Cognizant Q4 results: Revenue dips 1.7% to an 8-quarter low, profit rises to $558 mn

Information technology firm Cognizant Technology Solutions reported a 7% increase in net profit to $558 million for the December quarter, up from $521 million in the same period the previous year. Meanwhile, its revenue declined 1.7% YoY to $4.76 billion for the fourth quarter ending December, a likely eight-quarter low.

Based in New Jersey, the firm Revenue decreased by 2.4% in constant currency terms from the previous year to $4.75 billion, falling within its own guidance range of $4.69 to $4.82 billion. The company follows the calendar year as its financial year.

The underwhelming performance serves as an indication of the overall market environment for IT service companies in India, such as Tata Consultancy Services, Infosys, and Wipro. A majority of the clients of Indian IT exporters have a huge presence in the US and European markets.

While TCS experienced a 1.7% YoY growth in dollar revenue in constant currency, reaching $7.3 billion for the December quarter. Infosys' revenue declined by 1% in constant currency to $4.7 billion for the quarter ending in December.

For the full year 2023, Cognizant's revenue declined by 0.3% YoY in constant currency to $19.4 billion, aligning with its growth guidance of $19.3 to $19.4 billion.

"We delivered fourth-quarter revenue within our guided range and have maintained our commercial momentum. Full-year bookings of $26.3 billion represent a 9% increase YoY, driven by new clients and large deals,” said Ravi Kumar S, CEO of Cognizant.

“To further enhance our capability in designing and delivering solutions, we continue to invest in generative artificial intelligence, cloud, data modernization, digital engineering, and the Internet of Things,” added Kumar, who served as the former Infosys president, and assumed the role of CEO at Cognizant on January 12, following Brian Humphries, who departed the company on March 15, 2023.

The company said that the growth in the fourth quarter was primarily driven by the communications, media, and technology sector, which experienced a 2.6 % YoY growth in constant currency, followed by the products and resources sector with a 1.3% growth. The financial services sector declined by 5.8%, while health sciences saw a 2.1% decrease YoY in constant currency.

The voluntary attrition rate, calculated on a trailing 12-month basis, decreased to 13.8% in the December quarter from 16.2% in the previous three months and 26% YoY, indicating a downward trend across the industry. The total headcount at the end of the fourth quarter was 347,700, an increase of 1,100 from the third quarter of 2023 but a decrease of 7,600 from the fourth quarter of 2022.