UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



ý	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended ~~June 30, 2018~~March 31, 2019
¨	Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from to

Commission File Number 0-24429

COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

(Exact Name of Registrant as Specified in Its Charter)



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

Glenpointe Centre West 500 Frank W. Burr Blvd. Teaneck, New Jersey		07666
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code: (201) 801-0233

N/A

(Former Name, Former Address and Former Fiscal Year,

if Changed Since Last Report)

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 ý No: ¨

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Website, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ý No: ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer	ý	Accelerated filer	¨

Non-accelerated filer	¨ ~~(Do not check if a smaller reporting company)~~	Smaller reporting company	¨

		Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.01 par value per share	CTSH	The Nasdaq Stock Market LLC

Indicate the number of shares outstanding of each of the issuer’s class of common stock, as of ~~July 27, 2018:~~April 26, 2019:



Class		Number of Shares
Class A Common Stock, par value $.01 per share		~~580,233,834~~569,282,940

Table of Contents

COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

TABLE OF CONTENTS



		Page
PART I.	FINANCIAL INFORMATION	1

Item 1.	Consolidated Financial Statements (Unaudited)	1

	Consolidated Statements of Financial Position (Unaudited) as of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018	1

	Consolidated Statements of Operations (Unaudited) for the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~	2

	Consolidated Statements of Comprehensive Income (Unaudited) for the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~	3

	Consolidated Statements of Stockholders' Equity (Unaudited) for the ~~Six~~Three Months Ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~	4

	Consolidated Statements of Cash Flows (Unaudited) for the ~~Six~~Three Months Ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~	5

	Notes to Consolidated Financial Statements (Unaudited)	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3430

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5644

Item 4.	Controls and Procedures	5644

PART II.	OTHER INFORMATION	5745

Item 1.	Legal Proceedings	5745

Item 1A.	Risk Factors	5745

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5745

Item 6.	Exhibits	5846

SIGNATURES		5947

~~Table of Contents~~

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements (Unaudited).

COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Unaudited)

(in millions, except par values)


	June 30, 2018			December 31, 2017		March 31, 2019			December 31, 2018
Assets
Current assets:
Cash and cash equivalents	$	901		$	1,925	$	950		$	1,161
Short-term investments	3,346			3,131		2,718			3,350
Trade accounts receivable, net of allowances of $68 and $65, respectively	3,204			2,865
Unbilled accounts receivable	—			357
Trade accounts receivable, net of allowances of $92 and $78, respectively						3,377			3,257
Other current assets	852			833		838			909
Total current assets	8,303			9,111		7,883			8,677
Property and equipment, net	1,345			1,324		1,314			1,394
Operating lease assets, net						809			—
Goodwill	3,036			2,704		3,638			3,481
Intangible assets, net	1,060			981		1,185			1,150
Deferred income tax assets, net	367			418		464			442
Long-term investments	80			235		79			80
Other noncurrent assets	615			448		724			689
Total assets	$	14,806		$	15,221	$	16,096		$	15,913
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	217		$	210	$	262		$	215
Deferred revenue	308			383		340			286
Short-term debt	100			175		19			9
Operating lease liabilities						184			—
Accrued expenses and other current liabilities	1,912			2,071		1,915			2,267
Total current liabilities	2,537			2,839		2,720			2,777
Deferred revenue, noncurrent	77			104		64			62
Operating lease liabilities, noncurrent						651			—
Deferred income tax liabilities, net	145			146		177			183
Long-term debt	649			698		727			736
Long-term income taxes payable	508			584		471			478
Other noncurrent liabilities	242			181		150			253
Total liabilities	4,158			4,552		4,960			4,489
Commitments and contingencies (See Note 13)
Stockholders’ equity:
Preferred stock, $0.10 par value, 15.0 shares authorized, none issued	—			—		—			—
Class A common stock, $0.01 par value, 1,000 shares authorized, 580 and 588 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively	6			6
Class A common stock, $0.01 par value, 1,000 shares authorized, 569 and 577 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively						6			6
Additional paid-in capital	55			49		64			47
Retained earnings	10,681			10,544		11,140			11,485
Accumulated other comprehensive income (loss)	(94		)	70		(74		)	(114		)
Total stockholders’ equity	10,648			10,669		11,136			11,424
Total liabilities and stockholders’ equity	$	14,806		$	15,221	$	16,096		$	15,913

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

COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in millions, except per share data)


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
	2018			2017			2018			2017			2019			2018
Revenues	$	4,006		$	3,670		$	7,918		$	7,216		$	4,110		$	3,912
Operating expenses:
Cost of revenues (exclusive of depreciation and amortization expense shown separately below)	2,417			2,261			4,818			4,455			2,575			2,401
Selling, general and administrative expenses	805			709			1,516			1,395			873			711
Depreciation and amortization expense	114			94			221			190			123			107
Income from operations	670			606			1,363			1,176			539			693
Other income (expense), net:
Interest income	40			31			81			63			48			41
Interest expense	(7		)	(6		)	(13		)	(12		)	(7		)	(6		)
Foreign currency exchange gains (losses), net	(80		)	5			(111		)	57			2			(31		)
Other, net	—			(1		)	—			—			1			—
Total other income (expense), net	(47		)	29			(43		)	108			44			4
Income before provision for income taxes	623			635			1,320			1,284			583			697
Provision for income taxes	(168		)	(165		)	(345		)	(257		)	(142		)	(177		)
Income from equity method investments	1			—			1			—
Net income	$	456		$	470		$	976		$	1,027		$	441		$	520
Basic earnings per share	$	0.78		$	0.80		$	1.67		$	1.72		$	0.77		$	0.89
Diluted earnings per share	$	0.78		$	0.80		$	1.66		$	1.71		$	0.77		$	0.88
Weighted average number of common shares outstanding - Basic	585			589			586			597			573			587
Dilutive effect of shares issuable under stock-based compensation plans	1			2			1			2			2			2
Weighted average number of common shares outstanding - Diluted	586			591			587			599			575			589
Dividends declared per common share	$	0.20		$	0.15		$	0.40		$	0.15

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

COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(in millions)


	Three Months Ended June 30,						Six Months Ended June 30,					Three Months Ended March 31,
	2018			2017			2018			2017		2019			2018
Net income	$	456		$	470		$	976		$	1,027	$	441		$	520
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	(71		)	50			(34		)	67		(2		)	37
Change in unrealized gains and losses on cash flow hedges, net of taxes	(87		)	(1		)	(123		)	78
Change in unrealized gains and losses on available-for-sale securities, net of taxes	1			1			(6		)	2
Change in unrealized gains and losses on cash flow hedges												36			(36		)
Change in unrealized gains and losses on available-for-sale securities												6			(7		)
Other comprehensive income (loss)	(157		)	50			(163		)	147		40			(6		)
Comprehensive income	$	299		$	520		$	813		$	1,174	$	481		$	514

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

COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(in millions)


	Class A Common Stock				Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total			Class A Common Stock				Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
	Shares		Amount		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total			Shares		Amount		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Balance, December 31, 2017	588		$	6	$	49		$	10,544		$	70		$	10,669
Balance, December 31, 2018																	577		$	6	$	47		$	11,485		$	(114	)	$	11,424
Cumulative effect of changes in accounting principle⁽¹⁾	—		—		—			122			(1		)	121			—		—		—			2			—			2
Net income	—		—		—			976			—			976			—		—		—			441			—			441
Other comprehensive income (loss)	—		—		—			—			(163		)	(163		)	—		—		—			—			40			40
Common stock issued, stock-based compensation plans	4		—		102			—			—			102			2		—		50			—			—			50
Stock-based compensation expense	—		—		130			—			—			130			—		—		66			—			—			66
Repurchases of common stock	(12	)	—		(226		)	(723		)	—			(949		)	(10	)	—		(99		)	(672		)	—			(771		)
Dividends	—		—		—			(238		)	—			(238		)
Balance, June 30, 2018	580		$	6	$	55		$	10,681		$	(94	)	$	10,648
Dividends declared, $0.20 per share																	—		—		—			(116		)	—			(116		)
Balance, March 31, 2019																	569		$	6	$	64		$	11,140		$	(74	)	$	11,136

	Class A Common Stock				Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total			Class A Common Stock				Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
	Shares		Amount		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total			Shares		Amount		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Balance, December 31, 2016	608		$	6	$	358		$	10,478		$	(114	)	$	10,728
Balance, December 31, 2017																	588		$	6	$	49		$	10,544		$	70		$	10,669
Cumulative effect of changes in accounting principle⁽²⁾																	—		—		—			122			(1		)	121
Net income	—		—		—			1,027			—			1,027			—		—		—			520			—			520
Other comprehensive income (loss)	—		—		—			—			147			147			—		—		—			—			(6		)	(6		)
Common stock issued, stock-based compensation plans	4		—		105			—			—			105			2		—		60			—			—			60
Stock-based compensation expense	—		—		109			—			—			109			—		—		59			—			—			59
Repurchases of common stock	(22	)	—		(444		)	(1,100		)	—			(1,544		)	(4	)	—		(105		)	(211		)	—			(316		)
Dividends	—		—		—			(89		)	—			(89		)
Balance, June 30, 2017	590		$	6	$	128		$	10,316		$	33		$	10,483
Dividends declared, $0.20 per share																	—		—		—			(119		)	—			(119		)
Balance, March 31, 2018																	586		$	6	$	63		$	10,856		$	63		$	10,988


(1)	Reflects the adoption of ~~accounting standards~~the Accounting Standards Codification ("ASC") Topic 842 "Leases" (the "New Lease Standard") as described in Note 16.


(2)	Reflects the adoption of the ASC Topic 606 "Revenue from Contacts with Customers" (the "New Revenue Standard") as well as Accounting Standards Update ("ASU") 2018-02 "Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income" ("ASU 2018-02") on January 1, 2018. Refer to our Annual Report on Form 10-K for the year ended December 31, 2018.

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

COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in millions)


	For the Six Months Ended June 30,						For the Three Months Ended March 31,
	2018			2017			2019			2018
Cash flows from operating activities:
Net income	$	976		$	1,027		$	441		$	520
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	240			207			133			117
Provision for doubtful accounts	4			17			14			2
Deferred income taxes	51			8			(42		)	2
Stock-based compensation expense	130			109			66			59
Other	100			(63		)	(21		)	23
Changes in assets and liabilities:
Trade accounts receivable	(330		)	(103		)	(131		)	(273		)
Other current assets	296			(81		)
Other noncurrent assets	(159		)	(46		)
Other current and noncurrent assets							90			247
Accounts payable	(3		)	2			49			86
Deferred revenues, current and noncurrent	(47		)	10			56			(2		)
Other current and noncurrent liabilities	(230		)	(289		)	(386		)	(393		)
Net cash provided by operating activities	1,028			798			269			388
Cash flows from investing activities:
Purchases of property and equipment	(187		)	(126		)	(106		)	(96		)
Purchases of available-for-sale investment securities	(806		)	(1,622		)	(243		)	(300		)
Proceeds from maturity or sale of available-for-sale investment securities	906			1,936			650			193
Purchases of held-to-maturity investment securities	(519		)	(662		)	(94		)	(222		)
Proceeds from maturity of held-to-maturity investment securities	386			50			348			171
Purchases of other investments	(318		)	(213		)	(31		)	(31		)
Proceeds from maturity or sale of other investments	205			345			29			59
Payments for business combinations, net of cash acquired	(478		)	(6		)	(197		)	(1		)
Net cash (used in) investing activities	(811		)	(298		)
Net cash provided by (used in) investing activities							356			(227		)
Cash flows from financing activities:
Issuance of common stock under stock-based compensation plans	102			104			50			60
Repurchases of common stock	(949		)	(1,544		)	(771		)	(316		)
Repayment of term loan borrowings and capital lease obligations	(64		)	(42		)
Repayment of term loan borrowings and finance lease obligations							(2		)	(39		)
Net change in notes outstanding under the revolving credit facility	(75		)	150			—			(75		)
Dividends paid	(236		)	(89		)	(116		)	(118		)
Net cash (used in) financing activities	(1,222		)	(1,421		)	(839		)	(488		)
Effect of exchange rate changes on cash and cash equivalents	(19		)	44
(Decrease) in cash and cash equivalents	(1,024		)	(877		)
Effect of exchange rate changes on cash, cash equivalents and restricted cash							3			1
(Decrease) in cash, cash equivalents and restricted cash							(211		)	(326		)
Cash and cash equivalents, beginning of year	1,925			2,034			1,161			1,925
Cash and cash equivalents, end of period	$	901		$	1,157
Cash, cash equivalents and restricted cash, end of period (See Note 9)							$	950		$	1,599

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

COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



Note 1 — Interim Consolidated Financial Statements

The terms “Cognizant,” “we,” “our,” “us” and “the Company” refer to Cognizant Technology Solutions Corporation and its subsidiaries unless the context indicates otherwise. We have prepared the accompanying unaudited consolidated financial statements included herein in accordance with generally accepted accounting principles in the United States of America ~~or U.S. GAAP,~~("GAAP"), and Regulation S-X under the Securities Exchange Act of 1934, as(as amended, or the ~~Exchange Act.~~"Exchange Act"). The accompanying unaudited consolidated financial statements should be read in conjunction with our audited consolidated financial statements (and notes thereto) included in our Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018. In our opinion, all adjustments considered necessary for a fair statement of the accompanying unaudited consolidated financial statements have been included and all adjustments are of a normal and recurring nature. Operating results for the interim periods are not necessarily indicative of results that may be expected to occur for the entire year.

Recently Adopted Accounting Pronouncements



Date Issued and Topic	Date Adopted and Method	Description	Impact
~~May 2014~~ ~~Revenue~~February 2016 Leases	January 1, ~~2018~~2019 ~~Modified Retrospective~~	The new standard, as amended, sets forth a single comprehensive model for recognizing and reporting revenues. The standard also requires additional financial statement disclosures that enable users to understand the nature, amount, timing and uncertainty of revenues and cash flows relating to customer contracts. The standard allows for two methods of adoption: the full retrospective adoption, which requires the standard to be applied to each prior period presented, or the modified retrospective adoption, which requires the cumulative effect of adoption to be recognized as an adjustment to opening retained earnings in the period of adoption.	~~See~~ ~~Note 3~~ ~~for the impact of adoption of this standard.~~
~~November 2016~~ ~~Statement of Cash Flows~~	~~January 1, 2018~~ ~~Retrospective~~	This update requires restricted cash to be included with cash and cash equivalents when reconciling the beginning and ending amounts on the statement of cash flows. It also requires a reconciliation of such totals to the amounts on the statement of financial position and disclosure as to the nature of the restrictions.	~~There were no restricted cash balances as of June 30, 2018. The adoption of this update had no impact on our financial statements for the three and six months ended June 30, 2018.~~
~~February 2018~~ ~~Income Statement - Reporting Comprehensive Income~~	~~January 1, 2018~~ ~~In the period of adoption~~	This update provides an option for entities to reclassify stranded tax effects caused by the newly-enacted Tax Cuts and Jobs Act, or Tax Reform Act, from accumulated other comprehensive income to retained earnings.	We have early adopted this update as of January 1, 2018. The adoption resulted in a decrease of $1 million in accumulated other comprehensive income and a corresponding increase of $1 million to opening retained earnings.

~~New Accounting Pronouncements~~



~~Date Issued and Topic~~	Effective Date	~~Description~~	~~Impact~~
~~February 2016~~ ~~Leases~~ Method	~~January 1, 2019~~	The new standard replaces the existing guidance on leases and requires the lessee to recognize a right-of-use ("ROU") asset and a lease liability for all leases with lease terms equal to or greater than twelve months. For finance leases, the lessee ~~would recognize~~recognizes interest expense and amortization of the ~~right-of-use~~ROU asset, and for operating leases, the lessee ~~would recognize~~recognizes total lease expense on a straight-line basis. The standard offers several practical expedients for transition and certain expedients specific to lessees or lessors. The standard allows for two methods of adoption: retrospective to each prior reporting period presented with the cumulative effect of adoption recognized at the beginning of the earliest period presented or retrospective to the beginning of the period of adoption through a cumulative-effect ~~adjustment.~~adjustment (the "Effective Date Method").	~~While we are continuing to evaluate~~See Note 6 for the ~~provisions~~impact of ~~this standard, the primary effect will be to require recording of right-of-use assets and corresponding lease obligations for current operating leases. We expect the~~ adoption of this standard to have a material impact on our consolidated statement of financial position, but not on the consolidated statements of operations or cash flows. As of December 31, 2017, our undiscounted operating lease commitments were $943 million. We are currently planning to elect the package of practical expedients which permits us to not reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs. We are also evaluating other available practical expedients. We intend to adopt the standard retrospectively to the beginning of the period of adoption through a cumulative-effect adjustment.standard.
March 2017 Nonrefundable Fees and Other Costs	January 1, 2019 Modified Retrospective	This update shortens the amortization period for certain callable debt securities held at a premium to the earliest call date. The amendments do not require an accounting change for securities held at a discount. Upon adoption, entities ~~will be~~are required to use a modified retrospective transition with the cumulative effect adjustment recognized to retained earnings as of the beginning of the period of adoption.	~~We are currently evaluating the effect the amendments will~~The adoption of this update did not have an impact on our ~~consolidated~~ financial ~~statements~~statements.
August 2018 Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement ("CCA") that is a Service Contract	Early adoption on January 1, 2019 Prospective	This update aligns the accounting for costs incurred to implement a CCA that is a service arrangement with the guidance on capitalizing costs associated with developing or obtaining internal-use software. In addition, this update clarifies the financial statement presentation requirement for capitalized implementation costs and related ~~disclosures.~~amortization of such costs.	The adoption of this update did not have an impact on our financial statements.



Note 2 — ~~Internal Investigation and Related Matters~~Revenues

Disaggregation of Revenues

The table below presents disaggregated revenues from contracts with customers by customer location, service line and contract-type for each of our business segments. We believe this disaggregation best depicts how the nature, amount, timing and uncertainty of our revenues and cash flows are ~~conducting an internal investigation focused on whether certain payments relating~~affected by industry, market and other economic factors. Revenues are attributed to ~~Company-owned facilities in India were made improperly and in possible violation~~regions based upon customer location. Substantially all of the ~~U.S. Foreign Corrupt Practices Act, or FCPA, and other applicable laws. The investigation is also examining various other payments made~~revenue in ~~small amounts~~our North America region relates to operations in ~~India that may not have complied with Company policy or applicable law. In September 2016, we voluntarily notified~~ the U.S. Department of Justice, or DOJ, and Securities and Exchange Commission, or SEC, and are cooperating fully with both agencies. The investigation is being conducted under the oversight of the Audit Committee, with the assistance of outside counsel. To date, the investigation has identified a total of approximately $6 million in payments made between 2009 and 2016 that may have been improper. During the year ended December 31, 2016, we recorded out-of-period corrections related to $4 million of such payments that had been previously capitalized that should have been expensed. These out-of-period corrections and the other $2 million in potentially improper payments were not material to any previously issued financial statements. There were no adjustments recorded during 2018 and 2017 related to the amounts under investigation.United States.



	Three Months Ended March 31, 2019
	Three Months Ended March 31, 2019
	Financial Services		Healthcare		Products and Resources		Communications, Media and Technology		Total
	(in millions)
Revenues
Geography:
North America	$	1,018	$	1,042	$	641	$	422	$	3,123
United Kingdom	129		25		94		81		329
Rest of Europe	162		82		115		46		405
Europe - Total	291		107		209		127		734
Rest of World	127		16		64		46		253
Total	$	1,436	$	1,165	$	914	$	595	$	4,110

Service line:
Consulting and technology services	$	913	$	638	$	552	$	306	$	2,409
Outsourcing services	523		527		362		289		1,701
Total	$	1,436	$	1,165	$	914	$	595	$	4,110

Type of contract:
Time and materials	$	919	$	458	$	400	$	375	$	2,152
Fixed-price	464		400		414		190		1,468
Transaction or volume-based	53		307		100		30		490
Total	$	1,436	$	1,165	$	914	$	595	$	4,110



	Three Months Ended March 31, 2018
	Three Months Ended March 31, 2018
	Financial Services		Healthcare		Products and Resources		Communications, Media and Technology		Total
	(in millions)
Revenues
Geography:
North America	$	1,044	$	1,023	$	572	$	336	$	2,975
United Kingdom	116		23		87		84		310
Rest of Europe	162		61		109		42		374
Europe - Total	278		84		196		126		684
Rest of World	139		14		53		47		253
Total	$	1,461	$	1,121	$	821	$	509	$	3,912

Service line:
Consulting and technology services	$	871	$	638	$	481	$	278	$	2,268
Outsourcing services	590		483		340		231		1,644
Total	$	1,461	$	1,121	$	821	$	509	$	3,912

Type of contract:
Time and materials	$	935	$	448	$	369	$	306	$	2,058
Fixed-price	471		511		361		179		1,522
Transaction or volume-based	55		162		91		24		332
Total	$	1,461	$	1,121	$	821	$	509	$	3,912



~~Note 3 — Revenues~~

~~Adoption of ASC Topic 606, “Revenue from Contracts with Customers”~~

On January 1, 2018, we adopted ASC Topic 606, “Revenue from Contracts with Customers,” or the New Revenue Standard, using the modified retrospective method applied to contracts that were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under the New Revenue Standard, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting policies. For contracts that were modified before the effective date, the Company aggregated the effect of all contract modifications prior to identifying performance obligations and allocating transaction price in accordance with the practical expedient ASC 606-10-65-1-(f)-4. Upon adoption of the New Revenue Standard on January 1, 2018, we recorded a net increase to opening retained earnings of approximately $121 million, after a tax impact of $37 million. The impact of adoption primarily relates to (1) changes in the method used to measure progress on our fixed-price application maintenance, consulting and business process services contracts, (2) the longer period of amortization for costs to fulfill a contract, (3) the timing of revenue recognition and allocation of purchase price on our software license contracts, (4) the reclassification of balances representing receivables, as defined by the New Revenue Standard, from Unbilled accounts receivable to Trade accounts receivable, net, (5) the reclassification of balances representing contract assets, as defined by the New Revenue Standard, from Unbilled accounts receivable to Other current assets, as well as (6) the income tax impact of the above items, as applicable.

The following tables compare the financial statement line items materially affected by the adoption of the New Revenue Standard as of and for the three and six months ended June 30, 2018 to the pro-forma amounts had the previous guidance been in effect, or Pro-forma Amounts:

June 30, 2018
As Reported Pro-forma Amounts Impacts of the New Revenue Standard
(in millions)
Assets:
Trade accounts receivable, net^{(1), (2)}
$ 3,204
$ 3,082
$ 122
Unbilled accounts receivable^{(1), (3)}
—
416
(416 )
Other current assets^{(2), (3)}
852
534
318
Total current assets 24
Other noncurrent assets⁽⁴⁾
615
565
50
Total assets $ 74
Liabilities:
Deferred revenue⁽²⁾
$ 308
$ 451
$ (143 )
Total current liabilities (143 )
Deferred revenue, noncurrent⁽²⁾
77
86
(9 )
Deferred income tax liabilities, net⁽⁵⁾
145
95
50
Total liabilities (102 )
Stockholders’ equity:
Retained earnings 10,681
10,505
176
Total stockholders’ equity 176
Total liabilities and stockholders’ equity $ 74

Three Months Ended June 30, 2018 Six Months Ended June 30, 2018
As Reported Pro-forma Amounts Impacts of the New Revenue Standard As Reported Pro-forma Amounts Impacts of the New Revenue Standard
(in millions) (in millions)
Revenues⁽²⁾
$ 4,006
$ 3,975
$ 31
$ 7,918
$ 7,866
$ 52
Cost of revenues ⁽⁴⁾
2,417
2,424
(7 ) 4,818
4,833
(15 )
Selling, general and administrative expenses 805
805
—
1,516
1,516
—
Depreciation and amortization expense 114
114
—
221
221
—
Income from operations 670
632
38
1,363
1,296
67
Other income (expense), net (47 ) (47 ) —
(43 ) (43 ) —
Income before provision for income taxes⁽⁵⁾
623
585
38
1,320
1,253
67
Provision for income taxes (168 ) (161 ) (7 ) (345 ) (332 ) (13 )
Income (loss) from equity method investment 1
1
—
1
1
—
Net income $ 456
$ 425
$ 31
$ 976
$ 922
$ 54
Basic earnings per share $ 0.78
$ 0.73
$ 0.05
$ 1.67
$ 1.57
$ 0.10
Diluted earnings per share $ 0.78
$ 0.73
$ 0.05
$ 1.66
$ 1.57
$ 0.09


~~(1)~~	~~Reflects the reclassification of balances representing receivables, as defined by the New Revenue Standard, from Unbilled accounts receivable to Trade accounts receivable, net.~~


~~(2)~~	Reflects the impact of changes in the method used to measure progress on our fixed-price application maintenance, consulting and business process services contracts and the timing of revenue recognition and allocation of purchase price on our software license contracts.


~~(3)~~	~~Reflects the reclassification of balances representing contract assets, as defined by the New Revenue Standard, from Unbilled accounts receivable to Other current assets.~~


~~(4)~~	~~Reflects the impact of a longer period of amortization for costs to fulfill a contract.~~


~~(5)~~	~~Reflects the income tax impact of the above items.~~

~~Revenue Recognition~~

We recognize revenues as we transfer control of deliverables (products, solutions and services) to our customers in an amount reflecting the consideration to which we expect to be entitled. To recognize revenues, we apply the following five step approach: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenues when a performance obligation is satisfied. We account for a contract when it has approval and commitment from all parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience.

We may enter into arrangements that consist of multiple performance obligations. Such arrangements may include any combination of our deliverables. To the extent a contract includes multiple promised deliverables, we apply judgment to determine whether promised deliverables are capable of being distinct and are distinct in the context of the contract. If these criteria are not met, the promised deliverables are accounted for as a combined performance obligation. For arrangements with multiple distinct performance obligations, we allocate consideration among the performance obligations based on their relative standalone selling price. Standalone selling price is the price at which we would sell a promised good or service separately to the customer. When not directly observable, we typically estimate standalone selling price by using the expected cost plus a margin approach. We typically establish a standalone selling price range for our deliverables, which is reassessed on a periodic basis or when facts and circumstances change.

For performance obligations where control is transferred over time, revenues are recognized based on the extent of progress towards completion of the performance obligation. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the deliverables to be provided. Revenues related to fixed-price contracts for application development and systems integration services, consulting or other technology services are recognized as the service is performed using the cost to cost method, under which the total value of revenues is recognized on the basis of the percentage that each contract’s total labor cost to date bears to the total expected labor costs. Revenues related to fixed-price application maintenance, testing and business process services are recognized based on our right to invoice for services performed for contracts in which the invoicing is representative of the value being delivered, in accordance with the practical expedient in ASC 606-10-55-18. If our invoicing is not consistent with value delivered, revenues are recognized as the service is performed based on the cost to cost method described above. The cost to cost method requires estimation of future costs, which is updated as the project progresses to reflect the latest available information; such estimates and changes in estimates involve the use of judgment. The cumulative impact of any revision in estimates is reflected in the financial reporting period in which the change in estimate becomes known and any anticipated losses on contracts are recognized immediately. Revenues related to fixed-price hosting and infrastructure services are recognized based on our right to invoice for services performed for contracts in which the invoicing is representative of the value being delivered, in accordance with the practical expedient in ASC 606-10-55-18. If our invoicing is not consistent with value delivered, revenues are recognized on a straight-line basis unless revenues are earned and obligations are fulfilled in a different pattern. The revenue recognition method applied to the types of contracts described above provides the most faithful depiction of performance towards satisfaction of our performance obligations; for example, the cost to cost method is used when the value of services provided to the customer is best represented by the costs expended to deliver those services.

Revenues related to our non-hosted software license arrangements that do not require significant modification or customization of the underlying software are recognized when the software is delivered as control is transferred at a point in time. For software license arrangements that require significant functionality enhancements or modification of the software, revenues for the software license and related services are recognized as the services are performed in accordance with the methods described above. In software hosting arrangements, the rights provided to the customer, such as ownership of a license, contract termination provisions and the feasibility of the client to operate the software, are considered in determining whether the arrangement includes a license or a service. Sales and usage-based fees promised in exchange for licenses of intellectual property are not recognized as revenue until the uncertainty related to the variable amounts is resolved. Revenues related to software maintenance and support are generally recognized on a straight-line basis over the contract period.

Revenues related to our time-and-materials, transaction-based or volume-based contracts are recognized over the period the services are provided in a manner that corresponds with the value transferred to the customer to-date relative to the remaining services to be provided.

Revenues also include the reimbursement of out-of-pocket expenses. Our warranties generally provide a customer with assurance that the related deliverable will function as the parties intended because it complies with agreed-upon specifications and is therefore not considered an additional performance obligation in the contract.

