America Securities, and Barclays – raised their price targets on the stock.
❖ Uber Technologies (UBER) is investing hundreds of millions to launch a premium robotaxi service – partnering with EV maker Lucid and autonomous vehicle startup Nuro. Under the deal, Uber will invest $300 million in Lucid, commit to purchasing at least 20,000 Lucid Gravity SUVs over six years, and make an investment in Nuro worth hundreds of millions of dollars – which will equip the SUVs with Level-4 autonomous driving technology while Uber’s ride-hailing network provides scale. Lucid Gravity prototypes with Nuro’s autonomy software are already operating in autonomous mode on closed tracks in Las Vegas, and Uber plans to debut the service in a major U.S. city in 2026, expanding globally thereafter.
This is Uber’s largest direct investment in autonomous vehicles since selling its self-driving unit – a clear pivot toward a vertically integrated, end-to-end role in the robotaxi value chain – with greater control over hardware, autonomy stack, and operations. The Lucid-Nuro deal positions Uber to compete directly with other robotaxi operators like Waymo and Tesla, demonstrating its aggressive bet on autonomous ride-hailing.
In parallel, the company continues to expand its role as a platform, with agreements involving over 18 AV firms across ride-hailing, delivery, and trucking. Uber is pursuing a two-pronged strategy – building and operating its own fleets while continuing to act as a marketplace and aggregator with partners like Alphabet’s (GOOGL) Waymo in Austin and Atlanta. It has also struck a similar agreement with Baidu to expand robotaxi services in Asia and the Middle East – again blending its technology platform with external hardware and AI capabilities to establish itself as a dominant force in the next phase of autonomous transportation.
❖ Meanwhile, Alphabet’s (GOOGL) Waymo has more than doubled its autonomous service area in Austin, Texas – from 37 to 90 square miles – taking a clear lead over Tesla. Waymo’s expansion lets anyone in Austin hail a fully driverless robotaxi through the Uber app at any time, with over 100 Waymo vehicles operating and plans to grow that fleet further. Tesla has only recently launched a robotaxi service in Austin, starting with a small group of invitation-only riders and a limited service zone.
In other developments, several analysts have lifted their price targets on GOOGL ahead of earnings. The latest hike came from Bank of America, which said it expects Alphabet to beat consensus revenue and earnings estimates in its upcoming report. The BofA analysts said they are optimistic regarding the company’s ability to capitalize on AI incorporation in its various products, advance its Gemini AI, and increase prices. Earlier last week, Jeffries said that despite some lingering concerns over AI disruption of search, it sees a much more favorable setup for GOOGL going into earnings.
❖ Another company enjoying multiple pre-earnings price-target upgrades is MACOM Technology Solutions (MTSI). The most recent to raise expectations was Stifel Nicolaus, lifting the PT from $140 to $155 and maintaining a “Buy” rating. Stifel Nicolaus and other analysts report that the inventory correction in the broader semiconductor industry over the past two years appears to be complete and a cyclical recovery is now underway – supporting MACOM, a supplier of high-frequency, high-power semiconductor solutions. Moreover, MTSI is also supported by its exposure to defense and AI through its core business of supplying high-frequency, high-power semiconductor solutions critical for next-generation connectivity and computing infrastructure.
❖ MasTec (MTZ) has also seen considerable positive analyst action going into earnings, and also as the stock of the infrastructure engineering and construction leader surged 30%+ year-to-date, now trading near its all-time high. JPMorgan raised the firm’s price target on MasTec to $214 – a new Street high – from $180, while UBS hiked to $206 from $180, Robert W. Baird increased from $168 to $180, and KeyBanc raised the target from $171 to $196.
❖ Vertiv (VRT) announced a collaboration with Oklo to co-develop advanced power and thermal management solutions for hyperscale and colocation data centers, leveraging steam and electricity from Oklo’s advanced nuclear power plants. This move aligns Vertiv with emerging solutions to meet the growing power and sustainability demands of AI-driven data centers, which are increasingly constrained by energy availability. While the financial impact is expected to be minimal in the near term, the agreement positions Vertiv at the forefront of innovation in data center infrastructure, addressing critical customer challenges around reliable, scalable, and sustainable power. By integrating its expertise in power and cooling systems with next-generation nuclear technology, Vertiv strengthens its role as a strategic partner to hyperscale clients and signals its commitment to long-term, sustainable growth in a rapidly evolving market.
