Cognizant lowers revenue outlook for 2024 after slow March quarter

The Nasdaq-listed institution said it present expects gross of betwixt $18.9 cardinal and $19.7 cardinal successful 2024. The little extremity of that projection is simply a 2.2% diminution successful reported currency from the twelvemonth prior, portion the precocious extremity would marque for a 1.8% growth. 

Cognizant, which follows a January-December fiscal year, had antecedently projected a gross of $19.8 cardinal for 2024. In 2023, the company's gross $19.35 billion, down from $19.43 cardinal successful 2022.

For the 3 months ended June, the outlook appears little promising. Cognizant expects a gross of $4.75 cardinal to $4.82 cardinal for the June quarter, which is simply a autumn of 2.9% to 1.4% successful reported currency. 

Cognizant’s gross for the January-March play totalled $4.76 billion, mostly unchanged from the preceding 3 months, but was down astir 1% from the corresponding year-ago period.

The diminution successful the March 4th was mostly due to the fact that of little gross from Cognizant’s ‘financial services’ business, which is 1 of its biggest segments. Also, concern from North America, its largest geography, came successful little astatine $1.39 cardinal for the March quarter, arsenic compared with $1.40 cardinal successful the October-December period. 

Operating borderline for the March 4th fell 60 ground points sequentially to 14.6%, though it was the aforesaid arsenic the year-ago period. 

While the IT large reported a 2% sequential autumn successful nett net to $546 cardinal for the March quarter, the autumn was much pronounced connected a yearly basis. Net income fell 5.9% arsenic compared with the year-ago January-March period. 

A nett positive

The Teaneck-headquartered company’s show lagged thoroughfare estimates connected the nett income beforehand but exceeded expectations connected revenue. 

According to a Bloomberg canvass of 17 analysts, Cognizant was expected to study a nett net of $551 cardinal for the March quarter; a 2nd canvass of 23 analysts had projected a gross of $4.7 billion. 

Still, astatine slightest 1 expert did not deliberation Cognizant's net were disappointing. 

"We judge CTSH (Cognizant) maintaining its erstwhile CY24 guidance range, portion inactive a wide range, is simply a nett affirmative successful this backdrop," Keith Bachman, an expert with BMO Capital Markets, wrote successful a enactment aft Cognizant declared its earnings. 

"Moreover, Cognizant was capable to clasp the borderline usher arsenic well, which calls for 20-40bps of y/y growth, arsenic we had suspected. Net, portion we deliberation the request situation remains challenging, Q1 and FY24 commentary is encouraging fixed different IT work reports," said Bachman. 

Two of Cognizant’s biggest businesses, fiscal services and wellness sciences, saw a year-on-year diminution of 6.2% and 1.2%, respectively. Revenue from its fiscal services conception totalled $1.39 billion, and from its wellness sciences concern totalled 1.42 billion.

The March 4th was the 2nd consecutive 4th erstwhile gross from Cognizant’s wellness sciences conception exceeded that of its fiscal services business, which has historically contributed astir to its gross successful its 30 years of existence.

Cognizant’s headcount fell sequentially by 3,300 employees betwixt January and March, mirroring a akin diminution successful different ample Indian IT firms. The institution ended the March 4th with 344,400 employees. As of December, astir 73%, oregon 250,000 of Cognizant’s employees, were based retired of India.

Last among peers

“Demand situation remains uncertain and geopolitical risks continue. These dynamics are shifting near-term lawsuit spending priorities from discretionary projects to projects that volition thrust near-term outgo savings and money innovation for the future," said main enforcement S. Ravi Kumar.

Chief fiscal serviceman Jatin Dalal said betterment successful discretionary spending tin assistance Cognizant scope the apical extremity of its gross guidance successful the aboriginal portion of the year.  

Notably, this is the 2nd consecutive 4th erstwhile Cognizant’s profitability was little than that of each of the apical 4 Indian IT companies for the 3 months ended 31 March. 

Indian IT bluechips, namely Tata Consultancy Services Ltd (TCS), Infosys Ltd, HCL Technologies Ltd, and Wipro Ltd, reported an operating borderline of 26%, 20.1%, 17.6%, and 16.4% respectively. 

Indian IT companies travel the April-March fiscal calendar. 

On the metric of gross growth, Cognizant’s gross for the March 4th grew astatine a slower clip sequentially compared with TCS, HCLTech, and Wipro, which saw a sequential gross maturation of 1.1%, 0.4%, and 0.05% respectively. Cognizant’s gross grew 0.04% from December 2023 to March 2024. 

While Infosys is up of Cognizant connected the number of nett net for the December-March period, the former's sequential autumn successful gross mightiness not span the spread successful revenue. 

Infosys expects 1-3% gross maturation successful changeless currency presumption for FY25 portion HCL Technologies is projecting 3-5% changeless currency gross maturation for the aforesaid period. TCS and Wipro person not fixed projections. Constant currency does not instrumentality currency fluctuations into account.

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Published: 02 May 2024, 05:29 PM IST