From time to time, we may enter into arrangements with third party suppliers to resell products or services. In such cases, we evaluate whether we are the principal (i.e. report revenues on a gross basis) or agent (i.e. report revenues on a net basis). In doing so, we first evaluate whether we control the good or service before it is transferred to the customer. If we control the good or service before it is transferred to the customer, we are the principal; if not, we are the agent. Determining whether we control the good or service before it is transferred to the customer may require judgment.

Our contracts may be modified to add, remove or change existing performance obligations. The accounting for modifications to our contracts involves assessing whether the services added to an existing contract are distinct and whether the pricing is at the standalone selling price. Services added that are not distinct are accounted for on a cumulative catch up basis, while those that are distinct are accounted for prospectively, either as a separate contract if the additional services are priced at the standalone selling price, or as a termination of the existing contract and creation of a new contract if not priced at the standalone selling price. Services added to our application development and systems integration service contracts are typically not distinct, while services added to our other contracts, including application maintenance, testing and business process services contracts, are typically distinct.

Incentive revenues, volume discounts, or any other form of variable consideration is estimated using either the sum of probability weighted amounts in a range of possible consideration amounts (expected value), or the single most likely amount in a range of possible consideration amounts (most likely amount), depending on which method better predicts the amount of consideration to which we may be entitled. We include in the transaction price variable consideration only to the extent it is probable that a significant reversal of revenues recognized will not occur when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in the transaction price may involve judgment and are based largely on an assessment of our anticipated performance and all information that is reasonably available to us.

We assess the timing of the transfer of goods or services to the customer as compared to the timing of payments to determine whether a significant financing component exists. As a practical expedient, we do not assess the existence of a significant financing component when the difference between payment and transfer of deliverables is a year or less. If the difference in timing arises for reasons other than the provision of finance to either the customer or us, no financing component is deemed to exist. The primary purpose of our invoicing terms is to provide customers with simplified and predictable ways of purchasing our services, not to receive or provide financing from or to customers. We do not consider set up or transition fees paid upfront by our customers to represent a financing component, as such fees are required to encourage customer commitment to the project and protect us from early termination of the contract.

Costs to Fulfill

Recurring operating costs for contracts with customers are recognized as incurred. Certain eligible, nonrecurring costs incurred in the initial phases of our application maintenance, business process outsourcing and infrastructure services contracts (i.e. set-up or transition costs) are capitalized when such costs (1) relate directly to the contract, (2) generate or enhance resources of the Company that will be used in satisfying the performance obligation in the future, and (3) are expected to be recovered. These costs are expensed ratably over the estimated life of the customer relationship, including expected renewals. In determining the estimated life of the customer relationship, we evaluate the average contract term, on a portfolio basis by nature of the services to be provided, and apply judgment to evaluate the rate of technological and industry change. Capitalized amounts are monitored regularly for impairment. Impairment losses are recorded when projected remaining undiscounted operating cash flows are not sufficient to recover the carrying amount of the capitalized costs to fulfill.

The following table presents information related to the capitalized costs to fulfill, such as set-up or transition activities, for the ~~six~~three months ended ~~June 30, 2018~~March 31, 2019. ~~Costs to obtain contracts were immaterial for the periods disclosed.~~

Costs to Fulfill
(in millions)
Balance - January 1, 2018 $ 303
Amortization expense (32 )
Costs capitalized 85
Other (3 )
Balance - June 30, 2018 $ 353

Costs to fulfill are recorded in "Other noncurrent assets" in our ~~consolidated statements of financial position.~~

~~Trade Accounts Receivable and Contract Balances~~

We classify our right to consideration in exchange for deliverables as either a receivable or a contract asset. A receivable is a right to consideration that is unconditional (i.e. only the passage of time is required before payment is due). For example, we recognize a receivable for revenues related to our time and materials and transaction or volume-based contracts when earned regardless of whether amounts have been billed. We present such receivables in Trade accounts receivable, net in ourunaudited consolidated statements of financial position ~~at their net estimated realizable value. We maintain an allowance for doubtful accounts~~and the amortization expense of costs to ~~provide~~fulfill is included in "Cost of revenues" in our unaudited consolidated statement of operations. Costs to obtain contracts were immaterial for the estimated amount of receivables that may not be collected. The allowance is based upon an assessment of customer creditworthiness, historical payment experience, the age of outstanding receivables and other applicable factors.periods disclosed.



	Costs to Fulfill
	(in millions)
Balance - December 31, 2018	$	400
Amortization expense	(20		)
Costs capitalized	43
Balance - March 31, 2019	$	423

Contract Balances

A contract asset is a right to consideration that is conditional upon factors other than the passage of time. Contract assets are presented in ~~Other~~"Other current ~~assets~~assets" in our unaudited consolidated statements of financial position and primarily relate to unbilled amounts on fixed-price contracts utilizing the cost to cost method of revenue recognition. The table below shows significant movements in contract assets:



	Contract Assets
	(in millions)
Balance - December 31, 2018	$	305
Revenues recognized during the period but not billed	238
Amounts reclassified to accounts receivable	(208		)
Balance - March 31, 2019	$	335

Contract Assets
(in millions)
Balance - January 1, 2018 $ 306
Revenues recognized during the period but not billed 259
Amounts reclassified to accounts receivable (247 )
Balance - June 30, 2018 $ 318

Our contract liabilities, or deferred revenue, consist of advance payments and billings in excess of revenues recognized. We classify deferred revenue as current or noncurrent based on the timing of when we expect to recognize the revenues. The ~~noncurrent portion of deferred revenue is included in other noncurrent liabilities in our consolidated statements of financial position.~~

~~The~~ table below shows significant movements in the deferred revenue balances (current and noncurrent) for the period disclosed:



	Deferred Revenue
	(in millions)
Balance - December 31, 2018	$	348
Amounts billed but not recognized as revenues	205
Revenues recognized related to the opening balance of deferred revenue	(149		)
Balance - March 31, 2019	$	404

Deferred Revenue
(in millions)
Balance - January 1, 2018 $ 431
Amounts billed but not recognized as revenues 119
Revenues recognized related to the opening balance of deferred revenue (163 )
Other (2 )
Balance - June 30, 2018 $ 385

Our contract assets and liabilities are reported in a net position on a contract by contract basis at the end of each reporting period. The difference between the opening and closing balances of our contract assets and deferred revenues primarily results from the timing difference between our performance obligations and the customer’s payment. We receive payments from customers based on the terms established in our contracts, which vary by contract type.

Revenues recognized during the ~~six~~three months ended ~~June 30, 2018~~March 31, 2019 for performance obligations satisfied or partially satisfied in previous periods were immaterial.

Remaining Performance Obligations

~~ASC 606 requires that we disclose~~As of March 31, 2019, the aggregate amount of transaction price ~~that~~allocated to remaining performance obligations, was $1,990 million of which approximately 70% is ~~allocated~~expected to be recognized as revenue within 2 years. Disclosure is not required for performance obligations that ~~have not yet been satisfied as~~meet any of ~~June 30, 2018. This disclosure is not required for:~~the following criteria:


(1)	contracts with ~~an original~~a duration of one year or less ~~including contracts that can be terminated for convenience without a substantive penalty,~~as determined under the New Revenue Standard,


(2)	contracts for which we recognize revenues based on the right to invoice for services performed,


(3)	variable consideration allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation in accordance with ASC 606-10-25-14(b), for which the criteria in ASC 606-10-32-40 have been met, or


(4)	variable consideration in the form of a sales-based or usage based royalty promised in exchange for a license of intellectual property.

Many of our performance obligations meet one or more of these ~~exemptions. As of June 30, 2018,~~exemptions and therefore are not included in the ~~aggregate amount of transaction price allocated to~~ remaining performance ~~obligations, other than those meeting the exclusion criteria above, was $1,595 million, of which approximately 64% is expected to be recognized as revenues within 2 years.~~obligation amounts disclosed above.

~~Disaggregation of Revenues~~

Three Months Ended
June 30, 2018
Financial Services Healthcare Products and Resources Communications, Media and Technology Total
(in millions)
Revenues
Geography:
North America $ 1,056
$ 1,060
$ 585
$ 366
$ 3,067
United Kingdom 114
22
89
84
309
Rest of Europe 165
61
109
46
381
Europe - Total 279
83
198
130
690
Rest of World 134
13
57
45
249
Total $ 1,469
$ 1,156
$ 840
$ 541
$ 4,006

Service line:
Consulting and technology services $ 885
$ 613
$ 499
$ 289
$ 2,286
Outsourcing services 584
543
341
252
1,720
Total $ 1,469
$ 1,156
$ 840
$ 541
$ 4,006

Type of contract:
Time and materials $ 953
$ 452
$ 379
$ 335
$ 2,119
Fixed-price 460
443
367
179
1,449
Transaction or volume-based 56
261
94
27
438
Total $ 1,469
$ 1,156
$ 840
$ 541
$ 4,006

Six Months Ended
June 30, 2018
Financial Services Healthcare Products and Resources Communications, Media and Technology Total
(in millions)
Revenues
Geography:
North America $ 2,100
$ 2,083
$ 1,157
$ 702
$ 6,042
United Kingdom 230
45
176
168
619
Rest of Europe 327
122
218
88
755
Europe - Total 557
167
394
256
1,374
Rest of World 273
27
110
92
502
Total $ 2,930
$ 2,277
$ 1,661
$ 1,050
$ 7,918

Service line:
Consulting and technology services $ 1,756
$ 1,251
$ 980
$ 567
$ 4,554
Outsourcing services 1,174
1,026
681
483
3,364
Total $ 2,930
$ 2,277
$ 1,661
$ 1,050
$ 7,918

Type of contract:
Time and materials $ 1,888
$ 900
$ 748
$ 641
$ 4,177
Fixed-price 931
954
728
358
2,971
Transaction or volume-based 111

423
185
51
770
Total $ 2,930
$ 2,277
$ 1,661
$ 1,050
$ 7,918



Note 43 — Business Combinations

~~In 2018,~~

During the three months ended March 31, 2019, we completed two business combinations for total consideration of approximately ~~$492~~$244 million, inclusive of contingent consideration. ~~The acquisition of Bolder Healthcare Solutions,~~These acquisitions were Meritsoft, a ~~privately-held~~financial software company based in Ireland, and Mustache, a U.S. provider of revenue cycle management solutions to the healthcare industry expands our healthcare consulting, technology and business process services portfolio and strengthens our position in digital healthcare technology and operations. The acquisition of Hedera Consulting, a privately-held companybased creative content agency specializing in ~~business advisory~~creating original and ~~data analytics services across a number of industries expands our consulting, business insight~~branded content for digital, broadcast and ~~digital transformation capabilities in Belgium and the Netherlands.~~social mediums.

These acquisitions were not material, either individually or in the aggregate, to our operations ~~financial position~~ or cash flow. Accordingly, pro forma results have not been presented. These acquisitions were included in our unaudited consolidated financial statements as of the date on which the businesses were acquired. We have allocated the purchase price related to these transactions to tangible and intangible assets and liabilities, including non-deductible goodwill, based on their estimated fair values. We will finalize the purchase price allocation as soon as practicable within the measurement period, but in no event later than one year following the date of acquisition. The allocations of preliminary purchase price to the fair value of the aggregate assets acquired and liabilities assumed were as follows:



	Fair Value			Weighted Average Useful Life
	(in millions)
Cash	$	14
Current assets	8
Non-deductible goodwill ⁽¹⁾	157
Customer relationship intangible assets	50			9.9 years
Other intangible assets	30			6.9 years
Current liabilities	(4		)
Noncurrent liabilities	(11		)
Purchase price	$	244

Six Months Ended
June 30, 2018
Fair Value Weighted Average Useful Life
(in millions)
Cash $ 10

Current assets 37

Property, plant and equipment and other noncurrent assets 10

Non-deductible goodwill ⁽¹⁾
340

Customer relationship intangible assets 123
9.7 years
Other intangible assets 26
2.4 years
Current liabilities (15 )
Noncurrent liabilities (39 )
Purchase price $ 492

(1) The primary items that generated goodwill are the value of the acquired assembled workforces and synergies between the acquired companies and us, neither of which qualify as an amortizable intangible asset.

There were no business combinations during the three months ended March 31, 2018.



Note 54 — Realignment Charges

~~In 2017, we began a~~We incur realignment ~~of our business~~charges to accelerate ~~the~~our shift to digital services and solutions while improving the overall efficiency of our operations. ~~Charges we incurred as~~As part of this realignment, ~~were~~we may incur charges that include employee separation costs, lease termination costs and charges related to the development of our realignment plans. During the three months ended March 31, 2019, we incurred $2 million in costs associated with our CEO transition and the departure of our President ("Executive Transition Costs"). The total costs related to the realignment are reported in "Selling, general and administrative expenses" in our unaudited consolidated statements of operations. The accrued realignment ~~charges are comprised~~costs as of ~~severance costs, including those related to a voluntary separation program announced in May 2017, lease termination costs~~March 31, 2019 and ~~advisory fees related to non-routine shareholder matters and to the development of our realignment and return of capital programs.~~December 31, 2018 were immaterial.

Realignment charges were as follows:



	Three Months Ended March 31,
	2019		2018
	(in millions)
Executive Transition Costs	$	2	$	—
Lease termination costs	—		1
Total realignment costs	$	2	$	1

Three Months Ended
June 30, Six Months Ended
June 30,
2018 2017 2018 2017
(in millions)
Employee separations $ —
$ 37
$ —
$ 39
Advisory fees —
1
—
10
Lease termination costs —
1
1
1
Total realignment costs $ —
$ 39
$ 1
$ 50



Note 65 — Investments

Our investments were as follows:



	March 31, 2019		December 31, 2018
	(in millions)
Short-term investments:
Equity investment securities	$	25	$	25
Available-for-sale investment securities	1,361		1,760
Held-to-maturity investment securities	826		1,065
Time deposits ⁽¹⁾	506		500
Total short-term investments	$	2,718	$	3,350

June 30, 2018 December 31, 2017
(in millions)
Short-term investments:
Equity investment securities $ 25
$ 25
Available-for-sale investment securities 1,862
1,972
Held-to-maturity investment securities 987
745
Time deposits 472
⁽¹⁾
389
Total short-term investments $ 3,346
$ 3,131


Long-term investments:
Equity and cost method investments	$	74	$	74	$	73	$	74
Held-to-maturity investment securities	6		161		6		6
Total long-term investments	$	80	$	235	$	79	$	80


(1)	Includes ~~$419~~$427 million and $423 million in restricted time deposits as of ~~June 30, 2018.~~March 31, 2019 and December 31, 2018, respectively. See Note 9.

Equity Investment Securities

Our equity investment securities consist of a U.S. dollar denominated investment in a fixed income mutual fund. ~~Unrealized losses for~~For the three ~~and six~~ months ended ~~June 30,~~March 31, 2019 and 2018, realized and ~~2017~~unrealized gains and losses were immaterial. The value of the fixed income mutual fund is based on the net asset value ~~or NAV,~~("NAV") of the fund, with appropriate consideration of the liquidity and any restrictions on disposition of our investment in the fund. ~~There were no realized gains or losses on equity securities during the three and six months ended June 30, 2018 and 2017.~~

Available-for-Sale Investment Securities

Our available-for-sale investment securities consist of U.S. dollar denominated investments primarily in U.S. Treasury notes, U.S. government agency debt securities, municipal debt securities, non-U.S. government debt securities, U.S. and international corporate bonds, certificates of deposit, commercial paper, debt securities issued by supranational institutions, and asset-backed securities, including securities backed by auto loans, credit card receivables, and other receivables. Our investment guidelines are to purchase securities which are investment grade at the time of acquisition. We monitor the credit ratings of the securities in our portfolio on an ongoing basis.

The amortized cost, gross unrealized gains and losses and fair value of available-for-sale investment securities at ~~June 30, 2018~~March 31, 2019 were as follows:


	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
	(in millions)									(in millions)
U.S. Treasury and agency debt securities	$	647	$	—	$	(10	)	$	637	$	576	$	1	$	(4	)	$	573
Corporate and other debt securities	440		—		(5		)	435		371		1		(1		)	371
Certificates of deposit and commercial paper	377		—		—			377		19		—		—			19
Asset-backed securities	306		—		(3		)	303		341		1		(1		)	341
Municipal debt securities	111		—		(1		)	110		57		—		—			57
Total available-for-sale investment securities	$	1,881	$	—	$	(19	)	$	1,862	$	1,364	$	3	$	(6	)	$	1,361

The amortized cost, gross unrealized gains and losses and fair value of available-for-sale investment securities at December 31, ~~2017~~2018 were as follows:



	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
	(in millions)
U.S. Treasury and agency debt securities	$	630	$	1	$	(6	)	$	625
Corporate and other debt securities	420		—		(4		)	416
Certificates of deposit and commercial paper	296		—		—			296
Asset-backed securities	336		—		(2		)	334
Municipal debt securities	90		—		(1		)	89
Total available-for-sale investment securities	$	1,772	$	1	$	(13	)	$	1,760

Amortized
Cost

Unrealized
Gains

Unrealized
Losses

Fair
Value
(in millions)
U.S. Treasury and agency debt securities $ 667
$ —
$ (6 ) $ 661
Corporate and other debt securities 439
—
(2 ) 437
Certificates of deposit and commercial paper 450
—
—
450
Asset-backed securities 297
—
(2 ) 295
Municipal debt securities 130
—
(1 ) 129
Total available-for-sale investment securities $ 1,983
$ —
$ (11 ) $ 1,972

The fair value and related unrealized losses of available-for-sale investment securities in a continuous unrealized loss position for less than 12 months and for 12 months or longer were as follows as of ~~June 30, 2018:~~March 31, 2019:


	Less than 12 Months					12 Months or More					Total					Less than 12 Months				12 Months or More					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(in millions)															(in millions)
U.S. Treasury and agency debt securities	$	517	$	(8	)	$	86	$	(2	)	$	603	$	(10	)	$	13	$	—	$	412	$	(4	)	425		(4		)
Corporate and other debt securities	321		(4		)	97		(1		)	418		(5		)	15		—		233		(1		)	248		(1		)
Certificates of deposit and commercial paper	99		—			—		—			99		—			8		—		—		—			8		—
Asset-backed securities	212		(2		)	78		(1		)	290		(3		)	33		—		157		(1		)	190		(1		)
Municipal debt securities	86		(1		)	16		—			102		(1		)	1		—		32		—			33		—
Total	$	1,235	$	(15	)	$	277	$	(4	)	$	1,512	$	(19	)	$	70	$	—	$	834	$	(6	)	$	904	$	(6	)



	Less than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(in millions)
U.S. Treasury and agency debt securities	$	84	$	—		$	446	$	(6	)	$	530	$	(6	)
Corporate and other debt securities	108		(1		)	254		(3		)	362		(4		)
Certificates of deposit and commercial paper	295		—			—		—			295		—
Asset-backed securities	93		—			179		(2		)	272		(2		)
Municipal debt securities	17		—			64		(1		)	81		(1		)
Total	$	597	$	(1	)	$	943	$	(12	)	$	1,540	$	(13	)

Less than 12 Months 12 Months or More Total

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses
(in millions)
U.S. Treasury and agency debt securities $ 519
$ (4 ) $ 124
$ (2 ) $ 643
$ (6 )
Corporate and other debt securities 297
(1 ) 126
(1 ) 423
(2 )
Certificates of deposit and commercial paper 49
—
—
—
49
—
Asset-backed securities 193
(1 ) 94
(1 ) 287
(2 )
Municipal debt securities 107
(1 ) 18
—
125
(1 )
Total $ 1,165
$ (7 ) $ 362
$ (4 ) $ 1,527
$ (11 )

The unrealized losses for the above securities as of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 were primarily attributable to changes in interest rates. At each reporting date, we perform an evaluation of impaired available-for-sale securities to determine if the unrealized losses are other-than-temporary. We do not consider any of the investments to be other-than-temporarily impaired as of ~~June 30, 2018.~~March 31, 2019. The gross unrealized gains and losses in the above tables were recorded, net of tax, in "Accumulated other comprehensive income (loss)" in our unaudited consolidated statements of financial position.

The contractual maturities of our fixed income available-for-sale investment securities as of ~~June 30, 2018~~March 31, 2019 are set forth in the following table:



	Amortized Cost		Fair Value
	(in millions)
Due within one year	$	299	$	297
Due after one year up to two years	485		482
Due after two years up to three years	179		180
Due after three years	60		61
Asset-backed securities	341		341
Total available-for-sale investment securities	$	1,364	$	1,361

Amortized
Cost

Fair
Value
(in millions)
Due within one year $ 536
$ 535
Due after one year up to two years 526
518
Due after two years up to three years 468
461
Due after three years 45
45
Asset-backed securities 306
303
Total available-for-sale investment securities $ 1,881
$ 1,862

Asset-backed securities were excluded from the maturity categories because the actual maturities may differ from the contractual maturities since the underlying receivables may be prepaid without penalties. Further, actual maturities of debt securities may differ from those presented above since certain obligations provide the issuer the right to call or prepay the obligation prior to scheduled maturity without penalty.

Proceeds from sales of available-for-sale investment securities and the gross gains and losses that have been included in earnings as a result of those sales were as follows:



	Three Months Ended March 31,
	2019			2018
	(in millions)
Proceeds from sales of available-for-sale investment securities	$	314		$	125

Gross gains	$	1		$	—
Gross losses	(1		)	(1		)
Net realized (losses) on sales of available-for-sale investment securities	$	—		$	(1	)

Three Months Ended
June 30, Six Months Ended
June 30,
2018 2017 2018 2017
(in millions)
Proceeds from sales of available-for-sale investment securities $ 434
$ 397
$ 559
$ 1,645

Gross gains $ —
$ —
$ —
$ 1
Gross losses (1 ) —
(2 ) (1 )
Net realized (losses) on sales of available-for-sale investment securities $ (1 ) $ —
$ (2 ) $ —

Held-to-Maturity Investment Securities

Our held-to-maturity investment securities consist of Indian rupee denominated investments primarily in commercial paper, international corporate bonds and government debt securities. Our investment guidelines are to purchase securities that are investment grade at the time of acquisition. We monitor the credit ratings of the securities in our portfolio on an ongoing basis.

The amortized cost, gross unrealized gains and losses and fair value of held-to-maturity investment securities at ~~June 30, 2018~~March 31, 2019 were as follows:


	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
	(in millions)									(in millions)
Short-term investments:
Corporate and other debt securities	$	599	$	—	$	(2	)	$	597	$	417	$	1	$	—	$	418
Commercial paper	388		—		(1		)	387		409		1		—		410
Total short-term held-to-maturity investments	987		—		(3		)	984		826		2		—		828
Long-term investments:
Corporate and other debt securities	6		—		—			6		6		—		—		6
Total held-to-maturity investment securities	$	993	$	—	$	(3	)	$	990	$	832	$	2	$	—	$	834

The amortized cost, gross unrealized gains and losses and fair value of held-to-maturity investment securities at December 31, ~~2017~~2018 were as follows:



	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
	(in millions)
Short-term investments:
Corporate and other debt securities	$	546	$	—	$	—		$	546
Commercial paper	519		—		(1		)	518
Total short-term held-to-maturity investments	1,065		—		(1		)	1,064
Long-term investments:
Corporate and other debt securities	6		—		—			6
Total held-to-maturity investment securities	$	1,071	$	—	$	(1	)	$	1,070

Amortized
Cost Unrealized
Gains Unrealized
Losses Fair
Value
(in millions)
Short-term investments:
Corporate and other debt securities $ 346
$ —
$ (1 ) $ 345
Commercial paper 399
—
(2 ) 397
Total short-term held-to-maturity investments 745
—
(3 ) 742
Long-term investments:
Corporate and other debt securities 161
—
(1 ) 160
Total held-to-maturity investment securities $ 906
$ —
$ (4 ) $ 902

The fair value and related unrealized losses of held-to-maturity investment securities in a continuous unrealized loss position for less than 12 months and for 12 months or longer were as follows as of ~~June 30, 2018:~~March 31, 2019:



	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(in millions)
Corporate and other debt securities	$	29	$	—	$	6	$	—	$	35	$	—
Commercial paper	92		—		—		—		92		—
Total	$	121	$	—	$	6	$	—	$	127	$	—

Less than 12 Months 12 Months or More Total

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses
(in millions)
Corporate and other debt securities $ 485
$ (2 ) $ 31
$ —
$ 516
$ (2 )
Commercial paper 387
(1 ) —
—
387
(1 )
Total $ 872
$ (3 ) $ 31
$ —
$ 903
$ (3 )



	Less than 12 Months					12 Months or More				Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(in millions)
Corporate and other debt securities	$	263	$	—		$	57	$	—	$	320	$	—
Commercial paper	268		(1		)	—		—		268		(1		)
Total	$	531	$	(1	)	$	57	$	—	$	588	$	(1	)

Less than 12 Months 12 Months or More Total

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses
(in millions)
Corporate and other debt securities $ 473
$ (2 ) $ —
$ —
$ 473
$ (2 )
Commercial paper 394
(2 ) —
—
394
(2 )
Total $ 867
$ (4 ) $ —
$ —
$ 867
$ (4 )

At each reporting date, the Company performs an evaluation of held-to-maturity securities to determine if the unrealized losses are other-than-temporary. We do not consider any of the investments to be other-than-temporarily impaired as of ~~June 30, 2018.~~March 31, 2019.

The contractual maturities of our fixed income held-to-maturity investment securities as of ~~June 30, 2018~~March 31, 2019 are set forth in the following table:



	Amortized Cost		Fair Value
	(in millions)
Due within one year	$	826	$	828
Due after one year up to two years	6		6
Total held-to-maturity investment securities	$	832	$	834

Amortized
Cost

Fair
Value
(in millions)
Due within one year $ 987
$ 984
Due after two years 6
6
Total held-to-maturity investment securities $ 993
$ 990

During the ~~six~~three months ended ~~June 30, 2018~~March 31, 2019 and the year ended December 31, ~~2017,~~2018, there were no transfers of investments between our available-for-sale and held-to-maturity investment portfolios.



Note 6 — Leases

Adoption of the New Lease Standard

On January 1, 2019, we adopted the New Lease Standard using the Effective Date Method applied to all lease contracts existing as of January 1, 2019. Under the Effective Date Method, results for reporting periods beginning on or after January 1, 2019 are presented under the New Lease Standard. We elected the package of practical expedients that permits us to not reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs. Prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting policies.

The impact of adoption primarily relates to the recognition of ROU operating lease assets and operating lease liabilities on our unaudited consolidated statement of financial position for all operating leases with a term greater than twelve months. The accounting for our finance leases remained substantially unchanged. The following table provides the impact of adoption of the New Lease Standard on our unaudited consolidated statement of financial position as of January 1, 2019:



Location on Statement of Financial Position	January 1, 2019
	(in millions)
Property and equipment, net⁽¹⁾	$	(81	)
Operating lease assets, net^{(1) (2) (3)}	839
Total Assets	$	758

Operating lease liabilities^{(2) (3)}	$	191
Operating lease liabilities, noncurrent^{(2) (3)}	670
Accrued expenses and other liabilities⁽³⁾	(10		)
Other noncurrent liabilities⁽³⁾	(95		)
Total Liabilities	$	756

Retained earnings⁽⁴⁾	$	2


(1)	Reflects the reclassification of leasehold land and a built-to-suit lease asset from "Property and equipment, net" to "Operating lease assets, net".


(2)	Represents the recognition of operating lease assets and liabilities (current and noncurrent), as defined by the New Lease Standard, including the liability for a built-to-suit lease that was previously accounted for as a capital lease under the former lease guidance.


(3)	Represents the reclassification of deferred rent from "Accrued expenses and other liabilities" and "Other noncurrent liabilities" to "Operating lease assets, net" and the reclassification of built-to-suit lease liabilities from "Accrued expenses and other liabilities" and "Other noncurrent liabilities" to "Operating lease liabilities" and "Operating lease liabilities, noncurrent".


(4)	Represents the net impact of the derecognition of a built-to-suit lease under the former lease guidance and the re-establishment of that lease as an operating lease under the New Lease Standard.

The adoption of the New Lease Standard did not materially impact our unaudited consolidated statement of operations or our unaudited statement of cash flows.

Leases

Our lease asset classes primarily consist of operating leases for office space, data centers and equipment. At inception of a contract, we determine whether a contract contains a lease, and if a lease is identified, whether it is an operating or finance lease. In determining whether a contract contains a lease we consider whether (1) we have the right to obtain substantially all of the economic benefits from the use of the asset throughout the term of the contract, (2) we have the right to direct how and for what purpose the asset is used throughout the term of the contract and (3) we have the right to operate the asset throughout the term of the contract without the lessor having the right to change the terms of the contract. Some of our lease agreements contain both lease and non-lease components that we account for as a single lease component for all our lease asset classes.

