Cognizant Q4 results mark its return to double digit annual revenue growth

Cognizant also guided that for FY2022 it expects revenue growth to be in the range of 8.5 per cent to 11.5 per cent, which means revenue outlook of $20 billion to $20.5 billion.

Nasdaq-listed IT services company Cognizant reported a growth of 10 per cent in its annual revenue for financial year 2021 (FY21; it follows a January-December financial calendar) at $18.5 billion, marking the company’s return to double-digit annual revenue growth for the first time since 2015. The firm plans to onboard 50,000 freshers in India in FY22.

However, analyst tracking the company said that though the growth and commentary is strong, Cognizant continues to trail its rivals.

In the fourth quarter (Q4) the company reported revenue of $4.78 billion, up 14.2 per cent year-on-year (YoY), but was flat when compared to sequentially.

Cognizant also guided that for FY22 it expects revenue to grow in the 8.5-11.5 per cent range, which translates to $20-20.5 billion. Cognizant also reported that its digital revenues are now 45 per cent of its total and grew 20 per cent YoY.

However, it continued to lag behind Tata Consultancy Services (TCS), Infosys, and Wipro.

Cognizant’s net profit surged 82 per cent to $576 million in Q4, compared with $316 million over the same period last year.

However, the biggest positive for the company was a drop in attrition, which had peaked in the last few quarters, and the management in the past had stated that it had impacted its business growth.

In Q4, the company’s voluntary annualised attrition touched 31 per cent. Still higher than TCS (15.3 per cent), Infosys (25.5 per cent), and Wipro (22.7 per cent), but lower than the 33 per cent seen in Q3. 

“While management commentary on demand was good (Q4 booking up 22 per cent YoY), CY22 guidance of 10.0 per cent YoY (mid-point)/8.0 per cent YoY (organic) imply that Cognizant will continue to trail its Indian IT peers. Q4 attrition dip of 200 bps QoQ support the commentary from industry peers, but management expect it to remain elevated next year also and is not seeing any moderation,” said a report from MOSL.

The company ended the year with a total headcount of 330,600, up 14 per cent year-on-year.

“While the rest of the industry at least saw an uptick on attrition for this quarter we have managed to get a little respite on a quarter-on-quarter. Is this sustainable? We are doing everything within the organisation to make sure that it sustains, but attrition is always dependent on market dynamic,” said Rajesh Nambiar, chairman, Cognizant India.

The fresher hiring target is among the highest for the company. Unlike in the past, when it focused more on lateral hires, with the need to get more employees on board it has increased fresher intake. “Our commitment to hire such big numbers has been the highest in the history of Cognizant and we are doubling down,” added Nambiar.

The company is refocusing on a bottom-heavy pyramid structure of hiring after years. “We’ve made meaningful progress in correcting our delivery pyramid by significantly increasing the number of college graduate hires onboarded in India. In 2021, we added a record 33,000 college graduate hires in India, up from 17,000 in 2020. In 2022, we plan to add approximately 50,000 in India. Digital acquisitions have also brought incredible talent to Cognizant,” said CEO Brian Humphries on the earnings call on Thursday. Cognizant acquired seven companies during the fiscal.

Growth was strong across verticals, with BFSI reporting a growth of 18.5 per cent YoY, product and resources was up 17.7 per cent, communications, media and technology grew by 12.6 per cent and healthcare was up 7.9 per cent.