❖ Microsoft (MSFT) is addressing an active cyberattack targeting a zero day vulnerability in its on-premises SharePoint Server software. The flaw, identified last week, has been exploited by multiple hacking groups – including at least one sovereign actor – to gain unauthorized access and steal sensitive data from vulnerable servers. According to U.S. federal agencies and independent researchers, thousands of organizations globally, including government, finance, and energy sectors, could be at risk. Over the weekend, Microsoft released emergency security patches for SharePoint Server 2019 and Subscription Edition, with additional fixes for SharePoint 2016 underway. The company is also working closely with federal agencies and advising customers to apply patches immediately, rotate cryptographic keys, and monitor for suspicious activity. While the attacks underscore ongoing risks in on-premises infrastructure, Microsoft’s rapid response, clear mitigation guidance, and collaboration with authorities highlight its capability to contain and resolve critical security threats effectively.
❖ Roper Technologies (ROP) delivered another strong quarter in Q2 2025, showcasing its disciplined growth strategy and appetite for high-quality acquisitions. Revenues rose 13% from a year ago, with 7% organic growth and the remainder from acquisitions – slightly ahead of analyst expectations. Adjusted EPS rose 9%, coming in at $4.87 – above the consensus estimate of $4.83 – while adjusted EBITDA rose 12% YoY. Free cash flow margins remained robust at around 31%, underscoring the company’s ability to convert earnings into cash.
Roper also announced the $800 million acquisition of Subsplash – a cloud-native, AI-enabled software provider. Subsplash is expected to contribute approximately $115 million in revenue and $36 million in EBITDA by Q3 2026, with management highlighting its potential for further margin expansion over the next few years. The deal strengthens Roper’s vertical software portfolio and aligns with its strategy of acquiring niche, high-growth, high-margin businesses.
Roper raised its full-year outlook on the back of strong results and the Subsplash acquisition. It now expects about 13% revenue growth for 2025, up from ~12%, and lifted its adjusted EPS guidance to a range of $19.90-20.05, slightly ahead of the Street’s consensus. Q3 EPS is projected between $5.08 and $5.12, in line with analyst expectations. Analysts reacted positively to the quarterly results and the Subsplash deal, with Robert W. Baird, Truist Financial, and RBC Capital raising price targets and reiterating bullish outlooks, citing continued execution and M&A strength.
❖ RTX (RTX) posted a solid Q2 2025, with continued momentum in organic sales and profit growth across all of its business segments – including 16% year-over-year commercial aftermarket growth. Revenue – total and organic – rose 9% YoY to $21.60 billion, beating expectations of $20.64 billion. Adjusted EPS increased 11% to $1.56 per share – compared to analyst estimates of $1.44. Adjusted EBITDA was $3.34 billion versus estimates of $3.25 billion, with a 15.5% margin. RTX’s backlog grew 15% to $236 billion, comprising $144 billion in commercial and $92 billion in defense. The company returned $900 million to shareholders and raised its quarterly dividend by 8% in Q2. RTX also announced the sale of Collins’ Simmonds Precision Products business to TransDigm for $765 million in cash.
The aerospace and defense leader updated its outlook for full year 2025 – raising organic and adjusted revenue guidance while maintaining free cash flow expectations. However, RTX lowered its adjusted EPS guidance from $6.00-6.15 to $5.80-5.95, citing the expected impact of tariffs on its bottom line. The stock declined following the EPS guidance cut – but the reaction was mild compared to Q1, when RTX first warned of tariff-related headwinds. This suggests the impact was already anticipated, and the company merely quantified it this quarter.
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Portfolio Stocks Under Review
❖ We are keeping Roper Technologies (ROP) under review despite its better-than-expected Q2 2025 results and ongoing M&A strength – as detailed in the news section above.
