Cognizant lifts fiscal guidance again as net profit rises 10%

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Bengaluru | Published: August 6, 2015 12:41:20 AM

Cognizant, the Nasdaq-listed IT services company, has reported a 9.7% sequential rise in the net profit to $420.1 million in the June quarter.

Cognizant, the Nasdaq-listed IT services company, has reported a 9.7% sequential rise in the net profit to $420.1 million in the June quarter. The revenue rose 6% on strong demand from the financial services sector and an all-round growth across geographies. Revenue stood at $3.09 billion, rising by $174 million, the biggest ever sequential jump of the revenue in the company’s history.

Cognizant says it had faced revenue challenges from the healthcare sector, which accounts for 30% of its topline. The company, which follows the January-December fiscal, raised full-year revenue guidance for the second time this fiscal. For 2015, it has projected a revenue of $12.33 billion with a growth of 20.1% against its earlier guidance of $12.24 billion with a 19.3% rise.

Commenting on the results, Cognizant CEO Francisco D’Souza said, “Our second quarter sequential revenue increase in dollar terms was the strongest in our history. These results validate our business strategy, and our investments position us well to capture the emerging opportunities as clients look to transform into digital businesses.”

The company’s operating profit margin rose 20.2% compared with 19.8% in the previous quarter. The company historically operates in the 19-20% band as it reinvests any surplus back into the business.

Cognizant president Gordon Coburn said, “We are pleased that the significant investments we have made in our workforce over the past year are enabling us to meet strong demand from our clients to support their innovation initiatives.”

He said the innovative solutions developed and deployed by the company are fundamentally changing the business model and economics for clients around the world.

For the third quarter of 2015, Cognizant has provided a sequential revenue growth guidance of 1.8% translating into revenues of $3.14 billion. In the quarter, the financial services vertical, which accounts for 40% of Cognizant revenue, recorded a sequential growth of 7.7%. However, the healthcare vertical recorded only 2.1% sequential growth affected by the mergers & acquisitions in this segment.

In July, Cognizant had said that its healthcare revenues were likely to be hit as one of its clients Health Net, with whom it had a potential $520 million contract, is being acquired by another firm.

“Our strong performance has allowed us to raise our full year revenue and EPS guidance for the second time this year, despite the impact to our full year revenues from the announcement that Health Net would be acquired by Centene Corporation,” said Karen McLoughlin, Chief Financial Officer, Cognizant.

In terms of geographies, the North America segment recorded a sequential growth of 5.8% and 4.4% in UK. Continental Europe seemed to have turned the corner by recorded a sequential rise of 7.3% as compared to a decline in the previous quarter.

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