Cognizant sees Q4 growth driven by GenAI, healthcare and financial sectors

IT and professional services firm Cognizant Technologies announced on Thursday that its performance in the October-December quarter exceeded analysts' expectations, fueled by its generative artificial intelligence (GenAI) strategy, a strong presence in healthcare, and a rebound in financial services. 
CEO S. Ravi Kumar noted that GenAI is becoming integrated into all operations. He said that in 2024, the company accelerated investments in AI-led platforms and expanded its capabilities through the acquisitions of Thirdera and Belcan, further diversifying its portfolio. 

Originally based in Chennai and now headquartered in New Jersey, Cognizant acquired Belcan in September for $1.3 billion to enhance its engineering research and development capabilities, following its January acquisition of Thirdera for $430 million to expand its AI offerings. "Our focus on client centricity, agility, and innovation is enabling clients to unlock the next wave of hyper-productivity and enterprise-grade generative AI adoption," he said.

The company estimates that 20% of its code accepted by developers is AI-generated. In October, Cognizant reported generating 150,000 lines of accepted code monthly, equating to about two million lines annually, by incorporating AI tools into projects for clients. Kumar said that this level of hyper-productivity presents opportunities for partners to help clients tackle trillions of dollars in technical debt, modernise legacy systems, automate infrastructure, and reduce workload backlogs. 

In Q3, Cognizant reported over 750 early engagements using GenAI, up from 450 in the previous quarter, with an additional 600 GenAI proofs of concept in the pipeline, some expected to reach production. "Our performance in Generative AI is a positive indicator, allowing us to consolidate where our productivity surpasses that of our peers," Kumar said in October.

In the Oct-Dec quarter, the company reported a 2% decline in net profit to $546 million, down from $558 million a year prior. Revenue for 2024 rose by 6.8% to $5.1 billion, compared to $4.7 billion in 2023. For the full year, net income increased by 4.76% to $2.2 billion, up from $2.1 billion in 2023. A positive highlight for 2024 was a 5.36% year-over-year increase in net profit to $2.24 billion. (Cognizant follows a Jan-Dec financial cycle).

With around 70% of its workforce based in India, Cognizant concluded 2024 with approximately 336,800 employees. Attrition increased by 2.1 percentage points to 15.9% on a trailing twelve-month basis.

Much of Cognizant’s growth in 2024 was from healthcare clients, who brought the American IT outsourcer about a third, or $1.54 billion, of its quarterly revenue and $5.93 billion of its yearly revenue.

Revenue from the health sciences vertical increased by over 10.4% to $1.54 billion in CC terms, while the financial services vertical increased by 2.8% to $1.44 billion.

This is the fifth consecutive quarter when financial services trailed behind the health sciences vertical. In the fourth quarter of 2023, revenue from the financial services vertical trailed behind health sciences for the first time in 30 years of Cognizant’s history.

For the January-March quarter, the company anticipates revenue between $5 billion and $5.1 billion, projecting total revenue of $20.3 billion to $20.8 billion for the year.