Cognizant posts strong March quarter clocking $2.91 billion

Image: Amit Verma

Francesco Dsouza, CEO, Cognizant

Nasdaq-listed software services company Cognizant Technology Solutions Corp on Monday recorded a 6.2 percent sequential jump in dollar revenue growth during the January-March stretch, ahead of its Indian rivals TCS, Infosys and Wipro. India’s top three IT-services exporters (TCS, Infosys and Wipro) posted a decline in dollar revenue growth during the March quarter hit by cross currency volatility and sluggish demand in certain of its key verticals.

New Jersey-headquartered Cognizant, which has a majority of its workforce based in India, recorded a revenue of $2.91 billion during the January-March period, while India’s largest IT-services firm TCS' revenue stood at $3.9 billion, down 0.8 percent sequentially. Infosys' performance was worst among the top-tier Indian IT firms, recording a 2.6 percent sequential decline in dollar revenue at $2.16 billion during the same period. Bangalore-based Wipro reported a 1.2 percent sequential decline in dollar revenue at $1.78 billion.

Cognizant recorded a net income of $382.9 million during January-March, up 9.7 percent from $348.9 million a year ago. Sequentially, it was up 5.5 percent. However, in comparison, the TCS bottom line was more than double that of Cognizant during the same period. TCS posted a net income of $951 million, up 8.9 percent quarter-on-quarter, excluding the one-time special employee reward of $423 million during the March quarter. For Infosys, net profit during the same stretch stood at $498 million, down 4.6 percent sequentially.

Over the last three fiscal years, Cognizant has been busy disrupting the order of the Indian IT industry. In terms of sequential dollar-revenue growth, it first overtook Wipro and then outperformed Infosys in 2012. Later, during the 2013 March quarter, it edged past TCS in sequential dollar revenue growth.

“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 skills to manage this transformation in-house and are turning to Cognizant to help them re-architect their core business and organisational models,” said Francisco D’Souza, chief executive officer, Cognizant.

For 2015, Cognizant, which follows the calendar year, expects its annual revenue to be at least $12.24 billion, up 19.3 percent compared to 2014.  

“Our strong revenue performance this quarter versus our guidance was driven primarily by organic growth of our core businesses and is a reflection of our strategy and offerings resonating with our clients,” said Karen McLoughlin, chief financial officer, Cognizant. The company had a net addition of 6,200 people during the quarter, taking its total headcount to approximately 2,17,700 employees as of March 2015. Among the Indian IT majors, Mumbai-headquartered TCS has a total staff strength of 3,19,656 people followed by Infosys at 1,76,187 employees as of March 2015. Wipro has a total headcount of 1,58,217 people.

“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,” said Gordon Coburn, president, Cognizant.

Overall analysts tracking the space projected the sluggish demand environment to be a dampener for the $146 billion Indian IT industry during the January-March stretch, already a seasonally-soft quarter for the sector. Traditionally, January to March is a lean period for IT companies as client budgets are finalised during the period for the next fiscal and revenues do not accrue for the full quarter.