Cognizant Q4 profit up 7% at $558 mn, 2024 revenue guidance at -2% to 2%

Nasdaq-listed information technology (IT) and outsourcing firm Cognizant on Wednesday posted a 7 per cent increase in its net profit to $558 million for the December quarter (Q4), up from $521 million a year ago, on the back of a robust show in the communications, media, and technology verticals.

The New Jersey-based company follows a calendar year.

Cognizant’s revenue, however, has declined 2.4 per cent in constant currency from the year-ago period to $4.75 billion, with its guidance remaining in the range of $4.69 to $4.82 billion, despite the macroeconomic challenges and clients limiting discretionary spending.  

The IT firm has pegged its 2024 revenue to be in the range of $19 to $19.8 billion, indicating a decline of 2 per cent to a growth of 2 per cent in constant currency.

For 2023, Cognizant's revenue declined 0.3 per cent year-on-year (Y-o-Y) in constant currency to $19.4 billion, in line with its growth guidance of $19.3 to $19.4 billion.

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“We delivered Q4 revenue within our guided range, and we have maintained our commercial momentum. Full-year bookings of $26.3 billion represent an increase of 9 per cent Y-o-Y, driven by new clients and large deals," said Ravi Kumar S, chief executive officer (CEO), Cognizant.

"To keep advancing our ability to design and deliver solutions, we continue to invest in generative AI (GenAI), cloud, data modernisation, digital engineering, and IoT,” Kumar said.

In comparison, Tata Consultancy Services (TCS) revenues grew 1.7 per cent annually in constant currency to $7.3 billion for the December quarter. 

The revenue of Infosys, on the other hand, declined 1 per cent in constant currency to touch $4.7 billion for the quarter ended December.              

Growth for the fourth quarter was driven by communications, media, and technology verticals, whose revenue grew 2.6 per cent Y-o-Y in constant currency, followed by products and resources that grew 1.3 per cent.

Financial services declined 5.8 per cent, while health sciences declined 2.1 per cent Y-o-Y in constant currency.

Kumar asserted that Cognizant is focusing on “stimulating growth” in the financial services sector.

Cognizant continues to focus on leveraging artificial intelligence (AI) and generative AI (GenAI) to solve client issues. About 88,000 employees have completed training on AI and GenAI courses. “We aim to use AI in all our offerings,” Kumar said in a post-earnings investor call.

The voluntary attrition rate, on a trailing 12-month basis, reduced to 13.8 per cent in the December quarter, down from 16.2 per cent in the preceding three months and 26 per cent annually, indicating a downtrend visible across the industry.

The total headcount at the end of the fourth quarter stood at 347,700, an increase of 1,100 from Q3 2023 but a decrease of 7,600 from Q4 2022. The company promoted 30,000 employees last year.

For 2024, Kumar said Cognizant will focus on growing in select industries, expanding internationally, strengthening its large deal capabilities, and capturing the AI opportunity, among others.

“Pace of enterprise adoption (in GenAI) is expected to pick up soon…Results we have seen from initial PoCs (proofs-of-concepts) are very encouraging,” Kumar said.