ROP remains a high-quality operator in niche, mission-critical software and industrial markets – with strong pricing power, sticky customer relationships, and robust free cash flow. The company has delivered consistent EPS growth – beating estimates for the 17th straight quarter in Q2 – and raised its 2025 guidance once again. Roper has cemented its leadership in essential verticals – enabling steady organic growth, horizontal expansion, and premium pricing. The company also maintains a reliable dividend and a strong track record of accretive acquisitions – most recently highlighted by the Subsplash deal.
The key concerns that led us to place Roper under review have been largely addressed by the latest earnings. Margins have stabilized: adjusted EBITDA rose ~12% to $775 million – with margins holding firm even as CentralReach was integrated – demonstrating disciplined cost control and operating leverage. The integration is progressing smoothly, with its results already contributing to the quarter and management expectations of delivering 20%+ organic growth and margin expansion under Roper’s ownership. Cash flow remains strong: TTM free cash flow margin is ~31%, consistent with Q1, underscoring the company’s reliable cash-conversion model.
However, we remain cautious after the stock underperformed the S&P 500 over the past three months – sometimes lagging during periods of broader market strength. Some of this weakness appears technical: Roper trades at a premium multiple due to its defensible niche and sticky customer base, but since May, market sentiment has favored lower-multiple, cyclical names as macro fears eased. Additionally, ROP is not perceived as a high-growth AI beneficiary – so it has not fully participated in the recent AI-driven rally.
Given this context, we prefer to keep Roper under review a bit longer – to see whether its business and financial outperformance translate into improved sentiment and stronger stock performance.
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❖ We continue to keep LPL Financial (LPLA) under review. Despite strong fundamentals – including continued advisor additions, rising advisory assets, and efficient capital deployment – the stock struggled from mid-May through June following a more than 35% rally from April lows, suggesting pronounced profit taking.
On July 7, Citi opened a “negative 30 day short-term view” on LPL ahead of its Q2 earnings report. Citi expects negative estimate revisions and forecasts Q2 earnings to be ~5% below the consensus estimate. The firm reiterated its “Hold” rating, reflecting caution about near-term performance despite the stock’s strong longer-term prospects. In addition, on July 9, TD Cowen downgraded LPL from “Buy” to “Hold,” citing a reduced earnings outlook and valuation concerns.
However, the consensus among top ranked Wall Street analysts remains positive, with a “Buy” rating and an average target price implying about 10% upside from current levels. Out of recent analyst actions, most have reaffirmed their positive ratings. Moreover, Barclays, Wells Fargo, J.P. Morgan, and Morgan Stanley raised their price targets over the past two weeks, reflecting increased confidence in LPL’s earnings outlook and growth prospects.
J.P. Morgan analysts cited favorable trends in the wealth management industry and the firm’s ability to execute strategic initiatives, expand its advisor base, and integrate technology. Meanwhile, Wells Fargo highlighted strong revenue growth in recent quarters, significantly outpacing peers, along with both higher ROE and ROA – indicating strong management, efficient capital use, and solid operational performance. LPL continues to deliver solid organic net new asset growth, demonstrating its ability to attract and retain clients, while stability in client cash balances supports its financial health and resilience.
Barclays maintained its “Buy” rating, lifting its price target from $450 to $460, implying over 23% upside from current levels. The firm noted that heading into Q2 earnings, it sees a robust trading environment likely to benefit LPL given its ability to capitalize on market opportunities. A more significant price-target hike arrived on July 15, when Morgan Stanley raised it from $450 to $490 – a Street-high target – implying an upside of nearly 25% from current levels.
LPL’s stock jumped on strong analyst support and was also boosted by optimism emanating from peer firms’ earnings results. However, given its previous underperformance, we will be monitoring LPLA at least until it releases its Q2 results on July 31.
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Portfolio Earnings and Dividend Calendar
❖ The Q2 2025 earnings season is in full swing, with several Portfolio companies scheduled to report their quarterly results today and over the next week. These are: General Dynamics (GD), Amphenol (APH), Alphabet (GOOGL), IBM (IBM), Visa (V), Microsoft (MSFT), Qualcomm (QCOM), and Vertiv Holdings (VRT).
❖ The ex-dividend date for Bank of New York Mellon (BK) is July 25.