Our ROU lease assets represent our right to use an underlying asset for the lease term and may include any advance lease payments made and any initial direct costs, and exclude lease incentives. Our ROU lease liabilities represent our obligation to make lease payments arising from the contractual terms of the lease. ROU lease assets and lease liabilities are recognized at the commencement of the lease and are calculated using the present value of lease payments over the lease term. Typically, our lease agreements do not provide sufficient detail to arrive at an implicit interest rate. Therefore, we use our estimated country-specific incremental borrowing rate based on information available at the commencement date of the lease to calculate the present value of the lease payments. In estimating our country-specific incremental borrowing rates, we consider market rates of comparable collateralized borrowings for similar terms. Our lease terms may include the option to extend or terminate the lease before the end of the contractual lease term. Our ROU lease assets and lease liabilities include these options when it is reasonably certain that they will be exercised.

The following table provides information on the components of our operating and finance leases included in our unaudited consolidated statement of financial position:



Leases	Location on Statement of Financial Position	March 31, 2019
Assets		(in millions)
ROU operating lease assets	Operating lease assets, net	$	809
ROU finance lease assets	Property and equipment, net	21
	Total	$	830

Liabilities
Current
Operating lease	Operating lease liabilities	$	184
Finance lease	Accrued expenses and other current liabilities	13
Noncurrent
Operating lease	Operating lease liabilities, noncurrent	651
Finance lease	Other noncurrent liabilities	17
	Total	$	865

Our operating lease cost was $63 million for the three months ended March 31, 2019 and included $4 million of variable lease cost. A portion of our real estate leases is subject to annual changes in the Consumer Price Index ("CPI"). The changes to the CPI are treated as variable lease payments and are recognized in the period in which the obligation for those payments was incurred. Other variable lease costs primarily relate to adjustments for common area maintenance, utilities and property tax. These variable costs are recognized in the period in which the obligation for those payments was incurred. Our short term lease rental expense was $4 million for the three months ended March 31, 2019. Lease interest expense related to our finance leases was immaterial for the three months ended March 31, 2019.

The following table provides information on the weighted average remaining lease term and weighted average discount rate for our operating leases:



Operating Lease Term and Discount Rate	March 31, 2019

Weighted average remaining lease term	5.8 years
Weighted-average discount rate	5.8	%

The following table provides supplemental cash flow information related to our operating leases:



	Three Months Ended March 31, 2019
	(in millions)
Cash paid for amounts included in the measurement of operating lease liabilities	$	53
ROU assets obtained in exchange for operating lease liabilities	16

Cash paid for amounts included in the measurement of finance lease liabilities was immaterial for the three months ended March 31, 2019. Additionally, ROU assets obtained in exchange for finance lease liabilities was immaterial for the three months ended March 31, 2019.

The following table provides the schedule of maturities of our operating lease liabilities, under the New Lease Standard, as of March 31, 2019:



	March 31, 2019
	(in millions)
2019- remainder of year	$	171
2020	209
2021	166
2022	126
2023	95
2024	62
Thereafter	154
Total lease payments	983
Interest	(148		)
Total lease liabilities	$	835

The following table provides the schedule of our future minimum payments on our operating leases, as of December 31, 2018, which were accounted for in accordance with our historic accounting policies.



	December 31, 2018
	(in millions)
2019	$	226
2020	197
2021	157
2022	121
2023	90
Thereafter	197
Total lease payments	$	988

As of March 31, 2019, we had $29 million of additional operating leases that had yet to commence and therefore are not included in our unaudited statement of financial position. These leases are primarily related to real estate and will commence in various months in 2019 with lease terms of 1 year to 6 years.



Note 7 — Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities were as follows:


	June 30, 2018		December 31, 2017		March 31, 2019		December 31, 2018
	(in millions)				(in millions)
Compensation and benefits	$	928	$	1,272	$	931	$	1,216
Customer volume and other incentives					329		323
Derivative financial instruments					16		25
FCPA Accrual⁽¹⁾					—		28
Income taxes	174		48		130		162
Professional fees	113		100		115		110
Travel and entertainment	45		32		35		34
Customer volume and other incentives	312		289
Derivative financial instruments	18		5
Other	322		325		359		369
Total accrued expenses and other current liabilities	$	1,912	$	2,071	$	1,915	$	2,267

⁽¹⁾Refer to Note 13.



Note 8 — Debt

In ~~2014,~~2018, we completed a debt refinancing in which we entered into a credit agreement with a commercial bank syndicate ~~or, as amended, the Credit Agreement,~~(the "Credit Agreement") providing for a ~~$1,000~~$750 million unsecured term loan (the "Term Loan") and a ~~$750~~$1,750 million unsecured revolving credit ~~facility. The term loan and the revolving credit~~ facility, ~~both~~which are due to mature in November ~~2019. All notes drawn to date under the revolving credit facility have been less than 90 days in duration.~~2023. We are required under the Credit Agreement to make scheduled quarterly principal payments on the ~~term loan.~~Term Loan beginning in December 2019. The Credit Agreement contains customary affirmative and negative covenants as well as a financial covenant. We were in compliance with all debt covenants and representations as of ~~June 30, 2018.~~March 31, 2019.

Short-term Debt

~~The following summarizes our~~As of March 31, 2019 and December 31, 2018, we had $19 million and $9 million, respectively, of short-term debt ~~balances as of:~~

June 30, 2018 December 31, 2017
(in millions)
Notes outstanding under revolving credit facility $ —
$ 75
Term loan - current maturities 100
100
Total short-term debt $ 100
$ 175
related to current maturities for our Term Loan. As of March 31, 2019, we had no notes outstanding under the revolving credit facility.

Long-term Debt

The following summarizes our long-term debt balances as of:



	March 31, 2019			December 31, 2018
	(in millions)
Term loan	$	750		$	750
Less:
Current maturities	(19		)	(9		)
Deferred financing costs	(4		)	(5		)
Long-term debt, net of current maturities	$	727		$	736

June 30, 2018 December 31, 2017
(in millions)
Term loan, due November 2019 $ 750
$ 800
Less:
Current maturities (100 ) (100 )
Deferred financing costs (1 ) (2 )
Long-term debt, net of current maturities $ 649
$ 698



Note 9 — Income Taxes

On December 22, 2017, the United States enacted the Tax Reform Act, which significantly revised the U.S. corporate income tax law for tax years beginning after December 31, 2017 by (among other provisions):

~~reducing the U.S. federal statutory corporate income tax rate from 35% to 21% for tax years beginning after December 31, 2017;~~

~~implementing a modified territorial tax system that includes a one-time transition tax on all accumulated undistributed earnings of foreign subsidiaries;~~

~~providing for a full deduction on future dividends received from foreign affiliates; and~~

~~imposing a U.S. income tax on global intangible low-taxed income, or GILTI.~~

During the fourth quarter of 2017, in accordance with the SEC Staff Accounting Bulletin ("SAB") No. 118 - Income Tax Accounting Implications of the Tax Cuts and Jobs Act, we recorded a one-time provisional net income tax expense of $617 million, which was comprised of: (i) the one-time transition tax expense on accumulated undistributed earnings of foreign subsidiaries of $635 million, (ii) foreign and U.S. state income tax expense that will be applicable upon repatriation of the accumulated undistributed earnings of our foreign subsidiaries, other than our Indian subsidiaries, of $53 million, partially offset by (iii) an income tax benefit of $71 million resulting from the revaluation of U.S. net deferred income tax liabilities to the new lower U.S. income tax rate. The Company has elected to pay the transition tax on undistributed earnings over eight years. The one-time incremental income tax expense is provisional as it reflects certain assumptions based upon our interpretation of the Tax Reform Act and may change, possibly materially, as we receive additional clarification and guidance and as the interpretation of the Tax Reform Act evolves over time. During the six months ended June 30, 2018, we have not recorded any adjustments to the one-time provisional net income tax expense. We will complete the accounting for the Tax Reform Act within the one year measurement period as provided in SAB 118.

~~Our effective income tax rates were as follows:~~

Three Months Ended
June 30, Six Months Ended
June 30,
2018 2017 2018 2017
Effective income tax rate 27.0 % 26.0 % 26.1 % 20.0 %

The effective tax rate for the six months ended June 30, 2017 was affected by the recognition of income tax benefits previously unrecognized in our consolidated financial statements related to several uncertain tax positions totaling $72 million. The recognition of these benefits in the first quarter of 2017 was based on management’s reassessment regarding whether certain unrecognized tax benefits met the more-likely-than-not threshold in light of the lapse in the statute of limitations as to a portion of such benefits. The estimate of our 2018 annual effective income tax rate reflects the current interpretation of the Tax Reform Act, including the GILTI provision and may change as we receive additional clarification and guidance and as the interpretation of the Tax Reform Act evolves over time.

We are involved in an ongoing dispute with the Indian Income Tax Department ~~or ITD,~~("ITD") in connection with which we received a notice in March 2018 asserting that the ITD is owed additional taxes on our previously disclosed 2016 India Cash Remittance, ~~the~~which was a transaction undertaken by our principal operating subsidiary in India or ("CTS ~~India,~~India") to repurchase shares from its shareholders, which are non-Indian Cognizant entities, valued at $2.8 billion. As a result of that transaction, undertaken pursuant to a plan approved by the Madras High Court in Chennai, India, we previously paid $135 million in Indian income taxes, which we believe are all the applicable taxes owed for this transaction under Indian law. The ITD is asserting that we owe an additional 33 billion Indian rupees ($~~482~~477 million at the ~~June 30, 2018~~March 31, 2019 exchange rate) related to the 2016 India Cash Remittance. In addition to the dispute on the 2016 India Cash Remittance, we are involved in another ongoing dispute with the ITD relating to a 2013 transaction undertaken by CTS India to repurchase shares from its shareholders valued at $523 million (the two disputes collectively referred to as the ~~ITD Dispute)~~"ITD Dispute"), for which we also believe we have paid all the applicable taxes owed. Accordingly, we have not recorded any reserves for these matters as of ~~June 30, 2018.~~March 31, 2019. The ITD Dispute is ~~ongoing,~~currently pending before the Madras High Court, and no final decision has been reached.

In March 2018, the ITD placed an attachment on certain of our India bank accounts, relating to the 2016 India Cash Remittance. In April 2018, the Madras High Court granted our application for a stay of the actions of the ITD and lifted the ITD’s attachment of our bank accounts. As part of the interim stay order, we have deposited 5 billion Indian rupees ($7271 million at both the ~~June 30,~~March 31, 2019 and December 31, 2018 exchange ~~rate)~~rates) representing 15% of the disputed tax amount related to the 2016 India Cash Remittance, ~~to be kept in a segregated account by~~with the ITD. ~~This amount is~~These amounts are presented in "Other current assets" onin our unaudited consolidated ~~statement~~statements of financial position. In addition, in April 2018 the court placed a lien on certain time deposits of CTS India in the amount of 28 billion Indian rupees ($~~410~~406 million at the ~~June 30,~~March 31, 2019 exchange rate and $404 million at the December 31, 2018 exchange rate), which is the remainder of the disputed tax amount related to the 2016 India Cash Remittance. ~~We have classified~~The affected time deposits asare considered restricted assets and we have reported them in “Short-term investments” on

in our unaudited consolidated ~~statement~~statements of financial position. As of ~~June 30,~~March 31, 2019 and December 31, 2018, the restricted time deposits balance was ~~$419~~$427 million and $423 million, respectively, including accumulated interest. ~~There were no~~

As of March 31, 2018, we classified $159 million of our cash balance as restricted ~~time deposits as of December 31, 2017.~~cash due to events related to the ITD dispute.



Note 10 — Derivative Financial Instruments

In the normal course of business, we use foreign exchange forward contracts to manage foreign currency exchange rate risk. The estimated fair value of the foreign exchange forward contracts considers the following items: discount rate, timing and amount of cash flow and counterparty credit risk. Derivatives may give rise to credit risks from the possible non-performance by counterparties. Credit risk is ~~generally~~ limited to the fair value of those contracts that are favorable to us. We have limited our credit risk by entering into derivative transactions only with highly-rated financial institutions, limiting the amount of credit exposure with any one financial institution and conducting an ongoing evaluation of the creditworthiness of the financial institutions with which we do business. In addition, all the assets and liabilities related to our foreign exchange forward contracts set forth in the below table are subject to master netting arrangements, such as the International Swaps and Derivatives Association ~~or ISDA, master netting arrangements or other similar agreements~~("ISDA"), with each individual counterparty. These master netting arrangements generally provide for net settlement of all outstanding contracts with the counterparty in the case of an event of default or a termination event. We have presented all the assets and liabilities related to our foreign exchange forward contracts on a gross basis, with no offsets, in our ~~accompanying~~ unaudited consolidated statements of financial position. There is no financial collateral (including cash collateral) posted or received by us related to our foreign exchange forward contracts.

The following table provides information on the location and fair values of derivative financial instruments included in our unaudited consolidated statements of financial position as of:



		March 31, 2019				December 31, 2018
Designation of Derivatives	Location on Statements of Financial Position	Assets		Liabilities		Assets		Liabilities
		(in millions)
Foreign exchange forward contracts – Designated as cash flow hedging instruments	Other current assets	$	22	$	—	$	11	$	—
	Other noncurrent assets	30		—		15		—
	Accrued expenses and other current liabilities	—		12		—		21
	Other noncurrent liabilities	—		1		—		9
	Total	52		13		26		30
Foreign exchange forward contracts – Not designated as hedging instruments	Other current assets	3		—		1		—
	Accrued expenses and other current liabilities	—		4		—		4
	Total	3		4		1		4
Total		$	55	$	17	$	27	$	34

June 30, 2018 December 31, 2017
Designation of Derivatives
Location on Statements of
Financial Position
Assets Liabilities Assets Liabilities
(in millions)
Foreign exchange forward contracts – Designated as cash flow hedging instruments Other current assets $ 36
$ —
$ 134
$ —
Other noncurrent assets —
—
20
—
Accrued expenses and other current liabilities —
18
—
—
Other noncurrent liabilities —
25
—
—
Total 36
43
154
—
Foreign exchange forward contracts – Not designated as hedging instruments Other current assets 4
—
—
—
Accrued expenses and other current liabilities —
—
—
5
Total 4
—
—
5
Total $ 40
$ 43
$ 154
$ 5

Cash Flow Hedges

We have entered into a series of foreign exchange forward contracts that are designated as cash flow hedges of Indian rupee denominated payments in India. These contracts are intended to partially offset the impact of movement of exchange rates on future operating costs and are scheduled to mature each month during ~~2018,~~ 2019, 2020 and the first ~~half~~quarter of ~~2020.~~2021. Under these contracts, we purchase Indian rupees and sell U.S. dollars. The changes in fair value of these contracts are initially reported in ~~the caption “Accumulated~~"Accumulated other comprehensive income (loss)”" in our unaudited consolidated statements of financial position and are subsequently reclassified to earnings in the same period the forecasted Indian rupee denominated payments are recorded in earnings. As of ~~June 30, 2018,~~March 31, 2019, we estimate that ~~$13~~$9 million, net of tax, of net gains related to derivatives designated as cash flow hedges ~~recorded~~reported in ~~accumulated~~"Accumulated other comprehensive income (loss)" in our unaudited consolidated statements of financial position is expected to be reclassified into earnings within the next 12 months.

The notional value of our outstanding contracts by year of maturity and the net unrealized gains and losses included in ~~accumulated~~the caption "Accumulated other comprehensive income (loss)" in our unaudited consolidated statements of financial position, for such contracts were as ~~follows as of:~~follows:



	March 31, 2019		December 31, 2018
	(in millions)
2019	$	1,130	$	1,388
2020	965		780
2021	140		—
Total notional value of contracts outstanding	$	2,235	$	2,168
Net unrealized gains (losses) included in accumulated other comprehensive income (loss), net of taxes	$	33	$	(3	)

June 30, 2018 December 31, 2017
(in millions)
2018 $ 690
$ 1,185
2019 1,050
720
2020 315
—
Total notional value of contracts outstanding $ 2,055
$ 1,905
Net unrealized (losses) gains included in accumulated other comprehensive income (loss), net of taxes $ (8 ) $ 115

Upon settlement or maturity of the cash flow hedge contracts, we record the related gains or losses, based on our designation at the commencement of the contract, with the related hedged Indian rupee denominated expense reported within ~~cost~~the captions "Cost of ~~revenues~~revenues" and ~~selling,~~"Selling, general and administrative ~~expenses.~~expenses" in our unaudited consolidated statements of operations. Hedge ineffectiveness was immaterial for all periods presented.

The following table provides information on the location and amounts of pre-tax gains and losses on our cash flow hedges for the three months ended ~~June 30:~~March 31:



	Change in Derivative Gains/Losses Recognized in Accumulated Other Comprehensive Income (Loss) (effective portion)					Location of Net Derivative Gains and (Losses) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income (effective portion)	Net Gains and (Losses) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income (effective portion)
	2019		2018				2019			2018
	(in millions)
Foreign exchange forward contracts – Designated as cash flow hedging instruments	$	39	$	(14	)	Cost of revenues	$	(3	)	$	30
						Selling, general and administrative expenses	(1		)	5
						Total	$	(4	)	$	35

Change in
Derivative Gains/Losses Recognized
in Accumulated Other
Comprehensive Income (Loss)
(effective portion)

Location of Net Derivative Gains Reclassified
from Accumulated Other
Comprehensive Income (Loss)
into Income
(effective portion)

Net Gains Reclassified
from Accumulated Other
Comprehensive Income (Loss)
into Income
(effective portion)
2018 2017 2018 2017
(in millions)
Foreign exchange forward contracts – Designated as cash flow hedging instruments $ (91 ) $ 35
Cost of revenues $ 18
$ 29
Selling, general and administrative expenses 3
6
Total $ 21
$ 35

~~The following table provides information on the location and amounts of pre-tax gains on our cash flow hedges for the six months ended June 30:~~

Change in
Derivative Gains/Losses Recognized
in Accumulated Other
Comprehensive Income (Loss)
(effective portion)

Location of Net Derivative Gains Reclassified
from Accumulated Other
Comprehensive Income (Loss)
into Income
(effective portion)

Net Gains Reclassified
from Accumulated Other
Comprehensive Income (Loss)
into Income
(effective portion)
2018 2017 2018 2017
(in millions)
Foreign exchange forward contracts – Designated as cash flow hedging instruments $ (105 ) $ 159
Cost of revenues $ 48
$ 46
Selling, general and administrative expenses 8
9
Total $ 56
$ 55

The activity related to the change in net unrealized gains and losses on our cash flow hedges included in ~~accumulated~~"Accumulated other comprehensive income (loss)" in our unaudited consolidated statements of stockholders equity is presented in Note 12.

Other Derivatives

We use foreign exchange forward contracts ~~which have not been designated as hedges,~~ to provide an economic hedge against balance sheet ~~exposure~~exposures to certain monetary assets and liabilities denominated in currencies, ~~primarily the Indian rupee, British pound and Euro,~~ other than the functional currency of our foreign ~~subsidiaries.~~subsidiaries, primarily the Indian rupee, British pound and Euro. We entered into a series of foreign exchange forward contracts that are scheduled to mature in ~~2018.~~2019. Realized gains or losses and changes in the estimated fair value of these derivative financial instruments are recorded in the caption "Foreign currency exchange gains (losses), net" in our unaudited consolidated statements of operations.

Additional information related to our outstanding foreign exchange forward contracts not designated as hedging instruments iswas as follows:



	March 31, 2019					December 31, 2018
	Notional		Fair Value			Notional		Fair Value
	(in millions)
Contracts outstanding	$	410	$	(1	)	$	507	$	(3	)

June 30, 2018 December 31, 2017
Notional Fair Value Notional Fair Value
(in millions)
Contracts outstanding $ 432
$ 4
$ 255
$ (5 )

The following table provides information on the location and amounts of realized and unrealized pre-tax gains and losses on our other derivative financial instruments for the three ~~and six~~ months ended ~~June 30:~~March 31:



	Location of Net Gains (Losses) on Derivative Instruments	Amount of Net Gains (Losses) on Derivative Instruments
		2019			2018
		(in millions)
Foreign exchange forward contracts – Not designated as hedging instruments	Foreign currency exchange gains (losses), net	$	(1	)	$	2

Location of Net Gains (Losses) on
Derivative Instruments
Amount of Net Gains (Losses) on Derivative Instruments
Three Months Ended
June 30, Six Months Ended
June 30,
2018 2017 2018 2017
(in millions)
Foreign exchange forward contracts – Not designated as hedging instruments Foreign currency exchange gains (losses), net $ 18
$ (3 ) $ 20
$ (13 )

The related cash flow impacts of all of our derivative activities are reflected as cash flows from operating activities.



Note 11 — Fair Value Measurements

We measure our cash equivalents, investments, contingent consideration liabilities and foreign exchange forward contracts at fair value. The authoritative guidance defines fair value as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The authoritative guidance also establishes a fair value hierarchy that is intended to increase consistency and comparability in fair value measurements and related disclosures. The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entity’s pricing based upon their own market assumptions.

The fair value hierarchy consists of the following three levels:

Level 1 – Inputs are quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived principally from or corroborated by observable market data.

Level 3 – Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.

The following table summarizes our financial assets and (liabilities) measured at fair value on a recurring basis as of ~~June 30, 2018:~~March 31, 2019:


	Level 1		Level 2			Level 3		Total			Level 1		Level 2			Level 3			Total
	(in millions)										(in millions)
Cash equivalents:
Money market funds	$	300	$	—		$	—	$	300		$	353	$	—		$	—		$	353
Certificates of deposit and commercial paper	—		81			—		81
Commercial paper											—		16			—			16
Total cash equivalents	300		81			—		381			353		16			—			369
Short-term investments:
Time deposits⁽¹⁾	—		472			—		472			—		506			—			506
Available-for-sale investment securities:
U.S. Treasury and agency debt securities	572		65			—		637			526		47			—			573
Corporate and other debt securities	—		435			—		435			—		371			—			371
Certificates of deposit and commercial paper	—		377			—		377			—		19			—			19
Asset-backed securities	—		303			—		303			—		341			—			341
Municipal debt securities	—		110			—		110			—		57			—			57
Total available-for-sale investment securities	572		1,290			—		1,862			526		835			—			1,361
Held-to-maturity investment securities:
Corporate and other debt securities											—		418			—			418
Commercial paper	—		387			—		387			—		410			—			410
Corporate and other debt securities	—		597			—		597
Total short-term held-to-maturity investment securities	—		984			—		984			—		828			—			828
Total short-term investments⁽²⁾	572		2,746			—		3,318			526		2,169			—			2,695
Long-term investments:
Held-to-maturity investment securities:
Corporate and other debt securities	—		6			—		6			—		6			—			6
Total long-term held-to-maturity investment securities	—		6			—		6			—		6			—			6
Total long-term investments⁽³⁾	—		6			—		6			—		6			—			6
Derivative financial instruments - foreign exchange forward contracts:
Other current assets	—		40			—		40			—		25			—			25
Accrued expenses and other current liabilities	—		(18		)	—		(18		)	—		(16		)	—			(16		)
Other noncurrent assets											—		30			—			30
Other noncurrent liabilities	—		(25		)	—		(25		)	—		(1		)	—			(1		)
Total derivative financial instruments - foreign exchange forward contracts											—		38			—			38
Contingent consideration liabilities											—		—			(52		)	(52		)
Total	$	872	$	2,830		$	—	$	3,702		$	879	$	2,229		$	(52	)	$	3,056


(1)	Includes ~~$419~~$427 million in restricted time deposits. See Note 9.


(2)	Excludes an equity security invested in a mutual fund valued at $25 million based on the NAV of the fund.


(3)	Excludes equity and cost method investments of $73 million at March 31, 2019.

The following table summarizes our financial assets and (liabilities) measured at fair value on a recurring basis as of December 31, 2018:



	Level 1		Level 2			Level 3		Total
	(in millions)
Cash equivalents:
Money market funds	$	103	$	—		$	—	$	103
Bank deposits	—		32			—		32
Certificates of deposit and commercial paper	—		68			—		68
Total cash equivalents	103		100			—		203
Short-term investments:
Time deposits⁽¹⁾	—		500			—		500
Available-for-sale investment securities:
U.S. Treasury and agency debt securities	570		55			—		625
Corporate and other debt securities	—		416			—		416
Certificates of deposit and commercial paper	—		296			—		296
Asset-backed securities	—		334			—		334
Municipal debt securities	—		89			—		89
Total available-for-sale investment securities	570		1,190			—		1,760
Held-to-maturity investment securities:
Corporate and other debt securities	—		546			—		546
Commercial paper	—		518			—		518
Total short-term held-to-maturity investment securities	—		1,064			—		1,064
Total short-term investments⁽²⁾	570		2,754			—		3,324
Long-term investments:
Held-to-maturity investment securities:
Corporate and other debt securities	—		6			—		6
Total long-term held-to-maturity investment securities	—		6			—		6
Total long-term investments⁽³⁾	—		6			—		6
Derivative financial instruments - foreign exchange forward contracts:
Other current assets	—		12			—		12
Accrued expenses and other current liabilities	—		(25		)	—		(25		)
Other noncurrent assets	—		15			—		15
Other noncurrent liabilities	—		(9		)	—		(9		)
Total	$	673	$	2,853		$	—	$	3,526


(1)	Includes $423 million in restricted time deposits. See Note 9.


(2)	Excludes an equity security invested in a mutual fund valued at $25 million based on the NAV of the fund.


(3)	Excludes equity and cost method investments of $74 million ~~which are accounted for using the equity method of accounting and~~ at ~~cost, respectively.~~December 31, 2018.

~~The following table summarizes our financial assets and (liabilities) measured at fair value on a recurring basis as of December 31, 2017:~~

Level 1 Level 2 Level 3 Total
(in millions)
Cash equivalents:
Money market funds $ 334
$ —
$ —
$ 334
Bank deposits —
80
—
80
Commercial paper —
386
—
386
Total cash equivalents 334
466
—
800
Short-term investments:
Time deposits —
389
—
389
Available-for-sale investment securities:
U.S. Treasury and agency debt securities 585
76
—
661
Corporate and other debt securities —
437
—
437
Certificates of deposit and commercial paper —
450
—
450
Asset-backed securities —
295
—
295
Municipal debt securities —
129
—
129
Total available-for-sale investment securities 585
1,387
—
1,972
Held-to-maturity investment securities:
Commercial paper —
397
—
397
Corporate and other debt securities —
345
—
345
Total held-to-maturity investment securities —

742

—

742
Total short-term investments⁽¹⁾
585
2,518
—
3,103
Long-term investments:
Held-to-maturity investment securities:
Corporate and other debt securities —
160
—
160
Total held-to-maturity investment securities —
160
—
160
Total long-term investments⁽²⁾
—
160
—
160
Derivative financial instruments - foreign exchange forward contracts:
Other current assets —
134
—
134
Accrued expenses and other current liabilities —
(5 ) —
(5 )
Other noncurrent assets —
20
—
20
Total $ 919
$ 3,293
$ —
$ 4,212


~~(1)~~	~~Excludes an equity security invested in a mutual fund valued at $25 million based on the NAV of the fund.~~


~~(2)~~	~~Excludes equity and cost method investments of $74 million, which are accounted for using the equity method of accounting and at cost, respectively.~~

We measure the fair value of money market funds and U.S. Treasury securities based on quoted prices in active markets for identical assets and therefore classify these assets as Level 1. The fair value of commercial paper, certificates of deposit, U.S. government agency securities, municipal debt securities, debt securities issued by supranational institutions, U.S. and international corporate bonds and foreign government debt securities is measured based on relevant trade data, dealer quotes, or model-driven valuations using significant inputs derived from or corroborated by observable market data, such as yield curves and credit spreads. We measure the fair value of our asset-backed securities using model-driven valuations based on significant inputs derived from or corroborated by observable market data such as dealer quotes, available trade information, spread data, current market assumptions on prepayment speeds and defaults and historical data on deal collateral performance. The carrying value of the time deposits approximated fair value as of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017.~~2018.

We estimate the fair value of each foreign exchange forward contract by using a present value of expected cash flows model. This model calculates the difference between the current market forward price and the contracted forward price for each foreign

exchange contract and applies the difference in the rates to each outstanding contract. The market forward rates include a discount and credit risk factor. The amounts are aggregated by type of contract and maturity.

We estimate the fair value of our contingent consideration liabilities associated with our acquisitions utilizing one or more significant inputs that are unobservable. We calculate the fair value of the contingent consideration liabilities based on the probability-weighted expected performance of the acquired entity against the target performance metric, discounted to present value when appropriate. Contingent consideration liabilities were immaterial as of December 31, 2018.

During the ~~six~~three months ended ~~June 30, 2018~~March 31, 2019 and the year ended December 31, ~~2017,~~2018, there were no transfers among Level 1, Level 2, or Level 3 financial assets and liabilities.



