IT services major Cognizant profit rises 5.3 pct; optimistic on outlook

By: | Published: November 2, 2017 5:55 AM

Cognizant, the Nasdaq-listed IT services company with close to three-fourths of its employees based in India, reported a 5.3% sequential rise in its net profit for the three months ended September.

It marginally revised upwards the lower end of the revenue guidance to 9.5-10% from the earlier level of 9-10%. (Image: Reuters)

Cognizant, the Nasdaq-listed IT services company with close to three-fourths of its employees based in India, reported a 5.3% sequential rise in its net profit for the three months ended September, even as it marginally revised upwards the lower end of its revenue guidance to 9.5-10% from the earlier level of 9-10% for the calendar year. Cognizant reported a net profit of $495 million for the third quarter of 2017 and the growth in bottom line was largely due to the consistent decline in its overall employee headcount since March this year. In the second quarter of this year, the company had posted a 16% sequential decline in the net profit primarily on account of separation costs of employees. The upward revision in revenue guidance by Cognizant, second time in this year, reveals the optimism of the IT major unlike its peer Infosys, which had lowered its growth target for FY18. Cognizant has projected revenues in the range of $14.78-14.84 billion for 2017.

For the third quarter of 2017, Cognizant reported a 2.7% sequential rise in revenue to $3.77 billion and this performance came in well within its earlier stated guidance. This performance was almost in similar lines of its peers —TCS, Infosys and Wipro. The revenue guidance for the fourth quarter of 2017, which normally is a weak period due to furloughs and holidays, is in the range of 0.5-2%. Commenting on the results, Cognizant CEO Francisco D’Souza said, “We believe our long-term relationships with clients and deep understanding of their priorities put us in a privileged position to help them adapt, compete, and grow.”

The non-GAAP operating margin remained steady at 20% for the third quarter of 2017. Cognizant has already stated its intention to improve its non-GAAP operating margin to 22% in calendar year 2019. Cognizant CFO Karen McLoughlin said, “During the quarter, we continued to take actions designed to improve our cost structure while allowing us to invest in the business for growth. We maintained our momentum, and we expect to close out 2017 with solid revenue and earnings growth while having undertaken a substantial return of capital to shareholders.”

Cognizant had a total staff strength of 256,100 at the end of September quarter, down by 700 when compared with 256,800 at the end of June. At the end of March this year, the company had 261,200 employees. In terms of business verticals performance, the financial services posted a moderate sequential growth of 1.5% while healthcare, manufacturing, retail and logistics grew above 3%. The North America geography, which accounted for 76.8% of its revenues, grew just 1.4% sequentially. However, the company received a boost from the UK and the rest of Europe, which grew 4.5% and 12.5%, respectively.

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