Cognizant lowers revenue guidance for 2023 even as large deals rise – Times of India

CHENNAI: IT major Cognizant on Thursday reported a 3% rise in net profit at $580 million primarily on the back of lower selling and general administration expenses and other cost optimization actions. Quarterly revenue at $4.8 billion grew 1.5% year-on-year in constant currency terms beating analyst estimates marginally.
Approximately, 30% of the quarter’s deal bookings were large deals (total contract value of about $50 million or more) compared to approximately 20% for all of 2022. However, a tough technology demand environment led the company to soften its revenue guidance. For the full year 2023, Cognizant now expects revenue in the range of $19.2 billion-$19.6 billion, a decline on the lower end from the $19.4 billion revenue it recorded in FY 2022.
To simplify operations and accelerate the shift to a hybrid work environment, Cognizant launched a $400 million program NexGen – a plan to optimise the size of workforce and realign its real estate. This is expected to impact approximately 1% of jobs at Cognizant (3,500 associates), mainly non-billable workforce. The cost savings expected from NexGen remain undisclosed.
“We believe our company-specific operational challenges in financial services have largely subsided and we are beginning to stabilize the business,” Cognizant CEO Ravi Kumar S, said in its earnings call, noting that softer discretionary spending and decision delays by clients continue. “We expect the structural shift in our real estate costs to help eliminate 80,000 seats and 11 million square feet in large cities in India. This shift will also enable us to invest in collaboration spaces in smaller cities,” Kumar said.
Attrition stabilised at the company as voluntary attrition stood at 23%, down 3 percentage points sequentially and 7 percentage points on a YoY basis. Total headcount as of March 2023 was 351,500, a decrease of 3,800 from December 2022. The company has revamped the attrition metric to now disclose voluntary attrition only in the IT services.
To tap into the entrepreneurial spirit of its employees, Cognizant also launched a grassroots innovation movement, Blue Bold. In the coming months, the company plans to train more than 20,000 additional project leads in “innovation methods” and generate over 100,000 ideas for clients to use rapid prototyping. The company also accelerated its investment in generative AI, and said it has conducted ideation sessions with over 30 clients on this technology.