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New Buy: Cognizant (CTSH)
Cognizant holds a pivotal position in the global professional and IT services landscape, partnering with enterprises to modernize technology, reimagine processes, and transform customer and employee experiences. It designs, builds and runs business-critical technology systems – from cloud infrastructure and software platforms to data analytics, automation and AI-driven workflows – enabling clients to streamline operations and unlock growth. Its expertise helps businesses across healthcare, financial services, manufacturing and beyond navigate complexity and deliver outcomes that balance efficiency, innovation and resilience. With a portfolio that blends deep industry knowledge, advanced digital platforms and emerging technologies, Cognizant serves as both a trusted consultant and an execution partner. By embedding itself in critical workflows and delivering end-to-end solutions, it remains indispensable in driving digital transformation and long-term business value.
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Architecture of Ascent
Founded in 1994 as an in-house technology unit of Dun & Bradstreet, Cognizant became independent in the late 1990s and quickly grew into a leading global IT and professional services provider. Its early focus on application development, process optimization and industry-specific solutions helped it win market share in healthcare, financial services and technology throughout the 2000s and 2010s. Over time, Cognizant evolved into a full-spectrum digital transformation partner, integrating cloud, automation and data-driven insights into client operations.
In the past five years, Cognizant has undertaken a focused transformation to regain momentum and strengthen its competitive position. Under CEO Ravi Kumar S., who assumed leadership in 2023, the company emphasized higher-margin, platform-based services and made targeted investments in AI, automation and engineering. Its “AIfirst” strategy – now central to its growth plan – has become a key driver of large-scale, multiyear contracts and deeper client relationships.
To support this shift, Cognizant has executed a series of strategic acquisitions that expanded its reach and capabilities. In 2023, it acquired Belcan, an aerospace and defense engineering firm, adding depth in high-value industrial and engineering services. In early 2024, it acquired Thirdera, enhancing its expertise in ServiceNow automation and workflow platforms. Together, these acquisitions contributed an estimated 400 basis points to year-over-year revenue growth in Q1 2025, underscoring their immediate impact on market share and topline momentum.
Following its acquisitions, Cognizant strategically broadened its ecosystem by forging key partnerships aimed at expanding its reach into high-growth markets. Alliances with NVIDIA, Microsoft, ServiceNow, and Veeva were established not merely as tactical enhancements but as part of a deliberate move to position Cognizant at the center of emerging client needs – from AI-powered insights to workflow automation and cloud-based pharmaceutical development. These collaborations reflected management’s intent to integrate best-in-class technologies and strengthen Cognizant’s ability to deliver differentiated solutions at scale.
Investment in talent and delivery infrastructure has complemented these strategic moves. In 2025, Cognizant began construction of a 14acre Immersive Learning Center at its Chennai campus – designed to train up to 100,000 professionals annually with smart classrooms, design thinking hubs and client experience labs. This facility supports the company’s growth in next-generation skills such as AI, cloud and automation, while enhancing its ability to execute at scale and meet rising client demand.
Through disciplined strategy, focused M&A, advanced partnerships and deliberate upskilling investments, Cognizant has reasserted itself as a dynamic force in global IT services – positioned to capture share in an increasingly AI-driven market.
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Digital Dominion
Cognizant enables enterprises to modernize, optimize, and transform their operations – providing technology services, platforms, and expertise that underpin critical business workflows across healthcare, financial services, industrials, and beyond. As one of the largest global IT services firms, it sits at the center of an estimated $1 trillion plus total addressable market (TAM) that continues to expand as industries shift toward cloud-based, AI-driven, and outcome-oriented models.
The business spans four major segments. Health Sciences, the largest, contributes roughly 31% of revenue, serving insurers, providers, and pharmaceutical companies with platforms, data services, and digital transformation programs. Financial Services, at about 29%, delivers technology modernization, payments, and risk solutions to banks and insurers, benefiting recently from a rebound in demand for cost savings and regulatory compliance. Products & Resources, accounting for approximately 25%, includes manufacturing, energy, and logistics clients who increasingly seek automation and connected operations – aided by Cognizant’s engineering and ServiceNow platforms. Finally, Communications, Media & Technology, representing around 16%, supports technology, telecom, and media firms; while this segment has been under pressure, it remains strategically relevant.
