Cognizant reports good numbers in Mar quarter, revises revenue guidance

Net income for the first quarter of CY21 was $505 million, up 37%

Nasdaq-listed IT major Cognizant reported better numbers for the first quarter of CY21, as it saw recovery in its health care vertical and digital services grew faster than the company’s growth.
 
Cognizant also revised upwards its full year revenue guidance from 7 per cent to 9 per cent (5.5-7.5 per cent in constant currency).
 
At the end of its financial year December 2020, the company had guided for a revenue growth of 5.5 to 8.5 per cent (4-7 per cent in constant currency). When compared to Indian players, Cognizant’s guidance does not seem to match up. Infosys has guided for revenue growth of 12-14 per cent for FY22. Tata Consultancy Services (TCS) does not give guidance but its management has said that the demand environment gives it confidence of a double-digit growth for the financial year. Similarly, HCL Technologies and Wipro, too, shared similar confidence.
 
For Cognizant, even revenue for the first quarter ended March 31, 2021, went up to $4.4 billion, a growth of 4.2 per cent year-on-year (YoY), and 2.4 per cent in constant currency.
 
Its digital revenue grew by 15 per cent YoY and now represents 44 per cent of its total revenue. Again, compared to Indian players, Cognizant’s YoY revenue growth numbers look subdued. TCS reported a growth of 5.9 per cent, and Infosys’ growth was 9.6 per cent.
 
Net income of Cognizant for the quarter was at $505 million, up 37 per cent from $367 reported in the same quarter last year.
 
"In the first quarter, we successfully executed our strategy of embracing digital, investing in international expansion and repositioning the Cognizant brand. Cloud migration and digital adoption will create a significant opportunity for Cognizant in the coming years," said Brian Humphries, chief executive officer (CEO). He also shared his concern on the rising number of Covid cased in India. “The ongoing humanitarian crisis, especially in India, is deeply concerning. We have made a series of investments to support India in this time of need and continue to prioritise the health and safety of our associates while we serve our clients," he said.
 
The underperformance of the financial services segment is one of the reasons for the lag in numbers. Financial Services, which represents 33.1 per cent of revenues, grew 0.5 per cent YoY, and decreased 1.7 per cent in constant currency. “Revenue growth generated by our digital services in both banking and insurance was offset by declining non-digital revenue as the company said its clients continue to optimise the cost of supporting their legacy systems and operations,” said Humphries.