Cognizant sees slow year for IT

Firm pegs revenue growth at 9-14% in 2016; reports net profit at $423.4 mn in Q4

For calendar year 2015 (CY15), Cognizant had managed to deliver a steady set of results. However, the Nasdaq-listed information technology (IT) services firm’s guidance for CY16 resembled the cautious mood shared by many of its competitors in India.

This is perhaps for the first time that the company’s guidance range is much lower than what it has been providing for. Cognizant has guided that its revenue will be in the range of $13.6-14.2 billion for CY16, representing a growth of 9.9-14.3 per cent.

Compare this to its past two years’ guidance. For CY14, the company had guided for revenue growth of 14.7-14.9 per cent. And, it managed to report a revenue growth of 16 per cent. For CY15, Cognizant upped its guidance thrice. First, the company guided for a growth of 19 per cent (revenue of $12.21 billion), which was later upped to 20.1 per cent. In the third quarter, it yet again increased its revenue guidance to $12.41 billion — a growth of 21 per cent.

The current growth for CY16 (9.9-14.3 per cent) is not only half its earlier years’ guidance, but the lower end of its guidance is also below Nasscom’s guidance for the industry, which is 10-12 per cent.

Cognizant’s guidance factors in the cautiousness seen in the numbers of the top four Indian IT players, which reflects in Nasscom’s guidance. The sector has been cautious due to the volatile currency and global  macro environment.  “Cognizant has given a wide range of guidance. Even though the lower end is very low, the company will manage to grow better than Indian IT players. Besides, Cognizant does improve on its own guidance later in the year,” said an analyst on condition of anonymity.

For the fourth quarter ended December 31, 2015, Cognizant reported net profit at $423.4 million — up 16.7 per cent year-on-year and 6.6 per cent sequentially. The company, which competes with Tata Consultancy Services, Infosys and Wipro, grew its top line by 17.9 per cent year-on-year and 1.4 per cent sequentially.

The company managed to grow its full-year revenue by 21 per cent, which it had stated in its guidance.

Cognizant reported a revenue of $12.42 billion. Guidance for the first quarter revenue that Cognizant gave is in the range of $3.18-3.24 billion.

Cognizant reported a revenue of $12.42 billion. Guidance for the first quarter revenue that Cognizant gave is in the range of $3.18-3.24 billion.

“We are pleased with our strong performance in 2015,” said Francisco D’Souza, CEO. “At a time when major technology shifts are disrupting all industries, clients are looking to a partner like Cognizant to work with them to create the winning business models of tomorrow at the intersection of the physical and digital worlds. Our investments in disruptive technologies, new business models and best-in-class delivery uniquely position us to enable clients to drive digital transformation at enterprise scale.”

The company added around 2,400 employees during the quarter, and the year-end headcount was approximately 221,700.

“While digital opportunities significantly expand our addressable market, our rapidly growing consulting, infrastructure and business process services and geographic market expansion, continue to be solid drivers of demand for our services,” said Gordon Coburn, president.