Cognizant’s AI-first strategy is already shaping its growth prospects across all markets. The company has embedded AI and automation into hundreds of client workflows and consistently wins large contracts – including three “megadeals” in 2025 – that explicitly leverage its generative AI and automation capabilities. Notably, Evercore ISI recently cited CTSH’s pivotal role in enterprise AI adoption and forecast potential double-digit EPS growth.
CTSH also benefits from the high-impact partnerships initiated during its transformation. Collaborations with NVIDIA for enterprise AI, Microsoft and ServiceNow for digital workplace and workflow automation, and Veeva for pharmaceutical development clouds have matured into differentiators that deepen client engagement in fast-growing verticals. Other disclosed relationships include Citizens Financial Group (to build a global capability center in India) and extended support contracts with Docusign, Boehringer Ingelheim, and KBC Group.
Industry and broader economic developments present both headwinds and tailwinds. Regulatory and political risks – including potential U.S. healthcare spending cuts, ongoing trade tariffs, and cautious client spending in certain sectors – remain manageable, as IT solutions continue to be essential for efficiency even in constrained budgets. Meanwhile, the rebound in banking and retail IT budgets, vendor consolidation trends, and client focus on AI-enabled efficiencies continue to support growth. Moreover, the newly approved “One Big Beautiful Bill Act” fiscal package provides a generally business-friendly boost, relieving some burdens on the IT sector – a mild tailwind for Cognizant’s client demand – and improving cash flow and bottom line for the firm itself.
With its scale, strengthened portfolio, and deep domain expertise, Cognizant is well-positioned to capture share in a recovering IT services market increasingly driven by AI, cloud, and platform-based transformation.
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Turning Point Metrics
Cognizant delivered a solid start to 2025, reinforcing its profitability and signaling an inflection point as AI and cloud investments begin to accelerate growth. In Q1 2025, revenue rose 7.5% YoY (8.2% in constant currency) to $5.18 billion, modestly above the ~$5.15 billion consensus estimate. This outpaced many peers in IT services, thanks to its AI-driven strategy and disciplined execution. Organic growth was in the low- to mid-single digits, with acquisitions contributing roughly four percentage points.
Adjusted EPS came in at $1.23, up about 11% YoY and slightly ahead of the ~$1.20 consensus. Adjusted operating margin expanded to 15.5%, up from ~15.1% a year earlier, reflecting improved pricing and operational efficiency. Free cash flow rose to approximately $525 million, up ~12% YoY, underscoring strong cash generation.
Adjusted EPS came in at $1.23, up about 11% YoY and slightly ahead of the ~$1.20 consensus. Adjusted operating margin expanded to 15.5%, up from ~15.1% a year earlier, reflecting improved pricing and operational efficiency. Free cash flow rose to approximately $525 million, up ~12% YoY, underscoring strong cash generation.
Growth was broad-based, with Health Sciences and Financial Services both growing mid-to-high single digits, Products & Resources slightly ahead of the company average, and Communications, Media & Technology remaining soft with a ~2.7% YoY decline. This marked a meaningful improvement after weaker quarters in late 2024, when revenue and bookings slowed amid cautious client budgets.
Bookings in Q1 dipped ~7% YoY, but trailing 12month bookings stood at $26.7 billion, and a 1.3x book-to-bill ratio indicated a healthy pipeline for IT transformation contracts. Management also highlighted progress on more than 1,400 early GenAI projects, embedding AI into client workflows to drive productivity and cost savings. Notably, Cognizant secured three mega‑deals in the first half of 2025 – including one valued at over $500 million – underscoring its ability to win large‑scale, multi‑year contracts that differentiate it in a competitive market.
Cognizant’s WorkNEXT platform, a digital workplace solution enabling hybrid work with AI-powered automation, has emerged as a cornerstone of its offering – positioning it to capture a growing share of the estimated $1.2 trillion global digital workplace market. As of Q1 2025, the company holds an estimated 23.6% share of the cloud and data analytics market, and 9.7% of the broader technology sector, trailing IBM and Accenture but solidly ahead of other peers.