Note 12 — ~~Stockholders' Equity~~

~~Stock Repurchase Program~~

We have entered into multiple accelerated stock repurchase agreements, or ASRs, under our stock repurchase program authorized by our Board of Directors. The ASR activity and related information during the six months ended June 30, 2018 and the year ended December 31, 2017 were as follows:

Purchase Period End Date Number of Shares Average Repurchase Price per Share ASR Amount
(in millions) (in millions)
June 2018 ASR
⁽¹⁾
6.5
⁽¹⁾
⁽¹⁾
$ 600
March 2018 ASR May 2018 3.7
⁽²⁾
$ 79.95
$ 300
December 2017 ASR March 2018 4.0
⁽³⁾
$ 75.75
$ 300
March 2017 ASR August 2017 23.7
$ 63.19
$ 1,500

~~___________________~~

~~(1)~~

Under the terms of the June 2018 ASR and in exchange for up-front payments of $600 million, the financial institution initially delivered 6.5 million shares, a portion of the Company's total expected shares to be repurchased under the June 2018 ASR. The total number of shares ultimately delivered, and therefore the average price paid per share, will be determined at the end of the purchase period, which is scheduled to end during the third quarter of 2018, based on the volume-weighted average price of the Company's common stock during that period.


~~(2)~~	~~Includes 3.0 million shares initially delivered in March 2018 and 0.7 million shares delivered in May 2018 upon the final settlement of the ASR.~~


~~(3)~~	~~Includes 3.6 million shares initially delivered in December 2017 and 0.4 million shares delivered in March 2018 upon the final settlement of the ASR.~~

Our stock repurchase program allows for the repurchase of $3,500 million of our outstanding shares of Class A common stock, excluding fees and expenses, through December 31, 2019. As of June 30, 2018, the remaining available balance under our stock repurchase program was $800 million.

Stock repurchases were made in connection with our stock-based compensation plans, whereby Company shares were tendered by employees for payment of applicable statutory tax withholdings. In 2017, we also repurchased a limited number of shares from employees at the repurchase date market price. For the six months ended June 30, 2018 and 2017, such repurchases totaled 0.6 million shares at an aggregate cost of $49 million, and 0.7 million shares at an aggregate cost of $44 million, respectively.

~~Dividends~~

~~Dividends on our Class A common stock, including dividend equivalents, during the periods presented were as follows:~~

Dividends per Share Amount
(in millions)
2018:
Three months ended March 31, 2018 $ 0.20
$ 119
Three months ended June 30, 2018 0.20
119
Six months ended June 30, 2018 $ 238
2017:
Three months ended June 30, 2017 $ 0.15
$ 89
Three months ended September 30, 2017 0.15
90
Three months ended December 31, 2017 0.15
89
Year ended December 31, 2017 $ 268

~~On August 2, 2018, our Board of Directors approved the Company's declaration of a $0.20 per share dividend with a record date of August 22, 2018 and a payment date of August 31, 2018.~~

Accumulated Other Comprehensive Income (Loss)

Changes in accumulated other comprehensive income (loss) by component were as follows for the three months ended March 31, 2019:



	Before Tax Amount			Tax Effect			Net of Tax Amount
	(in millions)
Foreign currency translation adjustments:
Beginning balance	$	(108	)	$	5		$	(103	)
Change in foreign currency translation adjustments	(3		)	1			(2		)
Ending balance	$	(111	)	$	6		$	(105	)

Unrealized (losses) on available-for-sale investment securities:
Beginning balance	$	(12	)	$	4		$	(8	)
Net unrealized gains arising during the period	9			(3		)	6
Reclassification of net losses to Other, net	—			—			—
Net change	9			(3		)	6
Ending balance	$	(3	)	$	1		$	(2	)

Unrealized (losses) gains on cash flow hedges:
Beginning balance	$	(4	)	$	1		$	(3	)
Unrealized gains arising during the period	39			(7		)	32
Reclassifications of net losses to:
Cost of revenues	3			—			3
Selling, general and administrative expenses	1			—			1
Net change	43			(7		)	36
Ending balance	$	39		$	(6	)	$	33

Accumulated other comprehensive income (loss):
Beginning balance	$	(124	)	$	10		$	(114	)
Other comprehensive income (loss)	49			(9		)	40
Ending balance	$	(75	)	$	1		$	(74	)

Changes in accumulated other comprehensive income (loss) by component were as follows for the three ~~and six~~ months ended ~~June 30,~~March 31, 2018:



	Before Tax Amount			Tax Effect			Net of Tax Amount
	(in millions)
Foreign currency translation adjustments:
Beginning balance	$	(38	)	$	—		$	(38	)
Change in foreign currency translation adjustments	41			(4		)	37
Ending balance	$	3		$	(4	)	$	(1	)

Unrealized (losses) on available-for-sale investment securities:
Beginning balance	$	(11	)	$	4		$	(7	)
Cumulative effect of change in accounting principle ⁽¹⁾	—			(1		)	(1		)
Net unrealized (losses) arising during the period	(9		)	1			(8		)
Reclassification of net losses to Other, net	1			—			1
Net change	(8		)	—			(8		)
Ending balance	$	(19	)	$	4		$	(15	)

Unrealized gains on cash flow hedges:
Beginning balance	$	154		$	(39	)	$	115
Unrealized (losses) arising during the period	(14		)	5			(9		)
Reclassifications of net (gains) to:
Cost of revenues	(30		)	7			(23		)
Selling, general and administrative expenses	(5		)	1			(4		)
Net change	(49		)	13			(36		)
Ending balance	$	105		$	(26	)	$	79

Accumulated other comprehensive income (loss):
Beginning balance	$	105		$	(35	)	$	70
Other comprehensive income (loss)	(16		)	9			(7		)
Ending balance	$	89		$	(26	)	$	63

Three Months Six Months

Before Tax
Amount

Tax
Effect

Net of Tax
Amount
Before Tax
Amount Tax
Effect Net of Tax
Amount
(in millions)
Foreign currency translation adjustments:
Beginning balance $ 3
$ (4 ) $ (1 ) $ (38 ) $ —
$ (38 )
Change in foreign currency translation adjustments (82 ) 11
(71 ) (41 ) 7
(34 )
Ending balance $ (79 ) $ 7
$ (72 ) $ (79 ) $ 7
$ (72 )

Unrealized (losses) on available-for-sale investment securities:
Beginning balance $ (19 ) $ 4
$ (15 ) $ (11 ) $ 4
$ (7 )
Cumulative effect of change in accounting principle⁽¹⁾
—
—
—
—
(1 ) (1 )
Net unrealized (losses) arising during the period (1 ) 1
—
(10 ) 2
(8 )
Reclassification of net losses to Other, net 1
—
1
2
—
2
Net change —
1
1
(8 ) 1
(7 )
Ending balance $ (19 ) $ 5
$ (14 ) $ (19 ) $ 5
$ (14 )

Unrealized gains on cash flow hedges:
Beginning balance $ 105
$ (26 ) $ 79
$ 154
$ (39 ) $ 115
Unrealized (losses) arising during the period (91 ) 19
(72 ) (105 ) 24
(81 )
Reclassifications of net (gains) to:
Cost of revenues (18 ) 5
(13 ) (48 ) 12
(36 )
Selling, general and administrative expenses (3 ) 1
(2 ) (8 ) 2
(6 )
Net change (112 ) 25
(87 ) (161 ) 38
(123 )
Ending balance $ (7 ) $ (1 ) $ (8 ) $ (7 ) $ (1 ) $ (8 )

Accumulated other comprehensive income (loss):
Beginning balance $ 89
$ (26 ) $ 63
$ 105
$ (35 ) $ 70
Other comprehensive income (loss) (194 ) 37
(157 ) (210 ) 46
(164 )
Ending balance $ (105 ) $ 11
$ (94 ) $ (105 ) $ 11
$ (94 )


(1)	Reflects the adoption of ~~accounting standards as described in~~ ~~Note 1~~. ASU 2018-02.

~~Changes in accumulated other comprehensive income (loss) by component were as follows for the three and six months ended June 30, 2017:~~

Three Months Six Months

Before Tax
Amount

Tax
Effect

Net of Tax
Amount
Before Tax
Amount Tax
Effect Net of Tax
Amount
(in millions)
Foreign currency translation adjustments:
Beginning balance $ (132 ) $ —
$ (132 ) $ (149 ) $ —
$ (149 )
Change in foreign currency translation adjustments 50
—
50
67
—
67
Ending balance $ (82 ) $ —
$ (82 ) $ (82 ) $ —
$ (82 )

Unrealized gains (losses) on available-for-sale investment securities:
Beginning balance $ (4 ) $ 1
$ (3 ) $ (6 ) $ 2
$ (4 )
Net unrealized gains arising during the period 1
—
1
3
(1 ) 2
Reclassification of net (gains) to Other, net —
—
—
—
—
—
Net change 1
—
1
3
(1 ) 2
Ending balance $ (3 ) $ 1
$ (2 ) $ (3 ) $ 1
$ (2 )

Unrealized gains on cash flow hedges:
Beginning balance $ 155
$ (37 ) $ 118
$ 51
$ (12 ) $ 39
Unrealized gains arising during the period 35
(9 ) 26
159
(39 ) 120
Reclassifications of net (gains) to:
Cost of revenues (29 ) 7
(22 ) (46 ) 11
(35 )
Selling, general and administrative expenses (6 ) 1
(5 ) (9 ) 2
(7 )
Net change —
(1 ) (1 ) 104
(26 ) 78
Ending balance $ 155
$ (38 ) $ 117
$ 155
$ (38 ) $ 117

Accumulated other comprehensive income (loss):
Beginning balance $ 19
$ (36 ) $ (17 ) $ (104 ) $ (10 ) $ (114 )
Other comprehensive income (loss) 51
(1 ) 50
174
(27 ) 147
Ending balance $ 70
$ (37 ) $ 33
$ 70
$ (37 ) $ 33



Note 13 — Commitments and Contingencies

We are involved in various claims and legal ~~actions~~proceedings arising in the ordinary course of business. We accrue a liability when a loss is considered probable and the amount can be reasonably estimated. When a material loss contingency is reasonably possible but not probable, we do not record a liability, but instead disclose the nature and the amount of the claim, and an estimate of the loss or range of loss, if such an estimate can be made. Legal fees are expensed as incurred. InWhile we do not expect that the ~~opinion of management, the outcome~~ultimate resolution of any existing claims and ~~legal or regulatory~~ proceedings ~~other~~(other than the specific matters described below, if decided ~~adversely, is not expected to~~adversely), individually or in the aggregate, will have a material adverse effect on our ~~business,~~ financial ~~condition,~~position, an unfavorable outcome in some or all of these proceedings could have a material adverse impact on results of operations or cash flows for a particular period. This assessment is based on our current understanding of relevant facts and ~~cash flows.~~circumstances. As such, our view of these matters is subject to inherent uncertainties and may change in the future.

On February 28, 2019, a ruling of the Supreme Court of India interpreting certain statutory defined contribution obligations of employees and employers (the “India Defined Contribution Obligation”) altered historical understandings of such obligations, extending them to cover additional portions of the employee’s income. As a result, the contributions of our employees and the Company in future periods are required to be increased. We have accrued $117 million with respect to prior periods, assuming retroactive application of the Supreme Court’s ruling. There is significant uncertainty as to how the liability should be calculated as it is impacted by multiple variables, including the period of assessment, the application with respect to certain current and former employees and whether interest and penalties may be assessed. Since the ruling, a variety of trade associations and industry

groups have advocated to the Indian government, highlighting the harm to the information technology sector, other industries and job growth in India that would result from a retroactive application of the ruling. We ~~are conducting an~~anticipate the Indian government will review the matter and believe there is a substantial question as to whether the Indian government will apply the Supreme Court’s ruling on a retroactive basis. As such, the ultimate amount of our obligation may be materially different from the amount accrued.

In February 2019, we completed our previously disclosed internal investigation focused on whether certain payments relating to Company-owned facilities in India were made improperly and in ~~possible~~ violation of the ~~FCPA~~U.S. Foreign Corrupt Practices Act ("FCPA") and other applicable laws. ~~The investigation is~~We also ~~examining various other payments made~~announced a resolution of the previously disclosed investigations by the United States Department of Justice ("DOJ") and United States Securities and Exchange Commission ("SEC") into the matters that were the subject of our internal investigation. In connection with this resolution, in ~~small amounts in India that may not have complied with Company policy or applicable law. In September 2016,~~February 2019 we ~~voluntarily notified~~paid approximately $28 million to the DOJ and SEC, ~~and are cooperating fully~~an amount consistent with both agencies. The investigation is being conducted under the oversight of the Audit Committee, with the assistance of outside counsel. To date, the investigation has identified a total of approximately $6 million in payments made between 2009 and 2016 that may have been improper. During the year endedour December 31, ~~2016, we recorded out-of-period corrections related~~2018 accrual for this matter. The DOJ also issued a declination letter, declining to ~~$4 million of such payments that were previously capitalized that should have been expensed. These out-of-period corrections and~~take any additional action against the other $2 million in potentially improper payments were not material to any previously issued financial statements. There were no adjustments recorded during 2018 and 2017 related to the amounts under investigation.Company.

~~On October 5, 2016, October 27, 2016, and November 18,~~In 2016, three putative securities class action complaints were filed in the United States District Court for the District of New Jersey, naming us and certain of our current and former officers as

defendants. ~~In an order dated February 3, 2017, the United States District Court for the District of New Jersey~~These complaints were consolidated ~~the three putative securities class actions~~ into a single action and ~~appointed lead plaintiffs and lead counsel. On~~on April 7, 2017, the lead plaintiffs filed a consolidated amended complaint on behalf of a putative class of ~~stockholders~~persons and entities who purchased our common stock during the period between February 27, 2015 and September 29, 2016, naming us and certain of our current and former officers as defendants and alleging violations of the Exchange Act, based on allegedly false or misleading statements related to potential violations of the FCPA, our business, prospects and operations, and the effectiveness of our internal controls over financial reporting and our disclosure controls and procedures. The lead plaintiffs seek an award of compensatory damages, among other relief, and their reasonable costs and expenses, including attorneys’ fees. ~~Under~~Defendants filed a ~~stipulation filed by the parties on February 23, 2017, defendants filed motions~~motion to dismiss the consolidated amended complaint on June 6, ~~2017, plaintiffs filed~~2017. On August 8, 2018, the Court issued an ~~opposition brief on July 21, 2017 responding to defendants’ motions~~order which granted the motion to dismiss in part, including dismissal of all claims against current officers of the Company, and ~~defendants filed reply briefs~~denied them in ~~further support of their motions to dismiss on September 5, 2017.~~part. On September ~~5, 2017, defendants also~~7, 2018, we filed a motion ~~to strike certain allegations~~ in the ~~consolidated amended complaint, plaintiffs filed an opposition~~United States District Court for the District of New Jersey to certify the August 8, 2018 order for immediate appeal to the United States Court of Appeals for the Third Circuit pursuant to 28 U.S.C. § 1292(b). On October 18, 2018, the District Court issued an order granting our motion, and staying the action pending the outcome of our appeal petition to ~~strike on~~the Third Circuit. On October ~~2, 2017, and, on October 10, 2017,~~29, 2018, we filed a ~~reply brief in further support~~petition for permission to appeal with the United States Court of Appeals for the Third Circuit. On March 6, 2019, the Third Circuit denied our petition without prejudice. In an order dated March 19, 2019, the District Court directed the lead plaintiffs to provide the defendants with a proposed amended complaint. On April 26, 2019, lead plaintiffs filed their second amended complaint and the defendants must file a motion to ~~strike.~~dismiss the complaint on or before June 10, 2019.

~~On October 31, 2016, November 15, 2016, and November 18,~~In 2016, three putative shareholder derivative complaints were filed in New Jersey Superior Court, Bergen County, naming us, all of our then current directors and certain of our current and former officers as defendants. OnThese actions were consolidated in an order dated January 24, 2017, the New Jersey Superior Court, Bergen County, consolidated the three putative shareholder derivative actions filed in that court into a single action and appointed lead plaintiff and lead counsel.2017. The complaints assert claims for breach of fiduciary duty, corporate waste, unjust enrichment, abuse of control, mismanagement, and/or insider selling by defendants. On March 16, 2017, the parties filed a stipulation deferring all further proceedings pending a final, non-appealable ruling on the then anticipated motion to dismiss the consolidated putative securities class action. On April 26, 2017, in lieu of ordering the stipulation filed by the parties, the New Jersey Superior Court deferred further proceedings by dismissing the consolidated putative shareholder derivative litigation without prejudice but permitting the parties to file a motion to vacate the dismissal in the future. ~~On February 22,~~

In 2017, ~~a fourth~~three additional putative shareholder derivative ~~complaint asserting~~complaints alleging similar claims ~~was~~were filed in the United States District Court for the District of New Jersey, naming us and certain of our then current directors as defendants. On April 5, 2017, the United States District Court for the District of New Jersey entered an order staying all proceedings pending a final, non-appealable ruling on the then anticipated motion to dismiss the consolidated putative securities class action. On April 7, 2017, a fifth putative shareholder derivative complaint was filed in the United States District Court for the District of New Jersey, naming us, certain of our then current directors, and certain of our current and former directors and officers as defendants. ~~The complaint in that action asserts~~These complaints asserted claims similar to those in the previously-filed putative shareholder derivative actions, but also adds a claim for violations of Section 10(b) of the Exchange Act against the individual defendants. On May 10, 2017, a sixth putative shareholder derivative complaint was filed in the United States District Court for the District of New Jersey, naming us, certain of our then current directors, and certain of our current and former officers as defendants. The complaint in that action asserts claims similar to those in the previously-filed putative shareholder derivative actions, but also adds a claim for violations of Section 14(a) of the Exchange Act against the individual defendants.actions. In an order dated June 20, 2017, the United States District Court for the District of New Jersey consolidated ~~the three putative shareholder derivative~~these actions ~~filed in that court~~ into a single action, appointed lead plaintiff and lead counsel, and stayed all further proceedings pending a final, non-appealable ruling on the motions to dismiss the consolidated putative securities class action. ~~All of the~~On October 30, 2018, lead plaintiff filed a consolidated verified derivative complaint.

On March 11, 2019, a seventh putative shareholder derivative ~~complaints allege among other things that~~complaint was filed in the United States District Court for the District of New Jersey, naming us, certain of our ~~public disclosures were false~~current and ~~misleading by failing~~former directors, and certain of our current and former officers as defendants. The complaint in that action asserts claims similar to ~~disclose that payments allegedly~~those in ~~violation of~~ the FCPA had been made and by asserting that management had determined that our internal controls were effective. The plaintiffs seek awards of compensatory damages and restitution to the Company as a result of the alleged violations and their costs and attorneys’ fees, experts’ fees, and other litigation expenses, among other relief.previously-filed putative shareholder derivative actions.

We are presently unable to predict the duration, scope or result of ~~the internal investigation, any investigations by the DOJ or the SEC,~~ the consolidated putative securities class action, the putative shareholder derivative actions or any other lawsuits. As such, we are presently unable to develop a reasonable estimate of a possible loss or range of losses, if any, and thus have not recorded any accruals related to these matters. The DOJ and the SEC have a broad range of civil and criminal sanctions under the FCPA and other laws and regulations including injunctive relief, disgorgement, fines, penalties, modifications to business practices, including the termination or modification of existing business relationships, the imposition of compliance programs and the retention of a monitor to oversee compliance with the FCPA. In addition, the DOJ and the SEC could bring enforcement actions against the Company or individuals, including former members of senior management. Such actions, if brought, could result in dispositions, judgments, settlements, fines, injunctions, cease and desist orders, debarment or other civil or criminal penalties against the Company or such individuals.

We expect to incur additional expenses related to remedial measures, and may incur additional expenses related to fines. The imposition of any sanctions or the implementation of remedial measures could have a material adverse effect on our business, annual and interim results of operations, cash flows and financial condition. Furthermore, whileWhile the Company intends to defend the lawsuits vigorously, these lawsuits and any other related lawsuits are subject to inherent uncertainties, the actual cost of such litigation will depend upon many unknown factors and the outcome of the litigation is necessarily uncertain.

We have indemnification and expense advancement obligations pursuant to our ~~Bylaws~~bylaws and indemnification agreements with respect to certain current and former members of senior management and the Company’s directors. In connection with the ~~ongoing~~matters that were the subject of our previously disclosed internal investigation, the DOJ and SEC investigations and the related litigation, we have received and expect to continue to receive requests under such indemnification agreements and our ~~Bylaws~~bylaws to provide funds for legal fees and other ~~expenses, and expect additional requests in connection with the investigation and related litigation.~~expenses. We have ~~not recorded any liability for these matters as of June 30, 2018 as we cannot estimate the ultimate outcome at this time but have~~ expensed ~~payments made~~such costs incurred through ~~June 30, 2018.~~March 31, 2019.

We have maintained directors and officers insurance, from which a portion of the indemnification expenses and costs related to the putative securities class action complaints may be recoverable, and have recorded an insurance receivable of ~~less than $1~~$6 million as of ~~June 30, 2018.~~March 31, 2019. We are unable to make a reliable estimate of the eventual cash flows by period related to the indemnification and expense advancement obligations described here.

See Note 9 for information relating to the ITD Dispute.

Many of our engagements involve projects that are critical to the operations of our customers’ business and provide benefits that are difficult to quantify. Any failure in a customer’s systems or our failure to meet our contractual obligations to our customers, including any breach involving a customer’s confidential information or sensitive data, or our obligations under applicable laws or regulations could result in a claim for substantial damages against us, regardless of our responsibility for such failure. Although we attempt to contractually limit our liability for damages arising from negligent acts, errors, mistakes, or omissions in rendering our services, there can be no assurance that the limitations of liability set forth in our contracts will be enforceable in all instances or will otherwise protect us from liability for damages. Although we have general liability insurance coverage, including coverage for errors or omissions, there can be no assurance that such coverage will cover all types of claims, 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 us that exceed or are not covered by our insurance coverage or changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, results of operations, financial ~~condition~~position and cash ~~flows.~~flows for a particular period.

In the normal course of business and in conjunction with certain customer engagements, we have entered into contractual arrangements through which we may be obligated to indemnify customers or other parties with whom we conduct business with respect to certain matters. These arrangements can include provisions whereby we agree to hold the indemnified party and certain of their affiliated entities harmless with respect to third-party claims related to such matters as our breach of certain representations or covenants, our intellectual property infringement, our gross negligence or willful misconduct or certain other claims made against certain parties. Payments by us under any of these arrangements are generally conditioned on the customer making a claim and providing us with full control over the defense and settlement of such claim. It is not possible to determine the maximum potential liability under these indemnification agreements due to the unique facts and circumstances involved in each particular agreement. Historically, we have not made payments under these indemnification agreements and therefore they have not had any impact on our operating results, financial position, or cash flows. However, if events arise requiring us to make payment for indemnification claims under our indemnification obligations in contracts we have entered, such payments could have a material ~~impact~~adverse effect on our business, results of operations, financial ~~condition~~position and cash ~~flows.~~flows for a particular period.



Note 14 ~~— Related Party Transactions~~

Brackett B. Denniston, III was the Interim General Counsel and an executive officer of the Company from December 2016 until May 15, 2017, during which period Mr. Denniston was also a Senior Counsel at the law firm of Goodwin Procter LLP, or Goodwin. During the three and six months ended June 30, 2017, Goodwin performed legal services for the Company for which it earned approximately $1 million and $3 million, respectively. For such period and other periods when Goodwin was a related party of the Company, the provision of legal services from Goodwin was reviewed and approved by our Audit Committee. During the six months ended June 30, 2018, Goodwin was not a related party of the Company.



~~Note 15~~ — Segment Information

Our reportable segments are:

Financial Services, which consists of our banking and insurance operating segments;

Healthcare, which consists of our healthcare and life sciences operating segments;

Products and Resources, which consists of our retail and consumer ~~goods,~~goods; manufacturing, logistics, energy, and ~~logistics,~~utilities; and travel and hospitality ~~and energy and utilities~~ operating segments; ~~and~~

Communications, Media and Technology, which includes our communications and media operating segment and our technology operating segment.

Our sales managers, account executives, account managers and project teams are aligned in accordance with the specific industries they serve. Our chief operating decision maker evaluates the ~~Company’s~~Company's performance and allocates resources based on segment revenues and operating profit. Segment operating profit is defined as income from operations before unallocated costs. Generally, operating expenses for each operating segment have similar characteristics and are subject to the same factors, pressures and challenges. However, the economic environment and its effects on industries served by our operating segments may affect revenues and operating expenses to differing degrees.

In ~~2018,~~2019, we made changes to the internal measurement of segment operating profits for the purpose of evaluating segment performance and resource allocation. The primary reason for the ~~changes is~~change was to charge to our business segments costs that are directly managed and controlled by them. Specifically, segment operating profit now includes ~~the stock-based compensation expense of~~certain benefit, immigration, recruitment and sales ~~managers, account executives, account managers~~ and ~~project teams,~~field marketing costs, which ~~was~~were previously included in "unallocated costs." In addition, we have changed the methodology of charging our business segments for the use of our global delivery centers and infrastructure from a fixed per employee charge to a variable per employee charge that differs depending on location and assets deployed. We have reported our 2019 segment operating profits using the new ~~measurement~~allocation methodology and have restated the ~~prior period~~2018 results to conform to the new methodology. Additionally, we combined our energy and utilities operating segment with our manufacturing and logistics operating segment for our internal reporting. Our products and resources segment, which was previously comprised of four operating segments (retail and consumer goods; manufacturing and logistics; travel and hospitality; and energy and utilities) is now comprised of three operating segments (retail and consumer goods; manufacturing, logistics, energy and utilities; and travel and hospitality). This change reflects how this operating segment is currently managed and reported to chief operating decision makers but will not affect our reportable segment financial results.

Expenses included in segment operating profit consist principally of direct selling and delivery costs (including stock-based compensation expense) as well as a per employee charge for use of our global delivery centers and infrastructure. Certain selling, general and administrative expenses, excess or shortfall of incentive compensation for delivery personnel as compared to target, costs related to our realignment program, a portion of depreciation and amortization and the impact of the settlements of our cash flow hedges are not allocated to individual segments in internal management reports used by the chief operating decision maker. Accordingly, such expenses are excluded from segment operating profit and are separately disclosed as “unallocated costs” and adjusted against our total income from operations. The incremental accrual related to the India Defined Contribution Obligation recorded in the first quarter of 2019 has also been excluded from segment operating profits and is included in "unallocated costs" in the table below. Additionally, management has determined that it is not practical to allocate identifiable assets by segment, since such assets are used interchangeably among the segments.

~~As described in~~ For revenues by reportable segment and geographic area, please see Note 32 to our unaudited consolidated financial statements, on January 1, 2018, we adopted the New Revenue Standard, using the modified retrospective method. Results for reporting periods beginning after January 1, 2018 are presented under the New Revenue Standard, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting policies..

~~Revenues from external customers and segment~~Segment operating profits, before unallocated expenses, by reportable segment were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended March 31,
	2018		2017		2018		2017		2019		2018
	(in millions)								(in millions)
Revenues:
Financial Services	$	1,469	$	1,406	$	2,930	$	2,782
Healthcare	1,156		1,050		2,277		2,053
Products and Resources	840		747		1,661		1,484
Communications, Media and Technology	541		467		1,050		897
Total revenues	$	4,006	$	3,670	$	7,918	$	7,216

Segment Operating Profit:
Financial Services	$	462	$	445	$	909	$	872	$	400	$	440
Healthcare	357		345		695		619		337		337
Products and Resources	258		230		514		447		234		253
Communications, Media and Technology	179		156		338		291		174		158
Total segment operating profit	1,256		1,176		2,456		2,229		1,145		1,188
Less: unallocated costs⁽¹⁾	586		570		1,093		1,053
Less: unallocated costs									606		495
Income from operations	$	670	$	606	$	1,363	$	1,176	$	539	$	693

~~________________~~


~~(1)~~	In the second quarter of 2018, we provided $100 million of initial funding to Cognizant U.S. Foundation, which is focused on science, technology, engineering and math (or collectively, STEM) education in the United States. This charge was recorded in unallocated costs for the three and six months ended June 30, 2018.

