Cognizant maintains revenue guidance amidst declining profit and sectoral challenges

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Nasdaq-listed Cognizant Technology Solutions maintained its projected revenue for 2024 between $18.9 billion and $19.7 billion, indicating a decline of 2% to a growth of 2% in constant currency. For the second quarter, revenue is anticipated to fall between $4.75 billion and $4.82 billion, a decline of 2.5% to 1% in constant currency.

Cognizant operates on a calendar year basis.

The company reported a close to 6% drop in net profit for the March quarter, down to $546 million from $580 million a year ago. Amid macroeconomic challenges and clients limiting discretionary spending, revenue saw a 1.2% decline in constant currency from the year-ago period, reaching $4.76 billion, which was at the high end of the guidance range of $4.68 billion to $4.76 billion.

Ravi Kumar S, who took over as the CEO on January 12 last year, stated, “During the first quarter, we exceeded the high end of our revenue guidance and continued to advance our strategic priorities.” He also mentioned the signing of eight deals during the quarter, each valued at over $100 million, building on the large deal momentum of 2023. “As our clients navigate an uncertain economic environment, we are adapting to market dynamics by helping them achieve operational efficiencies, supporting their innovation agendas, and preparing them for AI-driven transformation across their businesses.”

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Adjusted operating margin for the first quarter expanded by 50 basis points year-on-year to 15.1%, primarily driven by the NextGen program. Chief Financial Officer Jatin Dalal emphasized their focus on operational excellence and cost discipline as clients continue to limit discretionary spending.

The growth for the first quarter was largely driven by the communications, media, and technology sectors, which saw a 5.7% year-over-year growth in constant currency, followed by products and resources with nearly 1%. Financial services declined by 6.5%, while health sciences declined by 1.3% year-over-year in constant currency.

On a trailing 12-month basis, the voluntary attrition rate decreased to 13.1% in the March quarter from 13.8% in the preceding three months and 23% in the year-ago period, indicating a downward trend across the industry. Total headcount at the end of the first quarter stood at 344,400, with a decrease of 3,300 quarter-over-quarter and 7,100 year-over-year.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow