Cognizant’s net profit came in at $629 million, from a quarterly revenue of $4.85 billion, up 5.6% in terms of constant currency.
The company’s bookings – which reflect robustness of future revenue – declined 2% year-on-year, with financial services, largest vertical by business size, growing by 1.6% in constant currency during the quarter.
The company’s attrition levels remained high at 35% (including retrenched employees for the quarter), with the company adding 8100 employees quarter-on-quarter.
Cognizant also cut its annual revenue guidance for the third straight quarter, trimming the estimate to $19.3 billion for FY22. Cognizant, however, reported a 60 basis point jump in operating margin at 16.4% in the third quarter.
“Revenue and bookings were below our expectations as company specific fulfillment challenges were compounded by the impact of an uncertain macroeconomic backdrop,” said Brian Humphries, Chief Executive Officer. “We are confident the steps we are taking will return the company to accelerated growth over the medium to long term.”
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In the earnings call on Thursday, Humphries said quarterly revenue streamed in lower than expected mainly due to fewer billable employees in the US market, its largest by business size.
“The primary driver of the revenue shortfall relates to a reduction in US onshore billable resources in recent quarters…” Humphries said. The CEO said the phenomenon follows trends of higher attrition, a “reduction in visa travel and a COVID-induced shift in the near and offshore delivery centers.”
Comparatively, India’s largest software exporter TCS reported an 18% jump in quarterly revenue, although net profit grew 8.4% to Rs 10,841 crore. Infosys reported a 23.4% jump in quarterly revenue (net profit up 11%) but the company’s operating margin declined 2.1% year-on-year.
Speaking about the macroeconomic environment, Humphries said clients are examining deals even more closely, and digital projects are not immune too: “We see clients closely scrutinizing and slowing their investment decisions for the backdrop of uncertain economic conditions. [indiscernible] has been reduced on lower-priority projects or those with a longer return on investment. We’re seeing some early signs of slowing in discretionary digital projects.”
Cognizant, which has well over 2.5 lakh of its 3.49 lakh employees in India, has struggled to contain attrition even as peers such as Infosys and Wipro signaled results in taming attrition levels at their companies.
Humphries acknowledged the challenge in the earnings call, saying the numbers this quarter were “little higher than expected.” The chief executive argued that daily resignation count has come down due to engagement drives over the last year.
The company expects positive results on its efforts to trim attrition in the fourth quarter.
Humphries said the reduction in onshore billable employee count in the US could have its impact in Q4 too, even though the company is making lateral hires and targeted compensation offers in the US. “We, therefore, expect these headwinds to continue in the fourth quarter, ahead of clear progress in Q1,” he said.
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