For Q2 2025, Cognizant guided revenue to $5.14-5.21 billion, representing 5.9-7.4% YoY growth (~5.0-6.5% in constant currency) – consistent with a moderate acceleration but still conservative versus the most optimistic analyst expectations. Full-year 2025 guidance remains at $20.5-21.0 billion, implying 3.5-6% CC growth, which analysts generally view as a cautious baseline. Notably, Guggenheim expects Cognizant to raise the midpoint of its full-year revenue growth outlook to 4.5-6% after the Q2 earnings release, while maintaining adjusted operating margin expansion of 20-40 basis points. The firm cited ongoing pyramid initiatives and other cost optimization strategies as supporting factors for the company’s margin outlook.
Looking further ahead, Evercore ISI projects an upside scenario where Cognizant sustains mid to high single-digit organic growth, ~50bps of annual margin expansion, and double-digit EPS/FCF growth, achieving ~$6.50+ EPS power over the next several years. Analysts at Needham, TD Securities, and others raised their ratings this year, viewing AI as the inflection point for Cognizant’s transition from low growth to accelerated expansion.
The upcoming Q2 earnings (July 30) consensus anticipates revenue near the upper end of guidance (~$5.2 billion), adjusted EPS of $1.25-1.30, and stable margins – with investors closely watching for signs of improving bookings and any upward revision to full-year outlook. With a strong pipeline, rising AI adoption, and steady financial discipline, Cognizant appears positioned to deliver on its promise of renewed, profitable growth as the IT services cycle recovers.
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Cognicash Flow
CTSH has tracked the broader trend in U.S. IT Services stocks over the past year – reaching its local peak in late January or early February and declining from there to April lows along with other technology stocks. However, for Cognizant’s stock, the decline was less severe than that of its peers, while the rebound was stronger than at most comparable industry stocks. As a result, CTSH is displaying the best performance among its peers over the past year as well as year-to-date – supported by positive market reaction to its previous quarterly reports over the trailing twelve months, which consistently beat estimates. Analysts are increasingly optimistic about CTSH, with several price target increases in the past couple of months and the consensus implying an upside of nearly 19% from current levels.
This upside is supported by Cognizant’s reasonable and attractive valuations. CTSH trades at a discount to most Technology sector median multiples and ranks near the bottom of the peer valuation scale in terms of the trailing twelve months and forward Non-GAAP P/E, EV/EBITDA, and EV/Sales. Its TTM Price/Book also sits near the bottom, while Price/Cash Flow is slightly below the peer average. Cognizant’s forward Non-GAAP PEG of 1.97 is considered reasonable for a mature, profitable IT services company – and it is below the PEG multiples of its peers, implying that the market does not fully credit it yet for the potential acceleration in EPS from AI and margin improvements. If CTSH confirms its turnaround story at the next earnings report, the stock could rerate significantly.
Cognizant’s capital return strategy further strengthens its appeal. The company generates strong free cash flow and operates with a low-capital-intensity model, which allows it to fund both growth initiatives and return excess cash to shareholders. In 2025, the company plans to return $1.7 billion to shareholders – through $1.1 billion in buybacks and $600 million in dividends.
CTSH has been paying and raising dividends for the past eight years, with average annual increases of ~8%. Its current dividend yield of 1.62% is nearly triple the Technology sector’s average. Despite this, payout ratios remain modest – below 30% – which supports analyst expectations for continued dividend growth.
Cognizant also maintains an active and substantial share repurchase program, underscoring its commitment to returning excess capital to shareholders. In February 2023, the Board of Directors expanded the authorization by $2.0 billion – bringing the total approved repurchase capacity to approximately $3.4 billion at that time. Since then, the company has repurchased roughly 23 million shares – comprising about 4.4% of the total float – through the end of Q1 2025. As of the end of the first quarter, approximately $1.9 billion remained authorized and available – providing flexibility to continue supporting EPS and shareholder value while funding strategic growth initiatives.
