Cognizant's profit beats on demand for cloud-based services

REUTERS - IT services provider Cognizant Technology Solutions Corp reported a better-than-expected quarterly profit on strong demand for its cloud-based services, especially from its financial and healthcare clients.

Shares of the company rose 3.1 percent at $70.66 in premarket trading on Thursday.

Revenue from its financial services sector, which accounts for more than a third of its total revenue, rose 4.1 percent, and revenue from healthcare services rose 9.5 percent in the second quarter.

Like its Indian rivals, Tata Consultancy Services Ltd and Infosys Ltd, Cognizant also gets the largest chunk of its revenue from financial services and healthcare clients.

Cognizant has been investing heavily to boost its digital services amid a tight cap on spending from its clients.

The company said it expected current-quarter revenue to be between $3.73 billion to $3.78 billion, largely in line with the average analysts' estimate of $3.76 billion, according to Thomson Reuters I/B/E/S.

The IT services provider had said in May it is seeing promising demand from the healthcare sector in 2017, despite concerns of lower client spending due to the uncertainty surrounding the U.S. healthcare policy.

The Republican quest to scrap Obamacare, a major campaign vow by U.S. President Donald Trump, failed last week, after the Senate failed to dismantle the healthcare law.

Cognizant's net income rose 86.5 percent to $470 million in the second quarter ended June 30 as the IT services provider benefited from lower income tax compared with the year-ago period.

Cognizant said its subsidiary in India repurchased shares valued at $2.8 billion from its shareholders in May last year.

As a result of the transaction, the company said it took an income tax expense of $190 million in the year-ago period.

Excluding items, the company earned 93 cents per share, beating the analysts' estimate of 90 cents.

Revenue rose nearly 9 percent to $3.67 billion, slightly above the average analysts' estimate of $3.66 billion.

(Reporting by Rishika Sadam in Bengaluru; Editing by Arun Koyyur)