Geographic Area Information

~~Revenue and long-lived~~Long-lived assets by geographic area are as follows:



	As of
	March 31, 2019		December 31, 2018
	(in millions)
Long-lived Assets: ⁽¹⁾
North America⁽²⁾	$	420	$	436
Europe	110		105
Rest of World ⁽³⁾	784		853
Total	$	1,314	$	1,394

Three Months Ended
June 30, Six Months Ended
June 30,
2018 2017 2018 2017
(in millions)
Revenues: ⁽¹⁾

North America ⁽²⁾
$ 3,067
$ 2,851
$ 6,042
$ 5,612
United Kingdom 309
288
619
562
Rest of Europe 381
291
755
576
Europe - Total 690
579
1,374
1,138
Rest of World ⁽³⁾
249
240
502
466
Total revenues $ 4,006
$ 3,670
$ 7,918
$ 7,216

As of
June 30, 2018 December 31, 2017
(in millions)
Long-lived Assets: ⁽⁴⁾

North America⁽²⁾
$ 403
$ 360
Europe 82
63
Rest of World ⁽³⁾⁽⁵⁾
860
901
Total $ 1,345
$ 1,324

________________


(1)	~~Revenues are attributed to regions based upon customer location.~~Long-lived assets include property and equipment, net of accumulated depreciation and amortization.


(2)	Substantially all relates to operations in the United States.


(3)	~~Includes our operations in Asia Pacific, the Middle East and Latin America.~~


~~(4)~~	~~Long-lived assets include property and equipment, net of accumulated depreciation and amortization.~~


~~(5)~~	Substantially all of these long-lived assets relate to our operations in India.



Note 15— Subsequent Events

Dividend

On May 1, 2019, our Board of Directors approved the Company's declaration of a $0.20 per share dividend with a record date of May 22, 2019 and a payment date of May 31, 2019.



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



Executive Summary

~~We are~~Cognizant is one of the world’s leading professional services companies. We are in business to help our customers adapt, compete and grow in the face of continual shifts and disruptions within their markets. We do so by partnering with them to apply technology to transform theircompanies, transforming clients’ business, operating and technology models ~~allowing them to achieve~~for the full value of digitizing their entire enterprises. We call this being “digital at scale.” When implemented, it enables customers to achieve more efficient and effective operations while reshaping their business models for innovation and growth.digital era. Our industry-based, consultative approach helps customers envision, build and run more innovative and efficient businesses. Our ~~core competencies include: business, process, operations~~services include digital services and ~~technology~~solutions, consulting, application development, ~~and~~ systems integration, ~~enterprise information management,~~ application testing, application maintenance, ~~information technology, or IT,~~ infrastructure services and business process services. Digital services are becoming an increasingly important part of our portfolio of services and solutions and are often integrated or delivered along with our other services. We tailor our services and solutions to specific industries and use an integrated global delivery model that employs customer service teams based at customer locations and delivery teams located at customer locations and dedicated global and regional delivery centers.

~~In 2017, we began~~On April 1, 2019, Brian Humphries succeeded Francisco D'Souza as our Chief Executive Officer. Francisco D’Souza has agreed to serve as an advisor to the new Chief Executive Officer with the title of “Executive Vice Chairman” from April 1, 2019 through June 30, 2019. Thereafter, he will continue to serve as Vice Chairman of the Board of Directors.

Q1 2019 Financial Results

The following table sets forth a ~~realignment~~summary of our business to improve the overall efficiency of our operations while continuing to drive revenue growth. As a continuation of this realignment program, we intend to take additional actions during the remainder of 2018 to further improve our cost structure primarily by optimizing our resource pyramid. As a result of these actions, we expect to incur $25 million to $35 million in severance costs during the remainder of 2018. The final amount and timing of these charges is uncertain and may change as the severance program continues to develop. In addition, to accelerate our shift to digital services and solutions, we are continuing to deploy the following strategies: aligning our digital services and solutions along three practice areas, investing to scale these digital practice areas across our business segments and geographies, continuing to develop our core business and selectively targeting higher margin work within our core business. We believe the above actions and strategies will enable us to gradually expand our non-GAAP operating margins¹ ~~with the goal of achieving 22% non-GAAP operating margin~~¹ in 2019. There can be no assurances that we will be successful in achieving the objectives of these plans or that other factors beyond our control, including the various risks set forth in "Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-Kfinancial results for ~~the year ended December 31, 2017, will not cause us to fail to achieve the targeted improvements.~~

In February 2017, we announced a plan to return $3.4 billion to our stockholders over a two-year period. To date, as part of this plan, we have repurchased $2.7 billion of stock through accelerated stock repurchase agreements, or ASRs, and paid dividends of $501 million. In May 2017, we initiated a quarterly cash dividend and, in February 2018, we increased our quarterly dividend to $0.20 per share from $0.15 per share. On an ongoing basis, we review our capital return plan, considering our financial performance and liquidity position, investments required to execute our strategic initiatives, the economic outlook, regulatory changes and other relevant factors. We are currently evaluating the impact of the Tax Cuts and Jobs Act, or Tax Reform Act, on our capital return plan.

On January 1, 2018, we adopted ASC Topic 606, “Revenue from Contracts with Customers,” or New Revenue Standard, using the modified retrospective method. Results for reporting periods beginning after January 1, 2018 are presented under the New Revenue Standard, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting policies. For the three months ended ~~June 30, 2018, adoption of the New Revenue Standard had a positive impact on revenue of $31 million, income from operations of $38 million~~March 31, 2019 and ~~diluted earnings per share of $0.05 per share. See~~ ~~Note 3~~ ~~to our unaudited consolidated financial statements for additional information.~~2018:



					Increase / (Decrease)
	2019		2018		$			%
	(Dollars in millions, except per share data)
Revenues	$	4,110	$	3,912	$	198		5.1
Income from operations	539		693		(154		)	(22.2	)
Net income	441		520		(79		)	(15.2	)
Diluted earnings per share	0.77		0.88		(0.11		)	(12.5	)
Other Financial Information¹
Adjusted Income from Operations	$	658	$	694	$	(36	)	(5.2	)
Adjusted Diluted Earnings Per Share ("EPS")	0.91		0.94		(0.03		)	(3.2	)

~~Non-GAAP operating margin is~~Adjusted Income From Operations and Adjusted Diluted EPS are not ~~a measurement~~measurements of financial performance prepared in accordance with ~~GAAP.~~generally accepted accounting principles in the United States of America ("GAAP"). See “Non-GAAP Financial Measures” for more information and ~~a reconciliation~~reconciliations to the most directly comparable GAAP financial ~~measure.~~measures.

~~The following table sets forth summarized operating results for~~During the ~~three months~~quarter ended ~~June 30,~~March 31, 2019, revenues increased by $198 million as compared to the quarter ended March 31, 2018, ~~and 2017:~~

Increase / Decrease
2018 2017 $ %
(Dollars in millions, except per share data)
Revenues $ 4,006
$ 3,670
$ 336
9.2
Income from operations and operating margin 670
16.7 % 606
16.5 % 64
10.6
Net income 456
470
(14 ) (3.0 )
Diluted earnings per share 0.78
0.80
(0.02 )

Other Financial Information²

Non-GAAP income from operations and Non-GAAP operating margin 882
22.0 % 735
20.0 % 147
20.0
Non-GAAP diluted earnings per share 1.19
0.93
0.26

representing growth of 5.1%, or 6.8% on a constant currency basis ("CC")². The following charts set forth revenues and revenue growth by business segment and geography for the three months ended ~~June 30, 2017~~March 31, 2018 and ~~2018:~~2019.

~~The following factors impacted our~~

Strong revenue growth ~~during the three months ended June 30, 2018 as compared to June 30, 2017:~~

~~Solid performance~~ in our Communications, Media and Technology and Products and Resources ~~and Healthcare segments;~~segments, with the growth being primarily generated from customers in our North America region;

Revenues in our Financial Services ~~business~~ segment ~~grew below Company average~~in the North America and Rest of World regions declined as certain banking customers continue to ~~optimize~~transition the ~~cost~~support of ~~supporting~~some of their legacy systems and operations ~~as they shift their spend~~ to offshore captives. However, demand among our banking customers for our transformation and digital ~~services;~~services continues to increase;

~~Sustained strength~~Revenues in our Healthcare segment in our North America region were negatively impacted by the mergers within the healthcare industry, the establishment of an offshore captive by a large customer, and a ramp down of a customer relationship in which we were a subcontractor to a third party for the purpose of delivering healthcare-related systems implementation services to local government, partially offset by revenues from Bolder Healthcare Solutions ("Bolder"), which we acquired in the ~~North American market;~~

~~Continued penetration~~second quarter of ~~the European and Rest of World (primarily Asia Pacific) markets;~~

~~Revenues from our customers in Europe grew 19.2% inclusive of a positive currency impact of 6.4%.~~


◦	~~Revenues from our Rest of Europe customers increased 30.9% inclusive of a positive currency impact of 7.1% and revenues from a new strategic customer acquired in the third quarter of 2017.~~


◦	Revenues from our United Kingdom customers increased 7.3% inclusive of a positive currency impact of 5.8%. Revenue growth in the United Kingdom continues to be negatively affected by weakness in the banking sector in that region;

~~Increased customer spending on discretionary projects;~~2018;

Expansion of our service offerings, including consulting and digital services, next-generation IT solutions and platform-based solutions; and

Continued expansion of the market for global delivery of technology and business process services.

Our operating margin and Adjusted Operating Margin² decreased to 13.1% and 16.0%, respectively, for the quarter ended March 31, 2019 from 17.7% for the quarter ended March 31, 2018. The decreases in our GAAP operating margin and Adjusted Operating Margin² were due to an increase in costs related to our delivery personnel (including employees and subcontractors) outpacing revenue growth. The margins were further impacted by higher costs incurred for strategic partners and other vendors in supporting the delivery of our digital operations, platform and infrastructure services and amortization expense due to recent acquisitions, partially offset by the depreciation of the Indian rupee (net of the impact of the settlement of our cash flow hedges). Our GAAP operating margin was additionally impacted by the $117 million incremental accrual related to the India Defined Contribution Obligation recorded in the first quarter of 2019 and described in "Other Matters" below.

In the first quarter of 2019, as part of our capital deployment plan, we returned $866 million to our stockholders through $750 million in share repurchases and $116 million in dividend payments.

Other Matters


²	~~Non-GAAP income from operations, Non-GAAP operating margin~~Constant currency revenue growth and ~~non-GAAP earnings per share~~Adjusted Operating Margin are not measurements of financial performance prepared in accordance with GAAP. See “Non-GAAP Financial Measures” for more information and ~~a reconciliation~~reconciliations to the most directly comparable GAAP financial measures.

~~Continued expansion~~have advocated to the Indian government, highlighting the harm to the information technology sector, other industries and job growth in India that would result from a retroactive application of the ~~market for global delivery of technology~~ruling. We anticipate the Indian government will review the matter and ~~business process services; and~~

~~Increased penetration at existing customers, including strategic customers.~~

~~Our customers seek~~believe there is a substantial question as to ~~meet~~whether the Indian government will apply the Supreme Court’s ruling on a ~~dual mandate of achieving more efficient and effective operations, while investing in digital technologies that are reshaping their business models. Increasingly,~~retroactive basis. As such, the relative emphasis among our customers is shifting towards investment and innovation, as reflected in accelerated demand for our digital services. We continue to see demand for larger, more complex projects that are transformational for our customers, including managed services contracts. Such contracts may have longer sales cycles and ramp-up periods and could lead to greater period-to-period variability in our operating results. We increased the number of strategic customers by 7 during the quarter, bringing the total numberultimate amount of our ~~strategic customers to 371. We define a strategic customer as one offering~~obligation may be materially different from the ~~potential to generate at least $5 million to $50 million or more in annual revenues at maturity.~~amount accrued.

In ~~the second quarter of 2018,~~February 2019, we provided $100 million of initial funding to Cognizant U.S. Foundation, which is focused on science, technology, engineering and math (or collectively, STEM) education in the United States. This funding was reported in "Selling, general and administrative expenses" incompleted our ~~consolidated statements of operations and was excluded from our non-GAAP income from operations~~³~~, non-GAAP operating margin~~³ ~~and non-GAAP diluted earnings per share~~³ ~~as it is not expected to recur at this magnitude in the foreseeable future.~~

~~Our operating margin increased to 16.7% for the quarter ended June 30, 2018 from 16.5% for the quarter ended June 30, 2017, while our non-GAAP operating margin for the same period increased to 22.0%~~³~~from 20.0%~~³. The increases in both our GAAP and non-GAAP operating margins were due to a decrease, as a percentage of revenues, in compensation and benefit costs as revenue growth outpaced headcount growth and the depreciation of the Indian rupee against the U.S. dollar, partially offset by an increase in fees paid to strategic partners and other vendors related to our managed services and digital products and lower gains on settlement of our cash flow hedges in 2018 compared to 2017. Our GAAP operating margin was further negatively impacted by the initial funding of the Cognizant U.S. Foundation and the increase in amortization expense due to recent acquisitions. For the remainder of 2018, we expect our GAAP and non-GAAP operating margins to trend lower than the second quarter of 2018 as we absorb increased costs related to our annual salary revision and promotion cycles and other planned investments.

On December 22, 2017, the United States enacted the Tax Reform Act, which significantly revised the U.S. corporate income tax law for tax years beginning after December 31, 2017. During the fourth quarter of 2017, we recorded a one-time provisional net income tax expense of $617 million, which reflects certain assumptions based upon our interpretation of the Tax Reform Act and may change, possibly materially, as we receive additional clarification and guidance and as the interpretation of the Tax Reform Act evolves over time. During 2018, we have not recorded any adjustments to the one-time provisional net income tax expense. We anticipate completing the accounting for the Tax Reform Act within the measurement period. See ~~Note 9~~ ~~to our unaudited consolidated financial statements for additional information.~~

As previously disclosed ~~the Company is conducting an~~ internal investigation focused on whether certain payments relating to Company-owned facilities in India were made improperly and in ~~possible~~ violation of the U.S. Foreign Corrupt Practices Act ~~or FCPA,~~("FCPA") and other applicable laws. ~~The investigation is~~We also ~~examining various other payments made in small amounts in India that may not have complied with Company policy or applicable law. In September 2016, we voluntarily notified~~announced a resolution of the previously disclosed investigations by the U.S. Department of Justice ~~or DOJ,~~(the "DOJ") and the U.S. Securities and Exchange Commission ~~or SEC, and are cooperating fully with both agencies. The investigation is being conducted under~~(the "SEC") into the ~~oversight of~~matters that were the Audit Committee, with the assistance of outside counsel. To date, the investigation has identified a total of approximately $6 million in payments made between 2009 and 2016 that may have been improper. In 2016, we recorded an out-of-period correction related to $4 million of such payments that had been previously capitalized that should have been expensed. There were no adjustments recorded during 2018 or 2017 related to the amounts under investigation.

In 2016, there were putative securities class action complaints filed, naming us and certain of our current and former officers as defendants and alleging violations of the Securities Exchange Act of 1934, as amended, or the Exchange Act, based on allegedly false or misleading statements related to potential violations of the FCPA, our business, prospects and operations, and the effectivenesssubject of our internal ~~control over financial reporting and our disclosure controls and procedures. Additionally,~~investigation. In connection with this resolution, in 2017 and 2016, putative shareholder derivative complaints were filed, naming us, certain of our current and former directors and certain of our current and former officers as defendants. See the section titled "~~Part II, Item 1. Legal Proceedings.~~"

~~During the quarters ended June 30, 2018 and 2017,~~February 2019 we ~~incurred $3~~paid approximately $28 million ~~and $8 million, respectively, in costs related~~ to the ~~FCPA investigation~~DOJ and ~~related lawsuits. We expect to continue to incur expenses related to these matters.~~SEC, an amount consistent with our December 31, 2018 accrual for this matter.


3	Non-GAAP income from operations, non-GAAP operating margin and non-GAAP earnings per share are not measurements of financial performance prepared in accordance with GAAP. See “Non-GAAP Financial Measures” for more information and a reconciliation to the most directly comparable GAAP financial measures.

WeAs previously disclosed, we are involved in an ongoing dispute with the Indian Income Tax Department ~~or ITD,~~("ITD") described in ~~connection with which we received a notice in March 2018 asserting that the ITD is owed additional taxes on~~Note 9 to our previously disclosed 2016 India Cash Remittance, the transaction undertaken by our principal operating subsidiary in India, or CTS India, to repurchase shares from its shareholders, which are non-Indian Cognizant entities, valued at $2.8 billion. As a result of that transaction, undertaken pursuant to a plan approved by the Madras High Court in Chennai, India, we previously paid $135 million in Indian income taxes, which we believe are all the applicable taxes owed for this transaction under Indian law.unaudited consolidated financial statements. The ITD is asserting that we owe an additional 33 billion Indian rupees ($482 million at the June 30, 2018 exchange rate) related to the 2016 India Cash Remittance. In addition to the dispute on the 2016 India Cash Remittance, we are involved in another ongoing dispute with the ITD ~~relating to a 2013 transaction undertaken by CTS India to repurchase shares from its shareholders valued at $523 million (the two disputes collectively referred to as~~is currently pending before the ~~ITD Dispute), for which we also believe we have paid all applicable taxes owed. Accordingly, we have not recorded any reserves for these matters as of June 30, 2018. The ITD Dispute is ongoing,~~Madras High Court and no final decision has been reached. While we believe that we have paid all applicable taxes related to the transactions underlying the ITD Dispute, if it is ultimately determined that we are liable for the full amount of additional taxes the ITD alleges we owe, there could be a material adverse effect on our results of operations, cash flows and financial condition.

In March 2018, the ITD placed an attachment on certain of our India bank accounts, relating to the 2016 India Cash Remittance. In April 2018, the Madras High Court granted our application for a stay of the actions of the ITD and lifted the ITD’s attachment of our bank accounts. As part of the interim stay order, we have deposited 5 billion Indian rupees ($72 million at the June 30, 2018 exchange rate) representing 15% of the disputed tax amount related to the 2016 India Cash Remittance, to be kept in a segregated account by the ITD. This amount is presented in "Other current assets" on our consolidated statement of financial position. In addition, the court has placed a lien on certain time deposits of CTS India in the amount of 28 billion Indian rupees ($410 million at the June 30, 2018 exchange rate), which is the remainder of the disputed tax amount related to the 2016 India Cash Remittance. We have classified affected time deposits as restricted assets and reported them in “Short-term investments” on our consolidated statement of financial position. As of June 30, 2018, the restricted time deposits balance was $419 million, including accumulated interest. See ~~Note 9~~ ~~to our unaudited consolidated financial statements for additional information.~~

We finished the second quarter of 2018 with approximately 268,900 employees, which is an increase of approximately 12,100 as compared to June 30, 2017. Annualized turnover, including both voluntary and involuntary, was approximately 22.6% for the three months ended June 30, 2018. The majority of our turnover occurs in India. The higher than usual annualized turnover rate reflects the highly competitive labor market in our industry in the geographies in which we compete for talent, including India. Annualized attrition rates on-site at customers are below our global attrition rate. In addition, attrition is weighted towards the more junior members of our staff.2019 Business Considerations

During the remainder of ~~2018,~~2019, barring any unforeseen events, we expect the following factors to affect our business and our operating results:

Demand from our customers for digital ~~services;~~services and industry-specific changes driven by evolving digital technologies;

Our customers' dual mandate of simultaneously achieving cost savings while investing in transformation and innovation;

~~Continued focus~~Discretionary spending by our customers ~~on directing technology spending towards cost containment projects;~~may be negatively affected by international trade policies as well as other macroeconomic factors;

~~Secular changes driven~~Customer demand may be impacted by ~~evolving digital technologies~~uncertainty related to the potential economic and regulatory ~~changes, including potential regulatory changes with respect~~impacts of the 2016 United Kingdom referendum to ~~immigration and taxes;~~

~~Demand from our healthcare customers may continue to be affected by~~exit the ~~uncertainty in the regulatory and secular environments;~~European Union;

Demand from certain banking customers may continue to be negatively affected by their ongoing efforts to optimize the cost of supporting their legacy systems and operations, ~~as they shift~~including through insourcing, while we expect their ~~spend to~~demand for our transformation and digital ~~services;~~services to continue to increase;

~~Discretionary spending by~~Demand from our ~~retail~~healthcare customers may continue to be affected by ~~weakness~~uncertainty in the ~~retail sector;~~regulatory environment and industry-specific trends, including industry consolidation and convergence;

~~Legal fees~~Demand among our technology customers may be affected by uncertainty in the regulatory environment while significant merger and ~~other expenses~~acquisition activity continues to impact our customers in the communications and media industry;

Potential disruption of our operations related to our new CEO transition, including any disruption from the ~~internal investigation~~diversion of efforts of the executive management team and ~~related matters as described above;~~possible departures of senior personnel;

Uncertainty regarding regulatory changes, including potential regulatory changes with respect to immigration and taxes;


•	Costs related to the potential resolution of legal and regulatory matters discussed in Note 13 in our unaudited consolidated financial statements;

Volatility in foreign currency ~~rates.~~rates; and

Clarification, if any, by the Indian government as to the application of the Supreme Court's ruling related to the India Defined Contribution Obligation.

In response to this environment, we plan to:

Continue to invest in our digital ~~practice areas of focus~~capabilities across industries and geographies;

Continue to invest in our talent base, including through local hiring and re-skilling, and new service offerings, including digital technologies and new delivery models;

Partner with our existing customers to garner an increased portion of our customers’ overall spend by providing innovative solutions;

Focus on growing our business in Europe, the Middle East, Asia Pacific and Latin America, where we believe there are opportunities to gain market share;

~~Increase our strategic customer base across all of our business segments;~~

Pursue strategic ~~acquisition opportunities~~acquisitions that we believe add new technologies, including digital technologies, or platforms that complement our existing services, improve our overall service delivery capabilities, ~~and/~~or expand our geographic presence; and

Focus on operating discipline in order to appropriately manage our cost structure.



Business Segments

Our reportable segments are:

Financial Services, which consists of our banking and insurance operating segments;

Healthcare, which consists of our healthcare and life sciences operating segments;

Communications, Media and Technology, which includes our communications and media operating segment and our technology operating segment.

Our sales managers, account executives, account managers and project teams are aligned in accordance with the specific industries they serve. Our chief operating decision maker evaluates the Company’s performance and allocates resources based on segment revenues and operating profit. Segment operating profit is defined as income from operations before unallocated costs. Generally, operating expenses for each operating segment have similar characteristics and are subject to the same factors, pressures and challenges. However, the economic environment and its effects on industries served by our operating segments may affect revenues and operating expenses to differing degrees.

In 2018, we made changes to the internal measurement of segment operating profits for the purpose of evaluating segment performance and resource allocation. The primary reason for the changes is to charge to our business segments costs that are directly managed and controlled by them. Specifically, segment operating profit now includes the stock-based compensation expense of sales managers, account executives, account managers and project teams, which was previously included in "unallocated costs." In addition, we have changed the methodology of charging our business segments for the use of our global delivery centers and infrastructure from a fixed per employee charge to a variable per employee charge that differs depending on location and assets deployed. We have reported our segment operating profits using the new measurement methodology and have restated the prior period results to conform to the new methodology.

We provide a significant volume of services to many customers in each of our business segments. Therefore, a loss of a significant customer or a few significant customers in a particular segment could materially reduce revenues for that segment. However, ~~no individual customer accounted for sales in excess of 10% of our consolidated revenues for the periods ended June 30, 2018 and 2017. In addition,~~ the services we provide to our larger customers are often critical to the operations of such ~~customers. As such,~~customers, and we believe that a termination of our services would in many instances require an extended transition period with gradually declining revenues.

In 2019, we made changes to the internal measurement of segment operating profits. See Note 14 to our unaudited consolidated financial statements for additional information relating to this change and on our business segments.



Results of Operations

Three Months Ended ~~June 30, 2018~~March 31, 2019 Compared to Three Months Ended ~~June 30, 2017~~March 31, 2018

The following table sets forth, for the periods indicated, certain financial data for the three months ended ~~June 30:~~March 31:



				% of				% of	Increase / Decrease
	2019			Revenues	2018			Revenues	$			%
	(Dollars in millions, except per share data)
Revenues	$	4,110		100.0	$	3,912		100.0	$	198		5.1
Cost of revenues⁽¹⁾	2,575			62.7	2,401			61.4	174			7.2
Selling, general and administrative expenses⁽¹⁾	873			21.2	711			18.2	162			22.8
Depreciation and amortization expense	123			3.0	107			2.7	16			15.0
Income from operations	539			13.1	693			17.7	(154		)	(22.2	)
Other income (expense), net	44				4				40			1,000.0
Income before provision for income taxes	583			14.2	697			17.8	(114		)	(16.4	)
Provision for income taxes	(142		)		(177		)		35			(19.8	)
Net income	$	441		10.7	$	520		13.3	$	(79	)	(15.2	)
Diluted earnings per share	$	0.77			$	0.88			$	(0.11	)

Other Financial Information³
Adjusted Income from Operations and Adjusted Operating Margin	$	658		16.0	$	694		17.7	$	(36	)	(5.2	)
Adjusted Diluted EPS	$	0.91			$	0.94			$	(0.03	)	(3.2	)

% of % of
Increase / Decrease⁽¹⁾

2018⁽¹⁾
Revenues
2017⁽¹⁾
Revenues $ %
(Dollars in millions, except per share data)
Revenues $ 4,006
100.0 $ 3,670
100.0 $ 336
9.2
Cost of revenues⁽²⁾
2,417
60.3 2,261
61.6 156
6.9
Selling, general and administrative expenses⁽²⁾
805
20.1 709
19.3 96
13.5
Depreciation and amortization expense 114
2.8 94
2.6 20
21.3
Income from operations 670
16.7 606
16.5 64
10.6
Other income (expense), net (47 ) 29
(76 ) (262.1 )
Income before provision for income taxes 623
15.6 635
17.3 (12 ) (1.9 )
Provision for income taxes (168 ) (165 ) (3 ) 1.8
Income from equity method investments 1
—
1

Net income $ 456
11.4 $ 470
12.8 $ (14 ) (3.0 )
Diluted earnings per share $ 0.78
$ 0.80
$ (0.02 )

Other Financial Information⁽³⁾

Non-GAAP income from operations and non-GAAP operating margin $ 882
22.0 $ 735
20.0 $ 147
20.0
Non-GAAP diluted earnings per share $ 1.19
$ 0.93
$ 0.26

_____________________

(1)

On January 1, 2018, we adopted the New Revenue Standard using the modified retrospective method. Results for reporting periods beginning after January 1, 2018 are presented under the New Revenue Standard, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting policies. For the three months ended June 30, 2018, adoption of the New Revenue Standard had a positive impact on revenue of $31 million, income from operations of $38 million and diluted earnings per share of $0.05 per share. See ~~Note 3~~ ~~to our unaudited consolidated financial statements for additional information.~~


~~(2)~~	Exclusive of depreciation and amortization expense.

Revenues - Overall

During the quarter ended March 31, 2019, revenues increased by $198 million as compared to the quarter ended March 31, 2018, representing growth of 5.1%, or 6.8% on a constant currency basis³. Revenues from customers added since March 31, 2018 were $146 million.

Revenues from our top customers as a percentage of total revenues were as follows:



	Three Months Ended March 31,
	2019		2018
Top five customers	8.8	%	9.0	%
Top ten customers	15.7	%	15.9	%

~~(3)~~

~~Non-GAAP income from operations, non-GAAP operating margin~~Adjusted Income From Operations, Adjusted Operating Margin, Adjusted Diluted EPS and ~~non-GAAP diluted earnings per share~~constant currency revenue growth are not measurements of financial performance prepared in accordance with GAAP. See “Non-GAAP Financial Measures” for more information and ~~a reconciliation~~reconciliations to the most directly comparable GAAP financial ~~measure.~~measures.

~~Revenues - Overall~~

Our revenue growth was primarily attributed to services related to integration of digital technologies that are reshaping our customers' business, operating and technology models to align with shifts in consumer preferences, increased customer spending on discretionary projects, continued interest in using our global delivery model as a means to reduce overall technology and operations costs and continued penetration in all our geographic markets. Revenues from customers added since June 30, 2017 were $126 million and represented 37.5% of the period-over-period revenue increase.

Our consulting and technology services revenues for the three months ended June 30, 2018 increased by 6.0% compared to the three months ended June 30, 2017 and represented 57.1% of total revenues for the three months ended June 30, 2018. Our outsourcing services revenues for the three months ended June 30, 2018 increased by 13.6% and constituted 42.9% of total revenues for the three months ended June 30, 2018.

