Healthcare helps Cognizant buck the weak trend

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Updated: May 5, 2015 11:56:13 AM

Thanks to a strong show by the healthcare vertical, Nasdaq-listed IT services major Cognizant beat Street expectations on Monday to post a 9.7% year-on-year (y-o-y) increase in its net profit for the March quarter to $382.9 million.

It also raised its annual revenue growth guidance marginally, to 19.3%. The IT major’s encouraging earnings come after a series of disappointing performances by its Indian IT peers.

Higher spend by financial and healthcare clients in North America enabled Cognizant to grow net profit by 5.5% sequentially. Revenue touched $ 2.91 billion in the first quarter of 2015, up 20.2% from the corresponding quarter last year. In February, the company had forecast a March quarter revenue of $2.88 billion.

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The IT major now expects June quarter revenue to be at least $ 3.01 billion. The company had finished 2014 on a strong note, crossing the $10-billion revenue mark, and had given a 19% growth guidance for 2015.

Revenue in the healthcare business, which accounts for nearly a third of Cognizant’s total income, soared 43% to $879.1 million in the first quarter. From North America, it garnered 78% of its revenue, or $ 2,292 million, during the quarter.

Francisco D’Souza, chief executive officer of Cognizant, said : “The investments we have made in digital, automation, utility-based delivery models, consulting and industry-specific expertise are clearly paying off. Given how fast the landscape is changing, clients typically don’t have the skill sets to manage this transformation in-house and are turning to Cognizant to help them re-architect their core business and organizational models. As a result, we’re building deeper relationships with CEOs and boards, CIOs, and business and functional leaders to help them transform their businesses into digital enterprises.”

IT majors like Infosys, TCS and Wipro had recorded below-par results, hit hard by currency volatility. Gartner had given out a not-so-promising outlook for global tech spend and had predicated it to fall by 1.3%. But Cognizant has bucked that trend.

Gordon Coburn, president, Cognizant, said: “The shift to a digital enterprise is driving greater demand for our traditional services and solutions as clients find the need to keep pace with the speed and scale of innovation and maintain their competitive advantage.”

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