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Investing Takeaway
Cognizant is a key enabler of enterprise technological transformation, powering the systems and workflows that drive healthcare, finance, industry, and beyond. With deep expertise across sectors, it operates at the crossroads of cloud, AI, and automation, embedding intelligence into critical business processes. Its platforms support major trends like hybrid work, data-driven decision-making, and scalable IT modernization – extending its relevance in a competitive landscape. Strategic investments in innovation, client partnerships, and operational discipline underpin its ability to grow and adapt through changing market conditions. For investors looking to capitalize on the growing demand for AI-driven efficiency and scalable digital solutions, Cognizant combines proven execution with renewed growth momentum – offering a compelling opportunity as it turns transformation into profits.
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New Sell: Texas Pacific Land (TPL)
After careful consideration, we have decided to sell Texas Pacific Land Corp. from the Smart Investor Portfolio.
TPL remains a remarkable business – but no longer a remarkable stock at today’s price. The company owns some of the most valuable land and royalty interests in the Permian Basin, complemented by a growing water business and the potential to monetize its acreage for data center and infrastructure projects. Its vast, utility-ready land holdings, access to power and water, and favorable regulatory positioning have made it a speculative favorite among investors looking for AI-driven data center plays. However, the stock surged more than 100% during 2024 – far outpacing the monetization of its long-term assets – as investors piled into anything linked to AI and data centers. The rally was further amplified by TPL’s inclusion in the S&P 500, which drove additional passive inflows.
The Q1 results were strong, with record oil and gas royalty production, record water revenues, and double-digit free cash flow growth. The company continues to expand its royalty base through acquisitions and acreage swaps, while pioneering desalination of produced water for industrial and agricultural use. Its long-term optionality in water and data centers is real and promising. The fiscal policy tailwinds from the “One Big Beautiful Bill,” which incentivizes U.S. production and streamlines permitting, should also help over the next 6-12 months.
But the stock has decoupled from the pace of monetization. Investors rushed into TPL during the 2024 AI data center wave, pricing the company as though these projects were already delivering meaningful cash flows. The reality is that monetization – particularly in water and data centers – will take time. Progress is being made on pilot desalination projects and land positioning for data center development, but no material contributions are yet visible. Meanwhile, oil and gas royalties still account for the majority of revenue, and those are inherently tied to commodity prices, which have softened recently.
Compounding these challenges is the near total lack of coverage. TPL has just one analyst, at Texas Capital Securities, who recently raised their target and upgraded the stock – but that alone may not sustain interest. A more widely covered stock might find stronger support in the interim; TPL instead risks falling into the gaps between enthusiastic long-term holders and nervous short-term traders looking to lock in gains.
Technical and sentiment signals reinforce caution. After its parabolic run in 2024, TPL’s stock has decisively broken below its 200 day moving average, and the recent bearish price patterns and downward momentum suggest investors are unwilling to pay peak multiples without visible monetization progress. This is a classic “broken parabola” situation, where even strong earnings may not spark a sustainable rally. With earnings on August 6, the lack of formal coverage makes it unclear what the market expects – but even strong results may not be enough to reverse the current negative sentiment without clear monetization progress.
In summary, Texas Pacific Land remains a uniquely positioned and high-quality company with excellent assets and long-term prospects. But the stock surged far ahead of the business’s ability to monetize these prospects, driven by speculative AI and S&P 500 related flows. Even after its sharp decline from the highs, TPL still trades at a valuation that leaves little room for error, and the upcoming earnings report may not be enough to restore investor confidence. For investors who have enjoyed the run, this looks like an appropriate moment to take profits, step aside, and wait for fundamentals and sentiment to realign.
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Smart Investor’s Winners Club
The 30% Winners Club includes stocks from the Smart Investor Portfolio that have risen at least 30% since their purchase dates.
Markets have been volatile, but our exclusive club’s ranks would have remained unchanged if we hadn’t moved to sell one of its members – TPL. Now, the Winners are 12 holdings: GE, AVGO, ORCL, ANET, HWM, EME, TSM, APH, IBKR, PH, CRWD, and IBM.
The first contender for the Club’s entry is still UBER with a 28.27% gain since purchase – followed by JPM and BK with 19.68% and 19.14%, respectively. Will one of them gain the rite of passage, or will another stock outrun them to the finish line?
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Disclaimer
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