On January 1, 2018, we adopted the New Revenue Standard using the modified retrospective method. For the three months ended June 30, 2018, adoption of the New Revenue Standard had a positive impact on revenue of $31 million. See ~~Note 3~~ ~~to our unaudited consolidated financial statements for additional information.~~

~~Revenues from our top customers as a percentage of total revenues were as follows:~~

Three Months Ended June 30,
2018 2017
Top five customers 8.6 % 9.0 %
Top ten customers 15.4 % 15.1 %

Revenues - Reportable Business Segments

Revenues by reportable business segment were as follows for the three months ended ~~June 30:~~March 31:


	2018		2017		Increase			2019		2018		Increase/ (Decrease)
	2018		2017		$		%	2019		2018		$			%		CC %⁴
	(Dollars in millions)							(Dollars in millions)
Financial Services	$	1,469	$	1,406	$	63	4.5	$	1,436	$	1,461	$	(25	)	(1.7	)	0.2	%
Healthcare	1,156		1,050		106		10.1	1,165		1,121		44			3.9		4.6	%
Products and Resources	840		747		93		12.4	914		821		93			11.3		13.8	%
Communications, Media and Technology	541		467		74		15.8	595		509		86			16.9		19.6	%
Total revenues⁽¹⁾	$	4,006	$	3,670	$	336	9.2	$	4,110	$	3,912	$	198		5.1		6.8	%

~~_____________________~~


~~(1)~~	~~Results for 2018 are presented under the New Revenue Standard, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting policies. See~~ ~~Note 3~~ ~~to our unaudited consolidated financial statements for additional information.~~

Financial Services

Revenues from our Financial Services segment declined 1.7%, but grew ~~4.5%, inclusive of~~0.2% on a ~~positive~~constant currency ~~impact of 1.0%~~basis⁴, for the three months ended ~~June 30, 2018,~~March 31, 2019, as compared to the three months ended ~~June 30, 2017. Growth was stronger~~March 31, 2018. Revenues in this segment increased by $9 million among our insurance customers ~~where revenues increased by $54 million~~ as compared to ~~an increase~~a decline of $9$34 million ~~for~~from our banking ~~customers. In this segment, revenues~~customers primarily in our North America and Rest of World regions. Revenues from customers added since ~~June 30, 2017~~March 31, 2018 were ~~$36 million and represented 57.1% of the period-over-period revenues increase~~$19 million. Demand in this ~~segment. Key areas~~segment was driven by our customers' focus on cost optimization in the face of ~~focus for our Financial Services customers included~~profitability pressures, the need to be compliant with significant regulatory requirements and adaptable to regulatory change, and their adoption and integration of digital technologies that are reshaping our customers' business and operating models, ~~cost optimization,~~including customer experience enhancement, robotic process automation ~~cyber security~~ and ~~vendor consolidation.~~analytics and artificial intelligence. Demand from certain banking customers has been and may continue to be negatively affected byas they transition the support of some of their ~~ongoing efforts to optimize the cost of supporting their~~legacy systems and operations ~~as they shift their spend~~ to offshore captives, while demand for our transformation and digital ~~services.~~services continues to increase.

Healthcare

Revenues from our Healthcare segment grew ~~10.1%~~3.9%, or 4.6% on a constant currency basis⁴, for the three months ended ~~June 30, 2018,~~March 31, 2019, as compared to the three months ended ~~June 30, 2017. Growth was stronger~~March 31, 2018. Revenues in this segment increased by $54 million among our life science customers compared to a decline of $10 million from our healthcare customers. Revenues from our healthcare customers ~~where revenues increased~~were negatively impacted by ~~$100 million, including~~the mergers within the segment, the establishment of an offshore captive by a large customer, and a ramp down of a customer relationship in which we were a subcontractor to a third party for the purpose of delivering healthcare-related systems implementation services to local government, partially offset by revenues from Bolder, ~~Healthcare Solutions~~which we acquired in the second quarter of ~~2018 and a new strategic customer acquired in the third quarter of 2017, as compared to an increase of $6 million for our life sciences customers.~~2018. Revenues from customers added since ~~June 30, 2017~~March 31, 2018, including Bolder's customers, were $52 ~~million and represented 49.1% of the period-over-period revenues increase~~million. Demand in this ~~segment. The demand for~~segment was driven by emerging industry trends, including enhanced compliance, integrated health management, claims investigative services, as well as services that drive operational improvements in areas such as claims processing, enrollment, membership and billing, in addition to the adoption and integration of digital technologies, such as artificial intelligence, personalized care plans and predictive data analytics to improve patient outcomes. Demand from our ~~services among life science customers has been affected by reduced discretionary spending. The demand for our services among~~ healthcare customers may continue to be affected by uncertainty in the regulatory ~~environment.~~environment and industry-specific trends, including industry consolidation and convergence. We believe that in the long term the healthcare industry continues to present a significant growth opportunity due to factors that are transforming the industry, including the changing regulatory environment, increasing focus on medical costs and the consumerization of healthcare.

_____________


⁴	Constant currency revenue growth is not a measurement of financial performance prepared in accordance with GAAP. See “Non-GAAP Financial Measures” for more information.

Products and Resources

Revenues from our Products and Resources segment grew ~~12.4%~~11.3%, ~~inclusive of~~or 13.8% on a ~~positive~~constant currency ~~impact of 1.7%~~basis⁵, for the three months ended ~~June 30, 2018,~~March 31, 2019, as compared to the three months ended ~~June 30, 2017.~~March 31, 2018. Revenue growth ~~in this segment~~ was strongest among ~~our manufacturing and logistics customers and energy and utilities customers where revenues increased by a combined $66 million. Revenues from~~ our retail and consumer goods customers and travel and hospitality customers, where revenue increased by ~~a combined $27~~$68 million. Revenues from our manufacturing, logistics, energy and utilities customers increased by $25 million. Revenues from customers added since ~~June 30, 2017~~March 31, 2018 were ~~$31 million, representing 33.3% of the period-over-period revenue increase~~$44 million. Demand in this ~~segment. Demand within this~~ segment ~~continues to be~~was driven by ~~increased~~our customers’ focus on improving the efficiency of their operations, the enablement and integration of mobile platforms to support sales and other omni-channel commerce initiatives, and their adoption

and integration of digital technologies, ~~that are reshaping our customers' business and operating models,~~such as ~~well as growing demand for analytics,~~the application of intelligent systems to manage supply chain ~~consulting, implementation initiatives, smart products, transformation of business models, internet of things~~ and ~~omni channel commerce implementation and integration services. Discretionary spending by our retail customers has been and may continue to be affected by weakness in the retail sector.~~enhance overall customer experiences.

Communications, Media and Technology

Revenues from our Communications, Media and Technology segment grew ~~15.8%~~16.9%, ~~inclusive of~~or 19.6% on a ~~positive~~constant currency ~~impact of 1.5%~~basis⁵, for the three months ended ~~June 30, 2018,~~March 31, 2019, as compared to the three months ended ~~June 30, 2017. Revenue growth~~March 31, 2018. Growth was ~~$59 million~~stronger among our technology customers ~~and $15~~where revenues increased $74 million ~~among~~as compared to an increase of $12 million for our communications and media customers. Revenues from customers added since ~~June 30, 2017~~March 31, 2018 were ~~$7 million and represented 9.5% of the period-over-period revenue increase~~$31 million. Demand in ~~this segment. Growth within~~ this segment was driven by ~~the increased adoption of digital technologies,~~our customers’ need to manage their digital content, ~~operations, services to help our customers balance rationalizing costs while creating a~~create differentiated user ~~experience and an expanded~~experiences, expand their range of services, including business process ~~services. Revenue growth~~services, transition to agile development methodologies, enhance their network and adopt and integrate digital technologies, such as cloud enablement and interactive and connected products. Additionally, demand among our ~~communications~~technology customers ~~has been and~~ may ~~continue to~~ be ~~negatively~~ affected by uncertainty ~~due to~~in the regulatory environment while significant merger and acquisition activity continues to impact our customers in ~~their~~the communications and media industry. A significant portion of the revenue growth within this segment was generated by a small number of customers and there can be no guarantee that the revenue generated by these customers will continue to grow at a similar pace.

Revenues - Geographic Markets

Revenues by geographic market were as follows for the three months ended ~~June 30:~~March 31:


	2018		2017		Increase			2019		2018		Increase
	2018		2017		$		%	2019		2018		$		%	CC %⁵
	(Dollars in millions)							(Dollars in millions)
North America	$	3,067	$	2,851	$	216	7.6	$	3,123	$	2,975	$	148	5.0	5.0
United Kingdom	309		288		21		7.3	329		310		19		6.1	12.1
Rest of Europe	381		291		90		30.9	405		374		31		8.3	16.2
Europe - Total	690		579		111		19.2	734		684		50		7.3	14.3
Rest of World	249		240		9		3.8	253		253		—		—	7.1
Total revenues⁽¹⁾	$	4,006	$	3,670	$	336	9.2	$	4,110	$	3,912	$	198	5.1	6.8

~~_____________________~~


~~(1)~~	~~Results for 2018 are presented under the New Revenue Standard, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting policies. See~~ ~~Note 3~~ ~~to our unaudited consolidated financial statements for additional information.~~

North America continues to be our largest market, representing ~~76.6%~~76.0% of total revenues for the ~~second~~first quarter of ~~2018,~~2019 and ~~64.3%~~74.7% of total revenue growth from the second quarter of 2017. Revenues from our customers in Europe grew 19.2% inclusive of a positive currency impact of 6.4%. Specifically, revenues from our Rest of Europe customers, increased 30.9% inclusive of a positive currency impact of 7.1%, while within the United Kingdom we experienced an increase in revenues of 7.3% inclusive of a positive currency impact of 5.8%. Revenues from our Rest of World customers grew 3.8% in the secondfirst quarter of 2018. Revenue growth from our North America customers was driven by our Communications, Media and Technology and Products and Resources segments. Revenue growth in ~~the United Kingdom~~our North America and Rest of World regions was negatively affected as certain customers in these regions transition the support of some of their legacy systems and operations to offshore captives, while demand for our transformation and digital services continues to increase. Revenues in our Healthcare segment in our North America region was negatively impacted by ~~weakness~~the mergers within the segment, the establishment of an offshore captive by a large customer, and a ramp down of a customer relationship in which we were a subcontractor to a third party for the ~~banking sector in those regions.~~purpose of delivering healthcare-related systems implementation services to local government, partially offset by revenues from Bolder. We believe that Europe, India, Middle East, Asia Pacific and Latin America ~~will continue to be areas of significant investment for us as we see these~~ regions asrepresent long term growth opportunities.

_____________


⁵	Constant currency revenue growth is not a measurement of financial performance prepared in accordance with GAAP. See “Non-GAAP Financial Measures” for more information.

Cost of Revenues (Exclusive of Depreciation and Amortization Expense)

Our cost of revenues consists primarily of salaries, incentive-based compensation, stock-based compensation expense, employee benefits, project-related immigration and travel for technical personnel, subcontracting and ~~subcontracting~~equipment costs relating to revenues. Our cost of revenues increased by ~~6.9%~~7.2% during the ~~second~~first quarter of ~~2018~~2019 as compared to the ~~second~~first quarter of ~~2017, decreasing~~2018, increasing as a percentage of revenues to ~~60.3%~~62.7% in the ~~second~~first quarter of ~~2018~~2019 compared to ~~61.6%~~61.4% in the ~~second~~first quarter of ~~2017.~~2018. The ~~decrease~~increase in cost of revenues, as a percentage of revenues, was due primarily to ~~a decrease~~an increase in ~~compensation~~costs related to our delivery personnel (including employees and ~~benefits as~~subcontractors) outpacing revenue growth ~~outpaced headcount growth~~ and higher costs incurred for strategic partners and other vendors in supporting the delivery of our digital operations, platform and infrastructure services, partially offset by the depreciation of the Indian rupee ~~against~~(net of the ~~U.S. dollar, partially offset by an increase in fees paid to strategic partners and other vendors related to our managed services and digital products and lower realized gains on~~impact of the settlement of our cash flow ~~hedges in 2018 compared to 2017. Compensation and benefits costs increased by $66 million when compared to the three months ended June 30, 2017, as the number of our technical personnel increased.~~

hedges).

Selling, General and Administrative Expenses and Depreciation and Amortization Expense

Selling, general and administrative expenses consist primarily of salaries, incentive-based compensation, stock-based compensation expense, employee benefits, immigration, travel, marketing, communications, management, finance, administrative and occupancy costs. Selling, general and administrative expenses ~~including depreciation and amortization,~~ increased by ~~14.4%~~22.8% during the ~~second~~first quarter of ~~2018~~2019 as compared to the ~~second~~first quarter of ~~2017,~~2018, increasing as a percentage of revenues to ~~22.9%~~21.2% in the ~~second~~first quarter of 2019 as compared to 18.2% in the first quarter of 2018. The increase is primarily due to the incremental accrual related to the India Defined Contribution Obligation recorded in the first quarter of 2019, which represented 2.9% of revenues. The increase in depreciation and amortization expense to 3.0% of revenues in the first quarter of 2019 from 2.7% of revenues in the first quarter of 2018 ~~as compared~~was primarily driven by the amortization of intangible assets acquired in recent business combinations.

Income from Operations and Operating Margin - Overall

Our operating margin and Adjusted Operating Margin⁶decreased to ~~21.9%~~13.1% and 16.0%, respectively, for the first quarter of 2019 from 17.7% in the ~~second~~first quarter of ~~2017.~~2018. The decreases in our GAAP operating margin and Adjusted Operating Margin⁵ were due to an increase ~~as a percentage~~in costs related to our delivery personnel (including employees and subcontractors) outpacing revenue growth. The margins were further impacted by higher costs incurred for strategic partners and other vendors in supporting the delivery of ~~revenues was due primarily to the initial funding of the Cognizant U.S. Foundation~~our digital operations, platform and ~~increases in~~infrastructure services and amortization expense due to recent acquisitions, partially offset by ~~a decrease in compensation and benefit costs.~~

~~Income from Operations and Operating Margin - Overall~~

Income from operations increased 10.6% in the second quarter of 2018 as compared to the second quarter of 2017. Our operating margin increased to 16.7% for the quarter ended June 30, 2018 from 16.5% for the quarter ended June 30, 2017, primarily due to a decrease, as a percentage of revenues, in compensation and benefit costs as revenue growth outpaced headcount growth and the depreciation of the Indian rupee ~~against the U.S. dollar, partially offset by the initial funding~~(net of the ~~Cognizant U.S. Foundation, an increase in fees paid to strategic partners and other vendors related to our managed services and digital products, an increase in amortization expense due to~~impact of the ~~recent acquisitions and lower gains on~~ settlement of our cash flow ~~hedges~~hedges). Our GAAP operating margin was additionally impacted by the $117 million incremental accrual related to the India Defined Contribution Obligation recorded in ~~2018 compared to 2017.~~ the first quarter of 2019.

Excluding the impact of applicable designated cash flow hedges, the depreciation of the Indian rupee against the U.S. dollar positively impacted our operating margin by approximately 66164 basis points, or ~~0.66~~1.64 percentage points, in the three months ended ~~June 30, 2018.~~March 31, 2019. Each additional 1.0% change in the exchange rate between the Indian rupee and the U.S. dollar will have the effect of moving our operating margin by approximately 17 basis points or 0.17 percentage points.

We entered into foreign exchange forward contracts to hedge certain Indian rupee denominated payments in India. These hedges are intended to mitigate the volatility of the changes in the exchange rate between the U.S. dollar and the Indian rupee. During the three months ended ~~June 30, 2018,~~March 31, 2019, the settlement of our cash flow hedges ~~positively~~negatively impacted our operating margin by approximately 5210 basis points or ~~0.52~~0.10 percentage points as compared to a positive impact of approximately 9589 basis points or ~~0.95~~0.89 percentage points during the three months ended ~~June 30, 2017.~~March 31, 2018.

~~For~~We finished the first quarter of 2019 with approximately 285,800 employees, which is an increase of approximately 24,400 as compared to March 31, 2018. Annualized turnover, including both voluntary and involuntary, was approximately 18.8% for the three months ended ~~June 30, 2018 and 2017, our non-GAAP operating margins were 22.0%~~⁴~~and 20.0%~~⁴~~, respectively. As set forth in the “Non-GAAP Financial Measures” section~~March 31, 2019. Average annualized attrition rates on-site at customers are below our non-GAAP operating margin excludes stock based compensation expense, acquisition-related charges, realignment charges and in the second quarter of 2018, the initial funding of the Cognizant U.S. Foundation.

For the remainder of 2018, we expect our GAAP and non-GAAP operating margins to trend lower than the second quarter of 2018 as we absorb increased costs related to our annual salary revision and promotion cycles and other planned investments.

~~Segment Operating Profit~~

In 2018, we made changes to the internal measurement of segment operating profits for the purpose of evaluating segment performance and resource allocation. The primary reason for the changes is to charge to our business segments costs that are directly managed and controlled by them. Specifically, segment operating profit now includes the stock-based compensation expense of sales managers, account executives, account managers and project teams, which was previously included in "unallocated costs."global attrition rate. In addition, ~~we have changed~~attrition is weighted towards the ~~methodology of charging our business segments for the use~~more junior members of our global delivery centers and infrastructure from a fixed per employee charge to a variable per employee charge that differs depending on location and assets deployed. We have reported our segment operating profits using the new measurement methodology and have restated the prior period results to conform to the new methodology.staff.

_______________


4 ⁶	~~Non-GAAP operating margin~~Adjusted Operating Margin is not a measurement of financial performance prepared in accordance with GAAP. See “Non-GAAP Financial Measures” for more information and a reconciliation to the most directly comparable GAAP financial measure.

Segment Operating Profit

Segment operating profits were as follows for the three months ended ~~June 30:~~March 31:


					Increase
	2018		2017		$		%	2019		Operating Margin %	2018		Operating Margin %	Increase / (Decrease)
	(Dollars in millions)							(Dollars in millions)
Financial Services	$	462	$	445	$	17	3.8	$	400	27.3	$	440	30.1	$	(40	)
Healthcare	357		345		12		3.5	337		28.3	337		30.1	—
Products and Resources	258		230		28		12.2	234		27.1	253		30.8	(19		)
Communications, Media and Technology	179		156		23		14.7	174		31.0	158		31.0	16
Total segment operating profit	1,256		1,176		80		6.8	1,145		27.9	1,188		30.4	(43		)
Less: unallocated costs	586		570		16		2.8	606			495			111
Income from operations	$	670	$	606	$	64	10.6	$	539	13.1	$	693	17.7	$	(154	)

In our Financial Services, Healthcare, and Products and Resources segments operating margins decreased as compensation, benefit and subcontractor costs outpaced revenue growth. Additionally, operating margins in Healthcare were negatively affected by mergers among several of our healthcare customers while bankruptcy filings by some of our Products and Resources customers negatively affected the profitability of that segment. In our Communications, Media and Technology ~~business segments,~~segment, operating ~~profits decreased as a percentage of revenues~~margins remained relatively flat. The increase in our unallocated costs was primarily due to ~~investments to accelerate our shift to digital, including re-skilling of service delivery personnel, an increase in subcontractor costs and an increase in fees paid~~the incremental accrual related to the ~~strategic partners and other vendors related to our managed services and digital products, partially offset by~~India Defined Contribution Obligation recorded in the ~~positive impact~~first quarter of revenue growth outpacing headcount growth and the depreciation of the Indian rupee against the U.S. dollar. In our Products and Resources business segment, operating profits remained flat as a percentage of revenues.2019.

Other Income (Expense), Net

Total other income (expense), net consists primarily of foreign currency exchange gains and ~~(losses),~~losses, interest income and interest expense. The following table sets forth total other income (expense), net for the three months ended ~~June 30:~~March 31:

2018 2017
Increase/
Decrease
(in millions)
Foreign currency exchange (losses) gains $ (98 ) $ 8
$ (106 )
Gains (losses) on foreign exchange forward contracts not designated as hedging instruments 18
(3 ) 21
Net foreign currency exchange (losses) gains (80 ) 5
(85 )
Interest income 40
31
9
Interest expense (7 ) (6 ) (1 )
Other, net —
(1 ) 1
Total other (expense) income, net $ (47 ) $ 29
$ (76 )



	2019			2018			Increase/ Decrease
	(in millions)
Foreign currency exchange gains (losses)	$	3		$	(33	)	$	36
(Losses) gains on foreign exchange forward contracts not designated as hedging instruments	(1		)	2			(3		)
Foreign currency exchange gains (losses), net	2			(31		)	33
Interest income	48			41			7
Interest expense	(7		)	(6		)	(1		)
Other, net	1			—			1
Total other income (expense), net	$	44		$	4		$	40

The foreign currency exchange gains and losses were primarily attributed to the remeasurement of the Indian rupee denominated net monetary assets and liabilities in our U.S. dollar functional currency India subsidiaries ~~as well as~~and, to a lesser extent, the remeasurement of other net monetary assets and liabilities denominated in currencies other than the functional currencies of our subsidiaries. The gains and losses on our foreign exchange forward contracts not designated as hedging instruments ~~relate~~related to the realized and unrealized gains and losses on foreign exchange forward contracts entered into primarily to offset foreign currency exposure to the Euro, Indian rupee, Canadian dollar, British pound and other non-U.S. dollar denominated net monetary assets and liabilities. As of ~~June 30, 2018,~~March 31, 2019, the notional value of our undesignated hedges was ~~$432~~$410 million. The increase in interest income of $9$7 million was primarily attributable to an increase in average invested balances and higher yields in ~~2018.~~2019.

Provision for Income Taxes

The provision for income taxes ~~increased~~decreased to ~~$168~~$142 million during the three months ended ~~June 30, 2018~~March 31, 2019 from ~~$165~~$177 million during the three months ended ~~June 30, 2017.~~March 31, 2018. The effective income tax rate ~~increased~~decreased to ~~27.0%~~24.4% for the three months ended ~~June 30, 2018 from 26.0%~~March 31, 2019 compared to 25.4% for the three months ended June 30, 2017 primarily due to a higher effective income tax rate for our India subsidiaries resulting from the foreign currency exchange gains on their statutory books as the Indian rupee depreciated against the U.S. dollar. The estimate of our 2018 annual effective income tax rate reflects the current interpretation of the Tax Reform Act, including the GILTI provision and may change as we receive additional clarification and guidance and as the interpretation of the Tax Reform Act evolves over time.

March 31, 2018.

Net Income

Net income decreased to ~~$456~~$441 million for the three months ended ~~June 30, 2018~~March 31, 2019 from ~~$470~~$520 million for the three months ended ~~June 30, 2017,~~March 31, 2018, representing ~~11.4%~~10.7% and ~~12.8%~~13.3% of revenues, respectively. The decrease in net income is primarily due to ~~foreign currency exchange losses~~the $117 million incremental accrual related to the India Defined Contribution Obligation recorded in ~~2018 compared to gains in 2017, partially offset by an increase in income from operations.~~the first quarter of 2019.

Non-GAAP Financial Measures

Portions of our disclosure ~~including the following table,~~ include non-GAAP ~~income from operations, non-GAAP operating margin, and non-GAAP diluted earnings per share.~~financial measures. These non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles and should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and may be different from non-GAAP financial measures used by other companies. In addition, these non-GAAP financial measures should be read in conjunction with our financial statements prepared in accordance with GAAP. The reconciliations of ~~Cognizant’s~~our non-GAAP financial measures to the corresponding GAAP measures, set forth below, should be carefully evaluated.

Our ~~non-GAAP income from operations~~Adjusted Operating Margin and ~~non-GAAP operating margin~~Adjusted Income From Operations exclude ~~stock-based compensation expense, acquisition-related charges, realignment charges~~unusual items and ~~in the second quarter of 2018, the initial funding of the Cognizant U.S. Foundation. Our definition of non-GAAP diluted earnings per share~~our Adjusted Diluted EPS additionally excludes net non-operating foreign currency exchange gains or losses and the effect of recognition in the first quarter of 2017 of an income tax benefit previously unrecognized in our consolidated financial statements related to a specific uncertain tax position, in addition to excluding stock-based compensation expense, acquisition-related charges, realignment charges and, in the second quarter of 2018, the initial funding of the Cognizant U.S. Foundation. Our non-GAAP diluted earnings per share is additionally adjusted for the income tax impact of ~~the above items, as applicable.~~all applicable adjustments. The income tax impact of each item is calculated by applying the statutory rate and local tax regulations in the jurisdiction in which the item was incurred. Free cash flow is defined as cash flows from operating activities net of purchases of property and equipment. Constant currency revenue growth is defined as revenues for a given period restated at the comparative period’s foreign currency exchange rates measured against the comparative period's reported revenues.

We believe providing investors with an operating view consistent with how we manage the Company provides enhanced transparency into ~~the~~our operating ~~results of the Company.~~results. For our internal management reporting and budgeting purposes, we use various GAAP and non-GAAP financial measures for financial and operational ~~decision making,~~decision-making, to evaluate period-to-period comparisons, to determine portions of the compensation for our executive officers and for making comparisons of our operating results to those of our competitors. In addition, due to a variety of award types, valuation methodologies and subjective assumptions that affect the calculations of stock-based compensation expense, we believe that the exclusion of stock-based compensation expense allows for more accurate comparisons of our operating results to those of our competitors. Therefore, it is our belief that the use of non-GAAP financial measures excluding ~~these~~certain costs provides a meaningful supplemental measure for investors to evaluate our financial performance. ~~Accordingly, we~~We believe that the presentation of our non-GAAP ~~income~~financial measures (Adjusted Income from ~~operations, non-GAAP operating margin~~Operations, Adjusted Operating Margin, Adjusted Diluted EPS, free cash flow and ~~non-GAAP diluted earnings per share, when read in conjunction~~constant currency revenue growth) along with ~~our reported~~reconciliations to the most comparable GAAP ~~results,~~measure, as applicable, can provide useful supplemental information to our management and investors regarding financial and business trends relating to our financial condition and results of operations.

A limitation of using non-GAAP financial measures versus financial measures calculated in accordance with GAAP is that non-GAAP financial measures do not reflect all of the amounts associated with our operating results as determined in accordance with GAAP and may exclude costs that are recurring ~~namely stock-based compensation expense, certain acquisition-related charges, and~~such as our net non-operating foreign currency exchange gains or losses. In addition, other companies may calculate non-GAAP financial measures differently than us, thereby limiting the usefulness of these non-GAAP financial measures as a comparative tool. We compensate for these limitations by providing specific information regarding the GAAP amounts excluded from our non-GAAP ~~income from operations, non-GAAP operating margin and non-GAAP diluted earnings per share~~financial measures to allow investors to evaluate such non-GAAP financial measures.

The following table presents a reconciliation of each non-GAAP financial measure to the most comparable GAAP measure for the three months ended ~~June 30:~~March 31:

2018
% of
Revenues
2017
% of
Revenues
(Dollars in millions, except per share amounts)
GAAP income from operations and operating margin $ 670
16.7 $ 606
16.5
Add: Stock-based compensation expense ⁽¹⁾
71
1.8 55
1.5
Add: Acquisition-related charges ⁽²⁾
41
1.0 35
1.0
Add: Realignment charges ⁽³⁾
—
— 39
1.0
Add: Initial funding of Cognizant U.S. Foundation ⁽⁴⁾
100
2.5 —
—
Non-GAAP income from operations and non-GAAP operating margin $ 882
22.0 $ 735
20.0

GAAP diluted earnings per share $ 0.78
$ 0.80

Effect of above operating adjustments, pre-tax 0.36
0.22

Effect of non-operating foreign currency exchange (gains) losses, pre-tax ⁽⁵⁾
0.14
(0.01 )
Tax effect of non-GAAP adjustments to pre-tax income ⁽⁶⁾
(0.09 ) (0.08 )
Non-GAAP diluted earnings per share $ 1.19
$ 0.93



	2019			% of Revenues	2018			% of Revenues
	(Dollars in millions, except per share amounts)
GAAP income from operations and operating margin	$	539		13.1	$	693		17.7
Realignment charges ⁽¹⁾	2			—	1			—
Incremental accrual related to the India Defined Contribution Obligation ⁽²⁾	117			2.9	—			—
Adjusted Income from Operations and Adjusted Operating Margin	$	658		16.0	$	694		17.7

GAAP diluted EPS	$	0.77			$	0.88
Effect of above adjustments, pre-tax	0.20				—
Non-operating foreign currency exchange (gains) losses, pre-tax ⁽³⁾	(0.01		)		0.06
Tax effect of above adjustments ⁽⁴⁾	(0.05		)		—
Adjusted Diluted EPS	$	0.91			$	0.94

Net cash provided by operating activities	$	269			$	388
Purchases of property and equipment	(106		)		(96		)
Free cash flow	$	163			$	292

_____________________


(1)	~~Stock-based compensation expense reported in:~~

Three Months Ended
June 30,
2018 2017
(in millions)
Cost of revenues $ 16
$ 13
Selling, general and administrative expenses 55
42

~~(2)~~

~~Acquisition-related charges include, when applicable, amortization~~

During the three months ended March 31, 2019, we incurred $2 million in costs associated with our CEO transition and the departure of ~~purchased intangible assets included in the depreciation and amortization expense line on~~ our consolidated statements of operations, external deal costs, acquisition-related retention bonuses, integration costs, changes in the fair value of contingent consideration liabilities, charges for impairment of acquired intangible assets and other acquisition-related costs.

~~(3)~~

President. Realignment charges may also include ~~severance~~employee separation costs, lease termination costs and ~~advisory fees~~costs related ~~to non-routine shareholder matters and~~ to the development of our realignment, ~~and return of capital programs,~~ as applicable. The total costs related to the realignment are reported in "Selling, general and administrative expenses" in our unaudited consolidated statements of operations. See Note 4 to our unaudited consolidated financial statements for additional information.

