Cognizant revises revenue guidance for CY22 as digital deals drive growth

But the forecast at 7-9% does not match Infosys' 12-14%; While TCS does not give guidance, its management is sure of double-digit growth

Nasdaq-listed IT major Cognizant reported a better set of numbers for the first quarter of CY2021, as the company saw recovery in its healthcare vertical and digital services grew faster than the company's overall growth. Cognizant also revised its full-year revenue guidance upwards to 7-9 per cent growth (5.5-7.5 per cent in constant currency). At the end of its fiscal year in 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) though it does not give guidance, the management has shared that the demand environment gives it confidence of a double-digit growth for the fiscal. Similarly, HCL Technologies and Wipro too shared similar confidence.

Even the revenue for the first quarter ended March 31, 2021 grew to $4.4 billion a growth of 4.2 per cent year-on-year, and 2.4 per cent in constant currency. Its digital revenue grew by 15 per cent y-o-y and now represents 44 per cent of its total revenue. Again compared to the Indian players. Cognizant’s yoy revenue growth numbers look subdued. TCS reported a growth of 5.9 per cent, and Infosys reported growth of 9.6 per cent.

Net income for the quarter at $505 million was 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 create a significant opportunity for Cognizant in the coming years," said Brian Humphries, Chief Executive Officer.

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 prioritize 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 optimize the cost of supporting their legacy systems and operations,” said Humphries.

Healthcare (29.3 per cent of revenues) revenue grew 7.9 per cent year-over-year, or 7 in constant currency. “Our healthcare revenue benefited from increased demand for our integrated payer software solutions and continued strong demand among our life sciences clients,” said the company in the statement.

Cognizant reported attrition of 21 per cent for the quarter, voluntary attrition was 18 per cent, one of the highest in the industry. The company has a total headcount of 296,500 employees.