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Cognizant overtakes Infy in June quarter revenues

Net profit jumps 21%, aided by exposure to verticals not under stress

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Exactly a year after it changed the pecking order of the offshore-centric companies in India by overtaking Wipro, has done it again. In the quarter ended June 30, the Nasdaq-listed company has overtaken India’s second largest IT services company, Infosys, by a comfortable margin of $43 million.

The US-headquartered company clocked $1,795 million in revenues during the April-June period (it is the second quarter for Cognizant, which follows the calendar year) compared with Infosys’ $1,752 million. In terms of guidance, Cognizant said its revenues were expected to be $7,340 million for the accounting year ending December 31, 2012.

had expected its revenues to be at least $7,343 million for the year ending March 31, 2013. However, in terms of the revenue run rate, Cognizant is expected to overtake Infosys in 2012.

Industry analysts say Cognizant’s numbers are a reflection of continuation of its journey and its exposure to verticals such as health care and pharmaceuticals that are not under stress in the current economic cycle.

“It was expected. I think Cognizant is much better positioned in terms of outlook. Their pipeline looks better and clients’ satisfaction is quite high. Whereas in the case of Infosys, there are still some doubts in the minds of clients, which are impacting the company’s success rate,” said Sudin Apte, CEO and research director at Offshore Insights, an advisory firm.

According to Dipen Shah, head of private client group research at Kotak Securities, while Cognizant’s exposure to verticals such as health care and pharmaceuticals has made it better placed, Infosys depends for a major chunk of its revenues on banking and financial services, which are under stress.

HOW THE IT GIANTS MEASURE UP
Company Revenue ($ mn) PAT ($ mn)
Q1 YoY (%) QoQ (%) Q1 YoY (%) QoQ (%)
TCS 2,730 13.0 3.4 604.0 13.6 3.2
Cognizant 1,795 20.9 4.9 251.9 21.1 3.4
Infosys 1,752 4.8 (1.1) 416.0 8.3 (10.2)
Wipro 1,515 8.0 1.6 284.0 18.0 (2.4)
HCL Tech 1,080 12.1 3.0 156.0 36.3 28.7
YoY & QoQ change in %; PAT numbers for include consumer care and lighting divison; HCL Tech follows financial calendar July-June; the quarter ended June was Q4 for HCL; Cognizant follows the calendar year
Source: Companies

“I also think that, probably, the internal restructuring and pitch for a higher margin business by Infosys have impacted their growth rate whereas Cognizant has been able to enjoy a much higher market share because of the favourable terms clients have with them,” Shah added.

In the quarter ended June 30, Cognizant has posted a 21.1 per cent increase in net profit at $251.9 million, compared with the same quarter in the previous year. The revenues of the company grew close to 21 per cent y-o-y. Sequentially, the net profit grew 3.4 per cent and revenues grew 4.9 per cent. “Cognizant once again delivered industry-leading growth despite a challenging macroeconomic environment,” said Gordon Coburn, president, Cognizant Technology Solutions.

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