Cognizant net profit jumps 12.7%, firm lowers annual revenue guidance

The Nasdaq-listed information technology (IT) firm lowered its FY22 revenue guidance to 8.5-9.5% – from the 9-11% declared in the previous quarter – in constant currency in the range of $19.7-19.9 billion amid gathering macroeconomic clouds seen impacting US markets.

At $4.9 billion, the Q2 revenue was the largest quarter for Cognizant in terms of revenue, India chief Rajesh Nambiar told ET in an interview post the earnings announcement.

This is Cognizant’s second consecutive cut in FY22 revenue guidance, from $20-20.5 billion declared in the last quarter of FY21 to $19.7-19.9 billion declared in the Q2 results on Thursday.

In a press statement, Cognizant’s chief executive officer Brian Humphries said the financial results were “balanced” in a scenario marked by “elevated attrition” and “significant wage inflation.”

For the June quarter, Cognizant’s India peers

and fared better in terms of revenue growth. Mumbai-headquartered TCS’
revenue grew 15.5% in constant currency, while Infosys
registered a 21.4% growth. Infosys had also raised its revenue guidance to 14-16% for FY23 in view of the better performance. ‘s gross revenue jumped 22.4% year-on-year (YOY), even though its IT services operating margins pared 29 basis points to 18.8%.

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Cognizant’s operating margin at 15.5% has shown a YOY increase from 15.2% in the year-ago period. Nambiar said Cognizant had outdone its peers in recording an improvement in margins at a time when the metric was lowering across the industry. He said the company has not felt any impact of the weakening macroeconomic situation seen in the US yet.

Cognizant’s financial services segment grew the lowest in constant currency among all its verticals at 5.1%. The earnings release said the sale of Samlink, a Finnish IT services provider it acquired in january 2019, impacted the financial services segment revenue.

Cognizant, which has over 2.5 lakh employees in India, had an attrition rate of 31%. Its total employee count as of end-June stood at 3.41 lakh people. Nambiar qualified higher attrition levels as an “industry issue.” He said the company’s hybrid model of work was evolving, and it meant opening several tier-II offices in India.

Cognizant’s total attrition, which includes employees fired for performance and other reasons, touched 36% in the second quarter. According to the company’s presentations, Cognizant’s voluntary attrition has remained high around 30% since the second quarter of the 2021 calendar year.