~~(4)~~(2)

During the ~~second quarter~~three months ended March 31, 2019, we recorded an accrual of ~~2018, we provided $100~~$117 million related to the India Defined Contribution Obligation. This accrual is reported in "Selling, general and administrative expenses" in our unaudited consolidated statement of ~~initial funding~~operations. See Note 13 to ~~Cognizant U.S. Foundation, which is focused on STEM education in the United States.~~our unaudited consolidated financial statements for additional information.


~~(5)~~(3)	Non-operating foreign currency exchange gains ~~(losses),~~and losses, inclusive of gains and losses on related foreign exchange forward contracts not designated as hedging instruments for accounting purposes, are reported in "Foreign currency exchange gains (losses), net" in our unaudited consolidated statements of operations.


~~(6)~~(4)	Presented below are the tax impacts of each of our non-GAAP adjustments to pre-tax income:

Three Months Ended
June 30,
2018 2017
(in millions)
Non-GAAP income tax benefit (expense) related to:
Stock-based compensation expense $ 19
$ 20
Acquisition-related charges 11
12
Realignment charges —
14
Foreign currency exchange gains (losses) (8 ) —
Initial funding of Cognizant U.S. Foundation 28
—

The effective income tax rate related to each of our non-GAAP adjustments varies depending on the jurisdictions in which such income and expenses are generated and the statutory rates applicable in those jurisdictions.

~~Six Months Ended June 30, 2018 Compared to Six Months Ended June 30, 2017~~

~~The following table sets forth, for the periods indicated, certain financial data for the six months ended June 30:~~

% of % of Increase / Decrease

2018⁽¹⁾
Revenues
2017⁽¹⁾
Revenues $ %
(Dollars in millions, except per share data)
Revenues $ 7,918
100.0 $ 7,216
100.0 $ 702
9.7
Cost of revenues⁽²⁾
4,818
60.8 4,455
61.7 363
8.1
Selling, general and administrative expenses⁽²⁾
1,516
19.1 1,395
19.3 121
8.7
Depreciation and amortization expense 221
2.8 190
2.6 31
16.3
Income from operations 1,363
17.2 1,176
16.3 187
15.9
Other income (expense), net (43 ) 108
(151 ) (139.8 )
Income before provision for income taxes 1,320
16.7 1,284
17.8 36
2.8
Provision for income taxes (345 ) (257 ) (88 ) 34.2
Income from equity method investments 1
—
1

Net income $ 976
12.3 $ 1,027
14.2 $ (51 ) (5.0 )
Diluted earnings per share $ 1.66
$ 1.71
$ (0.05 )
Other Financial Information ⁽³⁾

Non-GAAP income from operations and non-GAAP operating margin $ 1,676
21.2 $ 1,404
19.5 $ 272
19.4
Non-GAAP diluted earnings per share $ 2.25
$ 1.76
$ 0.49

~~(1)~~

On January 1, 2018, we adopted the New Revenue Standard using the modified retrospective method. Results for reporting periods beginning after January 1, 2018 are presented under the New Revenue Standard, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting policies. For the six months ended June 30, 2018, adoption of the New Revenue Standard had a positive impact on revenue of $52 million, income from operations of $67 million and diluted earnings per share of $0.09 per share. See ~~Note 3~~ ~~to our unaudited consolidated financial statements for additional information.~~


~~(2)~~	~~Exclusive of depreciation and amortization expense.~~


~~(3)~~	Non-GAAP income from operations, non-GAAP operating margin and non-GAAP diluted earnings per share are not measurements of financial performance prepared in accordance with GAAP. See “Non-GAAP Financial Measures” for more information and a reconciliation to the most directly comparable GAAP financial measure.

~~Revenues - Overall~~

Our revenue growth was primarily attributed to services related to integration of digital technologies that are reshaping our customers' business, operating and technology models to align with shifts in consumer preferences, increased customer spending on discretionary projects, continued interest in using our global delivery model as a means to reduce overall technology and operations costs and continued penetration in all our geographic markets. Revenues from customers added since June 30, 2017 were $183 million and represented 26.1% of the period-over-period revenue increase.

Our consulting and technology services revenues for the six months ended June 30, 2018 increased by 8.3% compared to the six months ended June 30, 2017 and represented 57.5% of total revenues for the six months ended June 30, 2018. Our outsourcing services revenues for the six months ended June 30, 2018 increased by 11.7% and constituted 42.5% of total revenues for the six months ended June 30, 2018.

On January 1, 2018, we adopted the New Revenue Standard using the modified retrospective method. For the six months ended June 30, 2018, adoption of the New Revenue Standard had a positive impact on revenue of $52 million. See ~~Note 3~~ ~~to our unaudited consolidated financial statements for additional information.~~

~~Revenues from our top customers were as follows:~~

Six Months Ended June 30,
2018 2017
Revenues from top five customers as a percentage of total revenues 8.6 % 8.9 %
Revenues from top ten customers as a percentage of total revenues 15.6 % 15.0 %

~~Revenues - Reportable Business Segments~~

~~Revenues by reportable business segment were as follows for the six months ended June 30:~~

2018 2017 Increase
$ %
(Dollars in millions)
Financial Services $ 2,930
$ 2,782
$ 148
5.3
Healthcare 2,277
2,053
224
10.9
Products and Resources 1,661
1,484
177
11.9
Communications, Media and Technology 1,050
897
153
17.1
Total revenues⁽¹⁾
$ 7,918
$ 7,216
$ 702
9.7

~~_____________________~~


~~(1)~~	~~Results for 2018 are presented under the New Revenue Standard, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting policies. See~~ ~~Note 3~~ ~~to our unaudited consolidated financial statements for additional information.~~

~~Financial Services~~

Revenues from our Financial Services segment grew 5.3%, inclusive of a positive currency impact of 1.6%, for the six months ended June 30, 2018, as compared to the six months ended June 30, 2017. Growth was stronger among our insurance customers where revenues increased by $109 million as compared to an increase of $39 million for our banking customers. In this segment, revenues from customers added since June 30, 2017 were $56 million and represented 37.8% of the period-over-period revenue increase in this segment. Key areas of focus for our Financial Services customers included the adoption and integration of digital technologies that are reshaping our customers' business and operating models, cost optimization, robotic process automation, cyber security and vendor consolidation. Demand from certain banking customers may continue to be negatively affected by their ongoing efforts to optimize the cost of supporting their systems and operations as they shift their spend to transformation and digital services.

~~Healthcare~~

Revenues from our Healthcare segment grew 10.9% for the six months ended June 30, 2018, as compared to the six months ended June 30, 2017. Revenues from our healthcare customers increased by $211 million, including revenues from Bolder Healthcare Solutions acquired in the second quarter of 2018 and a new strategic customer acquired in the third quarter of 2017, while revenue growth among our life sciences customers was $13 million. Revenues from customers added since June 30, 2017 were $66 million and represented 29.5% of the period-over-period revenue increase in this segment. The increase in revenues from our life sciences customers was driven by a growing demand for a broader range of services, including business process services, advanced data analytics and solutions that span multiple service lines while leveraging cloud technologies and platforms. The demand for our services among healthcare customers could be affected by uncertainty in the regulatory environment. We believe that in the long term the healthcare industry continues to present a significant growth opportunity due to factors that are transforming the industry, including the changing regulatory environment, increasing focus on medical costs, and the consumerization of healthcare.

~~Products and Resources~~

Revenues from our Products and Resources segment grew 11.9%, inclusive of a positive currency impact of 2.4%, for the six months ended June 30, 2018, as compared to the six months ended June 30, 2017. Revenue growth in this segment was strongest among our energy and utilities customers and manufacturing and logistics customers, where revenues increased by a combined $130 million. Revenues from our retail and consumer goods customers and travel and hospitality customers increased by a combined $47 million. Revenues from customers added since June 30, 2017 were $50 million, representing 28.2% of the period-over-period revenue increase in this segment. Demand within this segment continues to be driven by increased adoption of digital technologies that are reshaping our customers' business and operating models, as well as growing demand for analytics, supply chain consulting, implementation initiatives, smart products, transformation of business models, internet of things and omni channel commerce

~~implementation and integration services. Discretionary spending by our retail customers has been and may continue to be affected by weakness in the retail sector.~~

~~Communications, Media and Technology~~

Revenues from our Communications, Media and Technology segment grew 17.1%, inclusive of a positive currency impact of 2.4%, for the six months ended June 30, 2018, as compared to the six months ended June 30, 2017. Revenue growth was $112 million among our technology customers and $41 million among our communications and media customers. Revenues from customers added since June 30, 2017 were $11 million and represented 7.2% of the period-over-period revenue increase in this segment. Growth within this segment was driven by the increased adoption of digital technologies, digital content operations, services to help our customers balance rationalizing costs while creating a differentiated user experience and an expanded range of services, including business process services. Revenue growth among our communications customers has been and may continue to be negatively affected by uncertainty due to significant merger and acquisition activity in their industry.

~~Revenues - Geographic Markets~~

~~Revenues by geographic market were as follows for the six months ended June 30:~~

2018 2017 Increase (Decrease)
$ %
(Dollars in millions)
North America $ 6,042
$ 5,612
$ 430
7.7
United Kingdom 619
562
57
10.1
Rest of Europe 755
576
179
31.1
Europe - Total 1,374
1,138
236
20.7
Rest of World 502
466
36
7.7
Total revenues⁽¹⁾
$ 7,918
$ 7,216
$ 702
9.7

~~_____________________~~


~~(1)~~	~~Results for 2018 are presented under the New Revenue Standard, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting policies. See~~ ~~Note 3~~ ~~to our unaudited consolidated financial statements for additional information.~~

North America continues to be our largest market, representing 76.3% of total revenues for the six months ended June 30, 2018 and accounting for 61.3% of total revenue growth over the six months ended June 30, 2017. Revenues from our customers in Europe grew 20.7%, after a positive currency impact of 9.0%. Specifically, revenues from our Rest of Europe customers grew 31.1% after an positive currency impact of 9.9%, while within the United Kingdom we experienced an increase in revenues of 10.1%, after a positive currency impact of 8.2%. Revenue growth in the United Kingdom was negatively affected by weakness in the banking sector in that region. Revenues from our Rest of World customers grew 7.7%. We believe that Europe, India, Middle East, Asia Pacific and Latin America regions will continue to be areas of significant investment for us as we see these regions as long term growth opportunities.

~~Cost of Revenues (Exclusive of Depreciation and Amortization Expense)~~

Our cost of revenues consists primarily of salaries, incentive-based compensation, stock-based compensation expense, employee benefits, project-related immigration and travel for technical personnel and subcontracting costs relating to revenues. Our cost of revenues increased by 8.1% during the six months ended June 30, 2018 as compared to the six months ended June 30, 2017, decreasing as a percentage of revenues to 60.8% in the first half of 2018 compared to 61.7% in the first half of 2017. The decrease as a percentage of revenues was due primarily to a decrease in compensation and benefits costs as revenue growth outpaced headcount growth, partially offset by an increase in fees paid to strategic partners and other vendors related to our managed services and digital products. For the six months ended June 30, 2018, compensation and benefits costs increased by $245 million as compared to the six months ended June 30, 2017.

~~Selling, General and Administrative Expenses~~

decrease as a percentage of revenues was due primarily to efficiencies of leveraging our cost structure over a larger organization, partially offset by the initial funding of the Cognizant U.S. Foundation in the second quarter of 2018.

~~Income from Operations and Operating Margin - Overall~~

Income from operations increased 15.9% for the six months ended June 30, 2018 as compared to the same period in 2017. Our operating margin increased to 17.2% for the six months ended June 30, 2018 from 16.3% for the six months ended June 30, 2017, due to a decrease, as a percentage of revenues, in compensation and benefits costs as revenue growth outpaced headcount growth, partially offset by the initial funding of the Cognizant U.S. Foundation in the second quarter of 2018 and an increase in fees paid to strategic partners and other vendors related to our managed service and digital products. Excluding the impact of applicable designated cash flow hedges, the appreciation of the Indian rupee against the U.S. dollar positively impacted our operating margin by approximately 2 basis points or 0.02% percentage points during the six months ended June 30, 2018. Each additional 1.0% change in exchange rate between the Indian rupee and the U.S. dollar will have the effect of moving our operating margin by approximately 18 basis points or 0.18 percentage points.

We entered into foreign exchange forward contracts to hedge certain Indian rupee denominated payments in India. These hedges are intended to mitigate the volatility of the changes in the exchange rate between the U.S. dollar and the Indian rupee. During the six months ended June 30, 2018, the settlement of cash flow hedges positively impacted our operating margin by approximately 71 basis points or 0.71 percentage points, as compared to a positive impact of approximately 76 basis points or 0.76 percentage points during the six months ended June 30, 2017.

~~For the six months ended June 30, 2018 and 2017, our non-GAAP operating margins were 21.2%~~⁵~~and 19.5%~~⁵, respectively. As set forth in the “Non-GAAP Financial Measures” section below, our non-GAAP operating margin excludes stock based compensation expense, acquisition-related charges, realignment charges and in the second quarter of 2018, the initial funding of the Cognizant U.S. Foundation.

~~Segment Operating Profit~~

~~Segment operating profits were as follows for the six months ended June 30:~~

Increase (Decrease)
2018 2017 $ %
(Dollars in millions)
Financial Services $ 909
$ 872
$ 37
4.2
Healthcare 695
619
76
12.3
Products and Resources 514
447
67
15.0
Communications, Media and Technology 338
291
47
16.2
Total segment operating profit 2,456
2,229
227
10.2
Less: unallocated costs 1,093
1,053
40
3.8
Income from operations $ 1,363
$ 1,176
$ 187
15.9

In our Healthcare and Products and Resources business segments, operating profits increased as a percentage of revenues as revenue growth outpaced headcount growth, partially offset by investments to accelerate our shift to digital. In our Financial Services and Communication, Media and Technology business segments, operating profits decreased as a percentage of revenues due to investments to accelerate our shift to digital.

~~________________~~


5	Non-GAAP operating margin is not a measurement of financial performance prepared in accordance with GAAP. See “Non-GAAP Financial Measures” for more information and a reconciliation to the most directly comparable GAAP financial measure.

~~Other Income (Expense), Net~~

Total other income (expense), net consists primarily of foreign currency exchange gains and (losses) and interest income. The following table sets forth total other income (expense), net for the six months ended June 30:

2018 2017
Increase/
Decrease
(in millions)
Foreign currency exchange (losses) gains $ (131 ) $ 70
$ (201 )
Gains (losses) on foreign exchange forward contracts not designated as hedging instruments 20
(13 ) 33
Foreign currency exchange (losses) gains, net (111 ) 57
(168 )
Interest income 81
63
18
Interest expense (13 ) (12 ) (1 )
Total other (expense) income, net $ (43 ) $ 108
$ (151 )

The foreign currency exchange gains and losses were primarily attributed to the remeasurement of the Indian rupee denominated net monetary assets in our U.S. dollar functional currency India subsidiaries as well as the remeasurement of other net monetary assets and liabilities denominated in currencies other than the functional currencies of our subsidiaries. The gains and losses on our foreign exchange forward contracts not designated as hedging instruments relate to the realized and unrealized gains and losses on foreign exchange forward contracts entered into primarily to offset foreign currency exposure to the Indian rupee and other non-U.S. dollar denominated net monetary assets and liabilities. As of June 30, 2018, the notional value of our undesignated hedges was $432 million. The increase in interest income of $18 million was primarily attributable to an increase in average invested balances in 2018.

~~Provision for Income Taxes~~

The provision for income taxes increased to $345 million during the six months ended June 30, 2018 from $257 million during the six months ended June 30, 2017. The effective income tax rate increased to 26.1% for the six months ended June 30, 2018 from 20.0% for the six months ended June 30, 2017. The increase in our effective income tax rate was primarily due to the recognition in the first quarter of 2017 of income tax benefits previously unrecognized in our consolidated financial statements related to several uncertain tax positions totaling $72 million and a higher effective income tax rate for our India subsidiaries resulting from the foreign currency exchange gains on their statutory books as the Indian rupee depreciated against the U.S. dollar. The estimate of our 2018 annual effective income tax rate reflects the current interpretation of the Tax Reform Act, including the GILTI provision and may change as we receive additional clarification and guidance and as the interpretation of the Tax Reform Act evolves over time.

~~Net Income~~

Net income decreased to $976 million for the six months ended June 30, 2018 from $1,027 million for the six months ended June 30, 2017, representing 12.3% and 14.2% of revenues, respectively. The decrease in net income as a percentage of revenues is primarily due to foreign exchange losses in 2018 compared to gains in 2017.

~~Non-GAAP Financial Measures~~

~~The following table presents a reconciliation of each non-GAAP financial measure to the most comparable GAAP measure for the six months ended June 30:~~

2018
% of
Revenues
2017
% of
Revenues
(Dollars in millions, except per share amounts)
GAAP income from operations and operating margin $ 1,363
17.2 $ 1,176
16.3
Add: Stock-based compensation expense ⁽¹⁾
130
1.6 109
1.5
Add: Acquisition-related charges ⁽²⁾
82
1.1 69
1.0
Add: Realignment charges ⁽³⁾
1
— 50
0.7
Add: Initial funding of Cognizant U.S. Foundation ⁽⁴⁾
100
1.3 —
—
Non-GAAP income from operations and non-GAAP operating margin $ 1,676
21.2 $ 1,404
19.5

GAAP diluted earnings per share $ 1.66
$ 1.71

Effect of above operating adjustments, pre-tax 0.53
0.38

Effect of non-operating foreign currency exchange losses (gains), pre-tax ⁽⁵⁾
0.19
(0.10 )
Tax effect of non-GAAP adjustments to pre-tax income ⁽⁶⁾
(0.13 ) (0.14 )
Effect of recognition of income tax benefit related to an uncertain tax position ⁽⁷⁾
—
(0.09 )
Non-GAAP diluted earnings per share $ 2.25
$ 1.76

~~_____________________~~


~~(1)~~	~~Stock-based compensation expense reported in:~~

Six Months Ended
June 30,
2018 2017
(in millions)
Cost of revenues $ 31
$ 28
Selling, general and administrative expenses 99
81

~~(2)~~

Acquisition-related charges include, when applicable, amortization of purchased intangible assets included in the depreciation and amortization expense line on our consolidated statements of operations, external deal costs, acquisition-related retention bonuses, integration costs, changes in the fair value of contingent consideration liabilities, charges for impairment of acquired intangible assets and other acquisition-related costs.


~~(3)~~	Realignment charges include severance costs, lease termination costs, and advisory fees related to non-routine shareholder matters and to the development of our realignment and return of capital programs, as applicable. The total costs related to the realignment are reported in "Selling, general and administrative expenses" in our consolidated statements of operations.


~~(4)~~	~~In the second quarter of 2018, we provided $100 million of initial funding to Cognizant U.S. Foundation, which is focused on STEM education in the United States.~~


~~(5)~~	Non-operating foreign currency exchange gains (losses), inclusive of gains and losses on related foreign exchange forward contracts not designated as hedging instruments for accounting purposes, are reported in "Foreign currency exchange gains (losses), net" in our consolidated statements of operations.


~~(6)~~	~~Presented below are the tax impacts of each of our non-GAAP adjustments to pre-tax income:~~

Six Months Ended
June 30,
2018 2017
(in millions)
Non-GAAP income tax benefit (expense) related to:
Stock-based compensation expense $ 38

$ 41
Acquisition-related charges 20

24
Realignment charges —

18
Foreign currency exchange gains (losses) (9 )
5
Initial funding of Cognizant U.S. Foundation 28
—



	Three Months Ended March 31,
	2019		2018
	(in millions)
Non-GAAP income tax benefit (expense) related to:
Realignment charges	$	—	$	—
Incremental accrual related to the India Defined Contribution Obligation	31		—
Foreign currency exchange gains and losses	1		(1		)

The effective tax rate related to each of our non-GAAP adjustments varies depending on the jurisdictions in which such income and expenses are generated and the statutory rates applicable in those jurisdictions.

~~(7)~~

During the three months ended March 31, 2017, we recognized an income tax benefit previously unrecognized in our consolidated financial statements related to a specific uncertain tax position of $55 million. The recognition of the benefit in the first quarter of 2017 was based on management’s reassessment regarding whether this unrecognized tax benefit met the more-likely-than-not threshold in light of the lapse in the statute of limitations as to a portion of such benefit.



Liquidity and Capital Resources

~~Cash~~Our cash generated from operations has historically been our primary source of liquidity to fund operations and investments to grow our business. In addition, as of ~~June 30, 2018,~~March 31, 2019, we had cash, cash equivalents and short-term investments of ~~$4,247~~$3,668 million, of which ~~$419~~$427 million was restricted and not available for use as a result of our ongoing dispute with the ITD ~~with respect to our 2016 India Cash Remittance. See~~ as described in Note 9 of our unaudited consolidated financial ~~statements for more information. As~~statements. Additionally, as of ~~June 30, 2018,~~March 31, 2019, we had available capacity under our revolving credit facility of approximately ~~$750~~$1,750 million.

The following table provides a summary of our cash flows for the ~~six~~three months ended ~~June 30:~~March 31:

2018 2017 Increase / Decrease
(in millions)
Net cash provided by operating activities $ 1,028
$ 798
$ 230
Net cash (used in) investing activities (811 ) (298 ) (513 )
Net cash (used in) financing activities (1,222 ) (1,421 ) 199



	2019			2018			Increase / Decrease
	(in millions)
Net cash provided by (used in):
Operating activities	$	269		$	388		$	(119	)
Investing activities	356			(227		)	583
Financing activities	(839		)	(488		)	(351		)

Operating activities

The ~~increase~~decrease in cash generated from operating activities ~~was primarily attributable to~~for the ~~increase in income from operations and the increase in non-cash expenses in the six~~three months ended ~~June 30, 2018 as~~March 31, 2019 compared to the same period in ~~2017, partially offset by~~2018 was primarily attributable to the ~~initial funding~~timing of estimated tax payments and the ~~Cognizant U.S. Foundation~~payment to the DOJ and SEC in connection with the ~~second quarter~~FCPA matter in 2019.

We monitor turnover, aging and the collection of ~~2018.~~

On January 1, 2018, we adopted the New Revenue Standard using the modified retrospective method. As a result of adoption, we classify our right to consideration in exchange for deliverables as either a receivable or a contract asset. A receivable is a right to consideration that is unconditional (i.e. only the passage of time is required before payment is due). By contrast, a contract asset is a right to consideration that is conditional upon factors other than the passage of time. Upon adoption, we reclassified (i) balances representing receivables, as defined by the New Revenue Standard, from Unbilled accounts receivable ~~to Trade accounts receivable, net and (ii) balances representing contract assets, as defined~~ by the New Revenue Standard, from Unbilled accounts receivable to Other current assets. Balances as of June 30, 2018 are presented under the New Revenue Standard, while prior period balances are not adjusted and continue to be reported in accordance with our historic accounting policies.

~~Historically, our~~customer. Our days sales outstanding ("DSO") calculation included billed and unbilled accounts receivable, net of allowance for doubtful accounts, reduced by the uncollected portion of our deferred revenue. To reflect the adoption of the New Revenue Standard and maintain the comparability of the calculation, in 2018 we adjusted the definition to includeincludes receivables, ~~as defined by the New Revenue Standard,~~ net of allowance for doubtful accounts, and contract assets, reduced by the uncollected portion of our deferred revenue. Our ~~days sales outstanding as of June 30, 2018~~DSO was ~~76 days, higher as compared to 71~~78 days as of ~~December~~March 31, ~~2017 and 73~~2019, 75 days as of ~~June 30, 2017. The adoption~~both December 31, 2018 and March 31, 2018.

Investing activities

Net cash provided by investing activities for the three months ended March 31, 2019 was driven by net sales of investments partially offset by payments for acquisitions. Net cash used in investing activities for the ~~New Revenue Standard increased our days sales outstanding as~~three months ended March 31, 2018 was driven by net purchases of ~~June 30, 2018 by 2 days. We monitor turnover, aging and the collection of accounts receivable by customer.~~investments.

~~Investing~~Financing activities

The increase in cash used in ~~investing activities is primarily related to higher payments for acquisitions and outflows for capital expenditures in the 2018 period as compared to 2017.~~

~~Financing activities~~

~~The decrease in cash used in~~ financing activities infor the ~~2018 period is~~three months ended March 31, 2019 was primarily attributable to ~~lower~~higher repurchases of common stock in ~~2018~~2019, including our $600 million accelerated stock repurchase agreement, compared to the same period in ~~2017, partially offset by higher dividends paid in~~2018. Additionally, during the three months ended March 31, 2018 ~~and~~we had net repayments under the revolving credit ~~facility in 2018 as compared to net borrowings under the credit facility in the same period in 2017.~~facility.

In ~~2014,~~2018, we completed a debt refinancing in which we entered into a credit agreement with a commercial bank syndicate ~~or the Credit Agreement,~~(the "Credit Agreement") providing for a ~~$1,000~~$750 million unsecured term loan (the "Term Loan") and a ~~$750~~$1,750 million ~~revolving credit facility. The term loan was used to pay a portion of the cash consideration in connection with our acquisition of TZ US Parent, Inc., or TriZetto. The~~unsecured revolving credit facility, is available for general corporate purposes. As of June 30, 2018, we had $750 million outstanding under the term loan and no outstanding notes under the revolving credit facility. The term loan and the revolving credit facility bothwhich are due to mature in November ~~2019 with a final payment of $625 million due~~2023. We are required under the Credit Agreement to make scheduled quarterly principal payments on the ~~term loan. While~~Term Loan beginning in December 2019.

The Credit Agreement requires interest to be paid, at our option, at either the ABR or the Eurocurrency Rate (each as defined in the Credit Agreement), plus, in each case, an Applicable Margin (as defined in the Credit Agreement). Initially, the Applicable Margin is 0.875% with respect to Eurocurrency Rate loans and 0.00% with respect to ABR loans. Subsequently, the Applicable Margin with respect to Eurocurrency Rate loans may range from 0.75% to 1.125%, depending on our public debt ratings (or, if we ~~believe we will~~ have ~~sufficient liquidity~~not received public debt ratings, from 0.875% to ~~fund~~1.125%, depending on our Leverage Ratio, which is the ~~final payment if necessary, we plan~~ratio of indebtedness for borrowed money to ~~evaluate alternative financing arrangements prior to maturity.~~

Consolidated EBITDA, as defined in the Credit Agreement).

The Credit Agreement contains ~~certain~~customary affirmative and negative covenants ~~including limitations on liens, mergers, consolidations and acquisitions, subsidiary indebtedness and affiliate transactions,~~ as well as ~~certain affirmative covenants. In addition,~~a financial covenant. The financial covenant is tested at the ~~Credit Agreement~~end of each fiscal quarter and requires us to maintain a ~~debt to total stockholders' equity ratio~~Leverage Ratio not in excess of ~~0.40~~3.50 to 1.00, or for a period of up to four quarters following certain material acquisitions, 3.75 to 1.00. ~~As of June 30, 2018, we~~We were in compliance with ~~our~~all debt covenants and ~~have provided a quarterly certification to our lenders to that effect.~~representations of the Credit Agreement as of March 31, 2019. We believe that we currently meet all conditions set

forth in the Credit Agreement to borrow thereunder, and we are not aware of any conditions that would prevent us from borrowing part or all of the remaining available capacity under the revolving credit facility as of ~~June 30, 2018~~March 31, 2019 and through the date of this filing.

