Insight Guru Inc.
10/20/2026 | Press release | Distributed by Public on 10/20/2026 14:24
What Gave IBM Stock Its Edge Over Cognizant
Two IT consulting and services companies grew their sales at about the same pace over the last three years. Over the five years to October 2026, though, one stock climbed 110.0% while the other dropped 8.8%. The stock that rose belongs to International Business Machines (IBM), and the one that fell belongs to Cognizant Technology Solutions (CTSH). Where do you think that gap came from: faster sales, bigger profits, or investors paying more?
Who Has Beaten Cognizant Over Five Years?
Cognizant has held up better than most of its industry. Over the five years to October 2026, its stock performed better than 55.6% of the 27 industry peers used for comparison.
Yet two industry peers outpaced it by a wide margin despite posting average sales growth within 4 points of Cognizant's over the last three years. IBM's stock finished 118.8 points ahead of Cognizant's over those five years.
| Company | Sales growth, 3-year average | P/E | 1-year | 3-year | 5-year |
|---|---|---|---|---|---|
| Cognizant Technology Solutions (CTSH) | 3.8% | 14.0x | 3.4% | 7.3% | -8.8% |
| International Business Machines (IBM) | 4.5% | 20.7x | -13.8% | 89.0% | 110.0% |
| Adeia (ADEA) | 7.0% | 18.9x | 28.4% | 160.6% | 148.0% |
Stock price change to 2026-10-19, excluding dividends. Companies in IT Consulting & Other Services whose sales grew within 4 points of CTSH's. P/E: latest close over the last four quarters' earnings per share.
The other company, Adeia (ADEA), finished 156.8 points ahead of Cognizant. For a Cognizant holder, beating most of the industry has still meant falling far behind the companies most like it.
Did IBM Grow Faster Than Cognizant?
Over the last three years, no. IBM grew its sales by an average of 4.5% a year, compared with 3.8% for Cognizant, which is about the same pace.
IBM operates through four business segments: Software, Consulting, Infrastructure, and Financing, with Red Hat included in its software unit. Cognizant is a technology services provider, and Financial Services and Health Sciences each brought in about 30% of its sales in fiscal 2025.
Where Did The Gap Come From?
The gap came from profit and from what investors pay for it. Between 2021 and 2026, IBM's earnings per share climbed 90.1%, compared with 47.6% for Cognizant's.
Cognizant's profit per share still grew faster than its sales. Net income rose 32.1% over those years, and its share count fell, so each remaining share captured a larger portion of the profit.
Investors also changed what they pay. In 2021, Cognizant's stock was priced at 23.3 times earnings, which was about the same as IBM's 23.6 times.
Today, investors pay 14.0 times earnings for Cognizant, against 20.7 times for IBM. Ultimately, IBM delivered much faster growth in profit per share, and investors maintained a multiple close to its old one while paying far less for Cognizant's. IBM's 2021 multiple was priced on June 30, 2021, and Cognizant's on September 30, 2021, rather than at the start of the five-year window. IBM's 2021 figures also include Kyndryl, the business it spun off in November 2021. So these figures do not multiply out to the stock moves.
Cognizant says it is working on its margin. During the company's fiscal Q2 2026 call, management said operational efficiency and favorable currency movements more than offset higher third-party costs and compensation costs. Management added that its mix of fixed-price and transaction-based work has grown for three consecutive years.
What To Watch In Cognizant's Next Report
On the July 29, 2026 call, management said its goal is consistent margin expansion and EPS growth ahead of revenue. The company raised its fiscal 2026 forecast for adjusted earnings per share growth to 8% to 10%, from 7% to 9%. It kept its adjusted operating margin forecast at 16% to 16.2%. Both are forecasts, not results.
Cognizant's operating margin is the figure to watch in its next quarterly report, expected on or around October 29, 2026.
How To Act On CTSH?
Not necessarily on Cognizant Technology Solutions alone, if your goal is long-term wealth. Wealth is built by owning the companies that keep outperforming, the leaders of their industries, wherever they are. Here are two companies from Cognizant Technology Solutions' own industry that have beaten it. Over the five years to October 2026, International Business Machines stock rose 110.0% and Adeia stock rose 148%, while Cognizant Technology Solutions stock fell 8.8%.
Finding companies like these takes comparison across industries and sectors, and that is what the Trefis High Quality (HQ) Portfolio does. It holds 30 quality companies in equal weight and, since its inception in September 2020, has returned more than 105%, ahead of a benchmark that combines the S&P 500, S&P Mid-cap and Russell 2000. See how we find the leaders.
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Insight Guru Inc. published this content on October 20, 2026, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on October 20, 2026 at 20:24 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]