1. Cognizant posts Q4 loss on new tax law

Cognizant posts Q4 loss on new tax law

The company's guidance again spoke about a growth in double digits, which is almost at the same level as at the end of the last year. The revenue projection and growth by Cognizant is higher than estimates put out by Nasscom.

By: | Bengaluru | Published: February 8, 2018 5:22 AM
Cognizant, the Nasdaq-listed IT services company with a majority of its employees based in India, has reported a loss of million for the fourth quarter of 2017. (Reuters)

Cognizant, the Nasdaq-listed IT services company with a majority of its employees based in India, has reported a loss of $18 million for the fourth quarter of 2017. The loss was caused by a one-time incremental income tax expense of $617 million, following the implementation of new tax reform Act in the US. On business operations, Cognizant provided an optimistic revenue growth guidance of 8-10.1% for 2018, projecting revenue in the range of $16-16.30 billion. The company’s guidance again spoke about a growth in double digits, which is almost at the same level as at the end of the last year. The revenue projection and growth by Cognizant is higher than estimates put out by Nasscom.

Nasscom has projected a growth rate of 7-8% for FY18. According to Cognizant, the one-time expense was primarily attributable to the deemed repatriation tax on undistributed earnings of foreign subsidiaries. It said the overall effective corporate income tax rate to be approximately 24% for 2018 and 24-26% beginning 2019. Chief financial officer Karen McLoughlin said it has announced a substantial increase in its quarterly dividend. “We are also evaluating the longer-term impact the new US tax legislation may have on our capital return programme.”

For 2017, Cognizant reported consolidated revenue of $14.81 billion, up 9.8% from 2016. This growth came well within its guidance of 9.5-10%. The net profit for the year stood at $1.5 billion, a decline of 3.2%. The non-GAAP operating margin for the company was 19.7% for 2017. CEO Francisco D’Souza said, “Consistent and solid execution throughout 2017, along with continued investments to further accelerate the shift to digital during the year, gives us confidence that we can deliver a strong 2018.”

The key drivers for growth during 2017 were the verticals of healthcare, products & resources and communication, media and technology, though its largest revenue generating business segment – financial services – recorded growth lower than the company’s average. Cognizant’s largest market North America grew by 8.6% during 2017, which was lower than its overall growth, while other geographies such as continental Europe and rest of the world posted much higher growth.

For the fourth quarter of 2017, Cognizant reported revenue of $3.83 billion, recording a sequential growth of 1.6%. The company has provided a revenue growth guidance in the range of 1.3-2.4% for the first quarter of 2018. $100-m foundation to push tech skills training Cognizant has announced the formation of a new non-profit foundation to support STEM (Science, Technology, Engineering and Math) and digital education and skills initiatives for US workers and students. The foundation will be established with an initial grant of $100 million.

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