~~In February 2017,~~During the three months ended March 31, 2019, we ~~announced a plan~~returned $866 million to ~~return $3.4 billion to~~our stockholders ~~by the end of 2018~~ through ~~a combination of stock~~$750 million in share repurchases and ~~cash dividends. As~~$116 million in dividend payments as part of ~~this plan, to date we expended $2.7 billion to repurchase~~ our Class A common stock under ASRs and paid cash dividends totaling $501 million. The payments related to the ASRs were funded with cash on hand in the U.S. and borrowings under the revolving credit facility. Stock repurchases may be made from time to time through open-market purchases, through the use of Rule 10b5-1 plans and/or by other means. We are currently evaluating the longer term impact the Tax Reform Act may have on our overall capital return ~~program. As a first step, in February 2018 our Board of Directors approved an increase to our quarterly dividend to $0.20 per share.~~

~~Our Board of Directors reviews~~plan. We review our capital return plan on an ~~ongoing~~on-going basis, ~~with consideration given to~~considering our financial performance and liquidity position, investments required to execute our strategic plans and initiatives, acquisition opportunities, the economic outlook, regulatory changes and ~~any~~ other relevant factors. The Board of Directors’ determinations regarding future share repurchases and dividends will include evaluating the longer term impact of the Tax Reform Act, as well as a variety of other factors, including our net income, cash flow generated from operations or other sources, liquidity position and potential alternative uses of cash, such as acquisitions, as well as economic conditions and expected future financial results. As these factors may change over time, the ~~amount of~~actual amounts expended on stock repurchase activity, dividends, and ~~actual amount of dividends declared,~~acquisitions, if any, during any particular period cannot be predicted and may fluctuate from time to time. ~~There can be no guarantee that we will achieve the objective of our announced capital return plan in the amounts or within the expected time frame that we have indicated, or at all.~~

Other Liquidity and Capital Resources Information

We seek to ensure that our worldwide cash is available in the locations in which it is needed. As part of our ongoing liquidity assessments, we regularly monitor the mix of our domestic and international cash flows and cash balances. As ~~a result~~ of March 31, 2019, the enactment of the Tax Reform Act, our historical and future foreign earnings are no longer subject to U.S. federal income tax upon repatriation beyond the one-time transition tax accrued in the fourth quarter of 2017. During the first half of 2018, we repatriated $2,108 million from our foreign subsidiaries. As of June 30, 2018, $2,570 millionamount of our cash, cash equivalents and short-term investments ~~were~~ held outside the United States was $2,159 million, of which ~~$1,723~~$1,737 million was ~~held~~ in India. As further described in Note 9 of our unaudited consolidated financial statements, ~~$419 million of our~~certain short-term investment balances ~~held~~ in India ~~were classified as restricted~~totaling $427 million as of ~~June 30, 2018.~~ March 31, 2019, were restricted in connection with our dispute with the ITD with respect to our 2016 India Cash Remittance. The affected balances may continue to remain restricted and unavailable for our use while the dispute is ongoing.

We ~~are continuing to~~ evaluate on an ongoing basis what portion of the non-U.S. cash, cash equivalents and short-term investments held outside India is needed locally to execute our strategic plans and what amount is available for repatriation back to the United States.

~~Our Indian~~ We consider our earnings ~~are~~in India to be indefinitely reinvested, ~~and~~which is consistent with our ~~current plans do not demonstrate the need~~ongoing strategy to ~~repatriate~~expand our historical undistributed earnings of our India subsidiaries to fund our liquidity needs outside of India. In reaching this conclusion, we considered our global capital needs, the available sources of liquidity globally and our growth plans in India.Indian operations, including through infrastructure investments. However, future events may occur, such as material changes in cash estimates, discretionary transactions, including corporate restructurings, and changes in applicable laws, that may lead us to repatriate the undistributed Indian earnings. As of March 31, 2019, the amount of unrepatriated Indian earnings was approximately $4,872 million. If weall of our accumulated unrepatriated Indian earnings were to ~~change our assertion that our accumulated undistributed Indian earnings are indefinitely reinvested, we would expect,~~be repatriated, based on our current interpretation of ~~Indian~~India tax law, ~~to accrue~~we estimate that we would incur an additional income tax expense ~~at a rate~~ of approximately ~~21% of cash available for distribution, which could have a material adverse effect on our future effective income tax rate.~~$1,023 million. This estimate is subject to change based on tax ~~legislative~~legislation developments in India and other jurisdictions as well as judicial and interpretive developments of applicable tax laws.

We expect our operating cash flow, cash and investment balances (excluding the ~~$419~~$427 million of India restricted ~~assets)~~assets described in Note 9), ~~and~~together with our available capacity under our revolving credit facility to be sufficient to meet our operating requirements, in India and globally, for

the next twelve months. We expect to fund the remaining balance of the one-time transition tax related to the Tax Reform Act, which is payable in installments through the year 2024, from a combination of cash generated from operations, borrowings and the repatriation of a portion of our historical non-U.S. earnings that are available for distribution to the United States. Our ability to expand and grow our business in accordance with current plans, to make acquisitions and form joint ventures, to meet our long-term capital requirements beyond a ~~twelve month~~twelve-month period and ~~our ability to~~ execute ~~the remainder of~~ our capital ~~return~~deployment plan will depend on many factors, including the rate, if any, at which our cash flow increases, our ability and willingness to ~~accomplish~~pay for acquisitions and joint ventures with capital stock and the availability of public and private debt and equity financing. We cannot be certain that additional financing, if required, will be available on terms and conditions acceptable to us, if at all.

~~As further described in~~ ~~Note 9~~ of our unaudited consolidated financial statements, certain cash, cash equivalents and short-term investment balances in India totaling $419 million were restricted in connection with our dispute with the ITD with respect to our 2016 India Cash Remittance. The dispute with the ITD is ongoing, and no final decision has been reached. The affected balances may continue to remain restricted and unavailable for our use while the dispute is ongoing. Additionally, while we believe that we have paid all applicable taxes related to the transactions underlying the ITD Dispute, if it is ultimately determined that we are liable for the full amount of additional taxes the ITD claims we owe, our liquidity could be materially adversely affected.



Commitments and Contingencies

See Note 13 to our unaudited consolidated financial statements.



Off-Balance Sheet Arrangements

Other than our foreign exchange forward contracts, there were no off-balance sheet transactions, arrangements or other relationships with unconsolidated entities or other persons in the ~~six~~three months ended ~~June 30, 2018~~March 31, 2019 that have, or are reasonably likely to have, a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.



Critical Accounting Estimates

Management’s discussion and analysis of our financial condition and results of operations is based on our unaudited consolidated financial statements that have been prepared in accordance with ~~accounting principles generally accepted in the United States of America.~~GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the amounts reported for assets and liabilities, including the recoverability of tangible and intangible assets, disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. On an on-going basis, we evaluate our estimates.

The most significant estimates relate to the recognition of revenue and profits, including the application of the cost to cost method of measuring progress to completion for certain fixed-price contracts, income taxes, ~~assumptions used in valuing stock-based compensation arrangements, valuation of investments and derivative financial instruments,~~ business combinations, valuation of goodwill and other long-lived assets and contingencies. We base our estimates on historical experience, current trends and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The actual amounts may differ from the estimates used in the preparation of the accompanying unaudited consolidated financial statements. For a discussion of our critical accounting estimates, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our ~~2017~~ Annual Report on Form ~~10-K.~~10-K for the year ended December 31, 2018. Our significant accounting policies are described in Note 1 to the audited consolidated financial statements included in our ~~2017~~ Annual Report on Form ~~10-K.~~10-K for the year ended December 31, 2018. There have been no material changes to the aforementioned critical accounting estimates and policies during the quarter.



Recently Adopted and New Accounting Pronouncements

See Note 1 to our unaudited consolidated financial statements.



Forward Looking Statements

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)~~Act of 1934, as amended (the "Exchange Act")) that involve risks and uncertainties. Such forward-looking statements may be identified by, among other things, the use of forward-looking terminology such as “believe,” “expect,” “may,” “could,” “would,” “plan,” “intend,” “estimate,” “predict,” “potential,” “continue,” “should” or “anticipate” 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, we or our 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 us with the SEC, orin press releases or in oral statements made by or with the approval of one of our authorized executive officers. These forward-looking statements, such as statements regarding our anticipated future revenues or operating margins, ~~contract percentage completions,~~ earnings, capital expenditures, anticipated effective tax rates and tax expense, liquidity, access to capital, capital ~~return~~deployment plan, investment strategies, cost management, realignment program, plans and objectives, including those related to our digital practice areas, investment in our business, ~~and~~ potential acquisitions, industry trends, customer behaviors and trends, the outcome of regulatory and litigation matters, the ~~ongoing internal investigation~~incremental accrual related to the India Defined Contribution Obligation and other statements regarding matters that are not historical facts, are based on our current expectations, estimates and projections, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Actual results, performance, achievements and outcomes could differ materially from the results expressed in, or anticipated or implied by, these forward-looking statements. There are a number of important factors that could cause our results to differ materially from those indicated by such forward-looking statements, including:

~~competition from other service providers;~~economic and political conditions globally and in particular in the markets in which our customers and operations are concentrated;

~~the risk that we may not be able~~our ability to attract, train and retain skilled professionals, including highly skilled technical personnel to satisfy customer demand and senior management to lead our business globally;

challenges related to growing our business organically as well as inorganically through acquisitions, and our ability to achieve our targeted ~~improvements~~growth rates;

our ability to achieve our profitability and capital return goals;

our ability to meet specified service levels required by certain of our contracts;

intense and evolving competition in ~~our operating margin~~the rapidly changing markets we compete in;

legal, reputational and ~~level of profitability,~~ financial risks if we fail to protect customer and/or ~~that our operating margin and profitability may decline;~~

~~the risk of liability or damage to our reputation resulting~~Cognizant data from security breaches or ~~disclosure of sensitive data or failure to comply with data protection laws and regulations;~~cyberattacks;

the ~~risk that we may not be able to keep pace with the rapidly evolving technological environment;~~

~~the rate~~effectiveness of ~~growth in the use of technology in~~our business continuity and disaster recovery plans and the ~~type and level of technology spending by~~potential that our ~~customers;~~global delivery capacity could be impacted;

~~mispricing of our services, especially~~restrictions on ~~our fixed-price and transaction- or volume-based priced contracts;~~

risks associated with our ongoing internal investigation into possible violations of the FCPA and similar laws, including the cost of such investigation and any sanctions, fines or remedial measures that may be imposed by the DOJ or SEC, additional expenses related to remedial measures, the costs of defending and/or settling possible judgments against us that may result from associated lawsuits against us and any possible impact on our ability to timely file the required reports with the SEC;

~~our inability to successfully acquire or integrate target companies;~~

~~system failure or disruptions~~visas, in ~~our communications or information technology;~~

~~the risk that we may lose key executives and not be able to enforce non-competition agreements with them;~~

~~competition for hiring highly-skilled technical personnel;~~

~~possible failure to provide business solutions and deliver complex and large projects for our customers;~~

~~the risk of reputational harm to us;~~

~~the effect of our use of derivative instruments;~~

~~our revenues being highly dependent on customers concentrated in certain industries, including financial services and healthcare, and located primarily~~particular in the United States, United Kingdom and ~~Europe;~~

~~the risk that we~~European Union, or immigration more generally, which may ~~not be able~~affect our ability to ~~pay dividends or repurchase shares in accordance with~~compete for and provide services to our ~~capital return plan, or at all;~~customers;

risks ~~relating~~related to anti-outsourcing legislation, if adopted, and negative perceptions associated with offshore outsourcing, both of which could impair our ~~global operations, including~~ability to serve our ~~operations in India;~~customers;

risks related to complying with the ~~effects of fluctuations~~numerous and evolving legal and regulatory requirements to which we are subject in the ~~Indian rupee~~many jurisdictions in which we operate;

potential changes in tax laws, or in their interpretation or enforcement, failure by us to adapt our corporate structure and ~~other currency exchange rates;~~intercompany arrangements to achieve global tax efficiencies or adverse outcomes of tax audits, investigations or proceedings;

potential exposure to litigation and legal claims in the ~~risk~~conduct of ~~war, terrorist activities, pandemics and natural disasters;~~

~~the Brexit Referendum and any negative effects on global economic conditions, financial markets and~~ our business;

~~the risk~~potential significant expense that would occur if we ~~may~~change our intent not ~~be able to enforce or protect our intellectual property rights, or that we may infringe upon the intellectual property rights of others;~~

~~regulatory uncertainties, including in the areas of outsourcing, immigration and taxes;~~

~~increased regulation of the financial services and healthcare industries, as well as other industries in which our customers operate;~~

~~the possibility that we may be required to or choose~~ to repatriate Indian accumulated undistributed earnings;

~~the possibility that we may lose certain tax benefits provided to companies in our industry by the Indian government, and any adverse outcome of our dispute with the ITD;~~ and

The factors set forth in "Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2017.~~

2018.

You are advised to consult any further disclosures we make on related subjects in the reports we file with the SEC, including this report in the section titled “Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Part I, Item 1. Business” in our Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.



Item 3. Quantitative and Qualitative Disclosures about Market Risk.

There have been no material changes in our quantitative and qualitative disclosures about market risk from those disclosed in Part II, Item 7A, Quantitative and Qualitative Disclosures about Market Risk, in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2017,~~2018, filed with the SEC on February ~~27, 2018.~~19, 2019.



Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, under the supervision and with the participation of our chief executive officer and our chief financial officer, evaluated the design and operating effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the ~~Securities Exchange Act of 1934, as amended, or the~~ Exchange Act) as of ~~June 30, 2018.~~March 31, 2019. Based on this evaluation, our chief executive officer and our chief financial officer concluded that, as of ~~June 30, 2018,~~March 31, 2019, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

No changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended ~~June 30, 2018~~March 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION



Item 1. Legal Proceedings

See Note 13 to our unaudited consolidated financial statements.



Item 1A. Risk Factors

There have been no material changes in our risk factors from those disclosed in Part I, Item 1A, Risk Factors, in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2017~~2018, filed with the SEC on February ~~27, 2018.~~19, 2019.



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer ~~Repurchases~~Purchases of Equity Securities

Our ~~existing~~ stock repurchase program, as approved by our Board of Directors, allows for the repurchase of ~~$3.5~~up to $5.5 billion, ~~of our outstanding shares of Class A common stock,~~ excluding fees and expenses, ~~through December 31, 2019. Under the stock repurchase program, the Company is authorized to repurchase its~~of our Class A common stock through open market purchases, including under a trading plan adopted pursuant to Rule 10b5-1 of the Exchange Act or in private transactions, including through accelerated stock repurchase ("ASR") agreements entered into with financial institutions, in accordance with applicable federal securities ~~laws.~~laws through December 31, 2020. The timing of repurchases and the exact number of shares to be purchased are determined by ~~the Company’s~~ management, in its discretion, or pursuant to a Rule 10b5-1 trading plan, and will depend upon market conditions and other factors.

AsDuring the three months ended March 31, 2019, we repurchased $750 million of ~~June 30, 2018, the remaining available balance~~our Class A common stock under our stock repurchase program. The stock repurchase activity under our stock repurchase program ~~authorized by~~during the ~~Board of Directors~~three months ended March 31, 2019 was ~~$0.8 billion.~~as follows:

Month Total Number
of Shares
Purchased Average
Price Paid
per Share Total Number of
Shares Purchased
as Part of Publicly
Announced
Plans or
Programs Approximate
Dollar Value of Shares
that May Yet Be
Purchased under the
Plans or Programs
(in millions)
April 1, 2018 - April 30, 2018
Open market and privately negotiated purchases —
$ —
—
$ 1,400
May 1, 2018 - May 31, 2018
Open market and privately negotiated purchases —
—
—

March 2018 ASR 708,984
(a)
708,984
1,400
June 1, 2018 - June 30, 2018
Open market and privately negotiated purchases —
—
—

June 2018 ASR 6,492,680
(b)
6,492,680
800
Total 7,201,664
$ —
7,201,664



Month	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs (in millions)
January 1, 2019 - January 31, 2019
Open market purchases	2,332,731	$	64.29	2,332,731	$	2,375
February 1, 2019 - February 28, 2019
Open market purchases	—	—		—	2,375
March 1, 2019 - March 31, 2019
Open market purchases	—	—		—
March 2019 ASR	7,136,860	(a)		7,136,860	1,775
Total	9,469,591	(b)		9,469,591

(a)

In March ~~2018, the Company~~2019, we entered into an ASR agreements with financial institutions to purchase ~~up to $300~~$600 million of ~~the Company's~~our Class A common ~~stock. In May 2018,~~stock (the "March 2019 ASR"). During the ~~purchase period for the ASR~~three months ended ~~and an additional 0.7 million shares were delivered. In total, 3.7 million shares were delivered under the ASR at an average repurchase price of $79.95.~~

~~(b)~~

~~Under the terms of the June 2018 ASR and in exchange for up-front payments of $600 million,~~March 31, 2019, the financial ~~institution initially~~institutions delivered ~~6.5~~7.1 million shares, a portion of the Company's total expected shares to be repurchased under the ~~June 2018~~March 2019 ASR. The total number of shares ultimately delivered and therefore the average price paid per share, will be determined at the end of the purchase period, which is scheduled to end during the third quarter of ~~2018,~~2019, based on the volume-weighted average price of ~~the Company's~~our common stock during that period.


(b)	The total average price paid per share cannot be calculated due to the unavailability of the average price per share for the March 2019 ASR.

During the three months ended ~~June 30, 2018,~~March 31, 2019, we also purchased shares in connection with our stock-based compensation plans, whereby shares of our common stock were tendered by employees for payment of applicable statutory tax withholdings. For the three months ended ~~June 30, 2018,~~March 31, 2019, such repurchases totaled ~~433,947~~0.3 million shares at an aggregate cost of ~~$33~~$21 million.



Item 6. Exhibit Index

EXHIBIT INDEX

Incorporated by Reference
Number Exhibit Description Form File No. Exhibit Date Filed or Furnished Herewith
3.1
Restated Certificate of Incorporation, dated June 5, 2018
8-K 000-24429 3.1
6/7/2018
3.2
Amended and Restated Bylaws, as adopted on June 5, 2018
8-K 000-24429 3.3
6/7/2018
10.1
Amendment to Employment Agreement, by and between the Company and Rajeev Mehta, dated June 12, 2018
Filed
31.1
Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Filed
31.2
Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Filed
32.1
Certification of principal executive officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. 1350
Furnished
32.2
Certification of principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. 1350
Furnished
101.INS XBRL Instance Document Filed
101.SCH XBRL Taxonomy Extension Schema Document Filed
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document Filed
101.DEF XBRL Taxonomy Extension Definition Linkbase Document Filed
101.LAB XBRL Taxonomy Extension Label Linkbase Document Filed
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document Filed

Incorporated by Reference

Number

Exhibit Description

Form

File No.

Exhibit

Date

Filed or Furnished Herewith

3.1

Restated Certificate of Incorporation, dated June 5, 2018

8-K

000-24429

3.1

6/7/2018

3.2

Amended and Restated Bylaws, as adopted on September 14, 2018

8-K

000-24429

3.1

9/20/2018

31.1

Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Filed

31.2

Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Filed

32.1

Certification of principal executive officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. 1350

Furnished

32.2

Certification of principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. 1350

Furnished

101.INS

XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

Filed

101.SCH

XBRL Taxonomy Extension Schema Document

Filed

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

Filed

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

Filed

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

Filed

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

Filed

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 2, 2018~~May 3, 2019		By:	/s/ F~~RANCISCO~~ ~~D’SOUZA~~BRIAN HUMPHRIES
				~~Francisco D’Souza,~~Brian Humphries,
				Chief Executive Officer
				(Principal Executive Officer)




Date:	~~August 2, 2018~~May 3, 2019	By:	/s/ KAREN MCLOUGHLIN
			Karen McLoughlin,
			Chief Financial Officer
			(Principal Financial Officer)

5947



	June 30, 2018
	As Reported		Pro-forma Amounts		Impacts of the New Revenue Standard
	(in millions)
Assets:
Trade accounts receivable, net^{(1), (2)}	$	3,204	$	3,082	$	122
Unbilled accounts receivable^{(1), (3)}	—		416		(416		)
Other current assets^{(2), (3)}	852		534		318
Total current assets					24
Other noncurrent assets⁽⁴⁾	615		565		50
Total assets					$	74
Liabilities:
Deferred revenue⁽²⁾	$	308	$	451	$	(143	)
Total current liabilities					(143		)
Deferred revenue, noncurrent⁽²⁾	77		86		(9		)
Deferred income tax liabilities, net⁽⁵⁾	145		95		50
Total liabilities					(102		)
Stockholders’ equity:
Retained earnings	10,681		10,505		176
Total stockholders’ equity					176
Total liabilities and stockholders’ equity					$	74



	Three Months Ended June 30, 2018									Six Months Ended June 30, 2018
	As Reported			Pro-forma Amounts			Impacts of the New Revenue Standard			As Reported			Pro-forma Amounts			Impacts of the New Revenue Standard
	(in millions)									(in millions)
Revenues⁽²⁾	$	4,006		$	3,975		$	31		$	7,918		$	7,866		$	52
Cost of revenues ⁽⁴⁾	2,417			2,424			(7		)	4,818			4,833			(15		)
Selling, general and administrative expenses	805			805			—			1,516			1,516			—
Depreciation and amortization expense	114			114			—			221			221			—
Income from operations	670			632			38			1,363			1,296			67
Other income (expense), net	(47		)	(47		)	—			(43		)	(43		)	—
Income before provision for income taxes⁽⁵⁾	623			585			38			1,320			1,253			67
Provision for income taxes	(168		)	(161		)	(7		)	(345		)	(332		)	(13		)
Income (loss) from equity method investment	1			1			—			1			1			—
Net income	$	456		$	425		$	31		$	976		$	922		$	54
Basic earnings per share	$	0.78		$	0.73		$	0.05		$	1.67		$	1.57		$	0.10
Diluted earnings per share	$	0.78		$	0.73		$	0.05		$	1.66		$	1.57		$	0.09



	Costs to Fulfill
	(in millions)
Balance - January 1, 2018	$	303
Amortization expense	(32		)
Costs capitalized	85
Other	(3		)
Balance - June 30, 2018	$	353



	Three Months Ended
	June 30, 2018
	Financial Services		Healthcare		Products and Resources		Communications, Media and Technology		Total
	(in millions)
Revenues
Geography:
North America	$	1,056	$	1,060	$	585	$	366	$	3,067
United Kingdom	114		22		89		84		309
Rest of Europe	165		61		109		46		381
Europe - Total	279		83		198		130		690
Rest of World	134		13		57		45		249
Total	$	1,469	$	1,156	$	840	$	541	$	4,006

Service line:
Consulting and technology services	$	885	$	613	$	499	$	289	$	2,286
Outsourcing services	584		543		341		252		1,720
Total	$	1,469	$	1,156	$	840	$	541	$	4,006

Type of contract:
Time and materials	$	953	$	452	$	379	$	335	$	2,119
Fixed-price	460		443		367		179		1,449
Transaction or volume-based	56		261		94		27		438
Total	$	1,469	$	1,156	$	840	$	541	$	4,006



	Six Months Ended
	June 30, 2018
	Financial Services		Healthcare		Products and Resources		Communications, Media and Technology		Total
	(in millions)
Revenues
Geography:
North America	$	2,100	$	2,083	$	1,157	$	702	$	6,042
United Kingdom	230		45		176		168		619
Rest of Europe	327		122		218		88		755
Europe - Total	557		167		394		256		1,374
Rest of World	273		27		110		92		502
Total	$	2,930	$	2,277	$	1,661	$	1,050	$	7,918

Service line:
Consulting and technology services	$	1,756	$	1,251	$	980	$	567	$	4,554
Outsourcing services	1,174		1,026		681		483		3,364
Total	$	2,930	$	2,277	$	1,661	$	1,050	$	7,918

Type of contract:
Time and materials	$	1,888	$	900	$	748	$	641	$	4,177
Fixed-price	931		954		728		358		2,971
Transaction or volume-based	111		423		185		51		770
Total	$	2,930	$	2,277	$	1,661	$	1,050	$	7,918



	Six Months Ended June 30, 2018
	Fair Value			Weighted Average Useful Life
	(in millions)
Cash	$	10
Current assets	37
Property, plant and equipment and other noncurrent assets	10
Non-deductible goodwill ⁽¹⁾	340
Customer relationship intangible assets	123			9.7 years
Other intangible assets	26			2.4 years
Current liabilities	(15		)
Noncurrent liabilities	(39		)
Purchase price	$	492



	Change in Derivative Gains/Losses Recognized in Accumulated Other Comprehensive Income (Loss) (effective portion)					Location of Net Derivative Gains Reclassified from Accumulated Other Comprehensive Income (Loss) into Income (effective portion)	Net Gains Reclassified from Accumulated Other Comprehensive Income (Loss) into Income (effective portion)
	2018			2017			2018		2017
	(in millions)
Foreign exchange forward contracts – Designated as cash flow hedging instruments	$	(91	)	$	35	Cost of revenues	$	18	$	29
						Selling, general and administrative expenses	3		6
						Total	$	21	$	35



	Purchase Period End Date	Number of Shares		Average Repurchase Price per Share		ASR Amount
		(in millions)				(in millions)
June 2018 ASR	⁽¹⁾	6.5	⁽¹⁾	⁽¹⁾		$	600
March 2018 ASR	May 2018	3.7	⁽²⁾	$	79.95	$	300
December 2017 ASR	March 2018	4.0	⁽³⁾	$	75.75	$	300
March 2017 ASR	August 2017	23.7		$	63.19	$	1,500



	Dividends per Share		Amount
			(in millions)
2018:
Three months ended March 31, 2018	$	0.20	$	119
Three months ended June 30, 2018	0.20		119
Six months ended June 30, 2018			$	238
2017:
Three months ended June 30, 2017	$	0.15	$	89
Three months ended September 30, 2017	0.15		90
Three months ended December 31, 2017	0.15		89
Year ended December 31, 2017			$	268



	Three Months									Six Months
	Before Tax Amount			Tax Effect			Net of Tax Amount			Before Tax Amount			Tax Effect			Net of Tax Amount
	(in millions)
Foreign currency translation adjustments:
Beginning balance	$	3		$	(4	)	$	(1	)	$	(38	)	$	—		$	(38	)
Change in foreign currency translation adjustments	(82		)	11			(71		)	(41		)	7			(34		)
Ending balance	$	(79	)	$	7		$	(72	)	$	(79	)	$	7		$	(72	)

Unrealized (losses) on available-for-sale investment securities:
Beginning balance	$	(19	)	$	4		$	(15	)	$	(11	)	$	4		$	(7	)
Cumulative effect of change in accounting principle⁽¹⁾	—			—			—			—			(1		)	(1		)
Net unrealized (losses) arising during the period	(1		)	1			—			(10		)	2			(8		)
Reclassification of net losses to Other, net	1			—			1			2			—			2
Net change	—			1			1			(8		)	1			(7		)
Ending balance	$	(19	)	$	5		$	(14	)	$	(19	)	$	5		$	(14	)

Unrealized gains on cash flow hedges:
Beginning balance	$	105		$	(26	)	$	79		$	154		$	(39	)	$	115
Unrealized (losses) arising during the period	(91		)	19			(72		)	(105		)	24			(81		)
Reclassifications of net (gains) to:
Cost of revenues	(18		)	5			(13		)	(48		)	12			(36		)
Selling, general and administrative expenses	(3		)	1			(2		)	(8		)	2			(6		)
Net change	(112		)	25			(87		)	(161		)	38			(123		)
Ending balance	$	(7	)	$	(1	)	$	(8	)	$	(7	)	$	(1	)	$	(8	)

Accumulated other comprehensive income (loss):
Beginning balance	$	89		$	(26	)	$	63		$	105		$	(35	)	$	70
Other comprehensive income (loss)	(194		)	37			(157		)	(210		)	46			(164		)
Ending balance	$	(105	)	$	11		$	(94	)	$	(105	)	$	11		$	(94	)



				% of				% of	Increase / Decrease⁽¹⁾
	2018⁽¹⁾			Revenues	2017⁽¹⁾			Revenues	$			%
	(Dollars in millions, except per share data)
Revenues	$	4,006		100.0	$	3,670		100.0	$	336		9.2
Cost of revenues⁽²⁾	2,417			60.3	2,261			61.6	156			6.9
Selling, general and administrative expenses⁽²⁾	805			20.1	709			19.3	96			13.5
Depreciation and amortization expense	114			2.8	94			2.6	20			21.3
Income from operations	670			16.7	606			16.5	64			10.6
Other income (expense), net	(47		)		29				(76		)	(262.1	)
Income before provision for income taxes	623			15.6	635			17.3	(12		)	(1.9	)
Provision for income taxes	(168		)		(165		)		(3		)	1.8
Income from equity method investments	1				—				1
Net income	$	456		11.4	$	470		12.8	$	(14	)	(3.0	)
Diluted earnings per share	$	0.78			$	0.80			$	(0.02	)

Other Financial Information⁽³⁾
Non-GAAP income from operations and non-GAAP operating margin	$	882		22.0	$	735		20.0	$	147		20.0
Non-GAAP diluted earnings per share	$	1.19			$	0.93			$	0.26



	Three Months Ended June 30,
	2018		2017
Top five customers	8.6	%	9.0	%
Top ten customers	15.4	%	15.1	%



	Six Months Ended June 30,
	2018		2017
Revenues from top five customers as a percentage of total revenues	8.6	%	8.9	%
Revenues from top ten customers as a percentage of total revenues	15.6	%	15.0	%



	2018		2017		Increase (Decrease)
	2018		2017		$		%
	(Dollars in millions)
North America	$	6,042	$	5,612	$	430	7.7
United Kingdom	619		562		57		10.1
Rest of Europe	755		576		179		31.1
Europe - Total	1,374		1,138		236		20.7
Rest of World	502		466		36		7.7
Total revenues⁽¹⁾	$	7,918	$	7,216	$	702	9.7