Cognizant Q2 net profit up 12.7%, lowers full year guidance

Nasdaq-listed Cognizant Technology Solutions Corp. reported a 12.7% rise in net profit to $577 million for the June quarter from $512 million a year ago, on the back of a 9.5% rise in revenue in constant currency from the year-ago period to $4.9 billion. This is the company’s fifth consecutive quarter of revenue growth and highest quarterly revenue to date. The company follows the calendar year.

In comparison, for the June quarter, Tata Consultancy Services Ltd’s (TCS) dollar revenue grew 15.5% in constant currency from a year earlier to $6.8 billion, while that of Infosys Ltd grew 21.4% in constant currency to $4.4 billion.

The Teaneck, New Jersey-based firm lowered its full year 2022 revenue growth guidance to 8.5-9.5% in constant currency at $19.7-19.9 billion, from the 9-11% growth it guided in the previous quarter. 

The company’s digital revenue grew about 13% annually and contributed 50% to the total revenues for the June quarter representing a strong demand environment for digital technologies. It continues to focus on its “digital battleground” areas of digital engineering, artificial intelligence (AI) and analytics, cloud, and internet of things (IoT).

“In a period of unprecedented labor market conditions characterized by elevated attrition and significant wage inflation, we focused on our client commitments and delivered balanced financial results in the second quarter,” said Brian Humphries, chief executive officer, Cognizant. “As we position the company for sustained success, we will continue to invest in our talented employees, our clients and our capabilities.”

Revenue from financial services grew 5.1% in constant currency from a year-ago driven by growth in the U.S. regional banking clients, strength in the UK, and solid performance within insurance. The sale of the Samlink subsidiary, which closed on 1 February, 2022, negatively impacted segment revenue growth by approximately 190 basis points.

Healthcare revenue grew 7.6% annually in constant currency, driven by digital services among pharmaceutical clients and sustained demand for integrated software solutions among our healthcare clients.

Products and resources revenue grew 11.6% annually in constant currency, driven partly by strength among automotive, logistics, retail and consumer goods clients. Segment growth includes the benefit of acquisitions closed in Q2 2021.

Communications, media and technology revenue grew 19.5% from the year-ago period in constant currency driven by strength among digital native companies.

Cognizant’s headcount expanded to over 341,000 employees globally amid an intensely competitive labour market. The voluntary annualized attrition rate increased to 31% from 26% in the preceding three months indicating strong demand for tech talent across the industry.