Bengaluru: Cognizant Technology Solutions Corp., a US-based information technology (IT) firm with most of its employees working out of India, on Monday posted fourth-quarter revenue that just met expectations and, worryingly, said it expects little or no growth in the three months to March.

Uncertainty over a global economic recovery is making Cognizant’s largest clients, especially banks, put technology spending on hold, forcing the company to depart from its practice of specifying expected annual revenue.

Rather, Cognizant expects its revenue growth to slow to between 10% and 14.3% for the calendar year 2016.

In the January-March period, it expects no growth—an ominous sign for the poster boys of India’s $146 billion IT sector, many of which are expected to expand revenue at the slowest pace since 2009 and had been expecting things to improve in the financial year beginning April.

Cognizant, which has most of its 221,700 employees based in India, said revenue in the three months ended 31 December rose 17.9% from a year earlier, and 1.4% from the third quarter, to $3.23 billion.

Net income rose to $423.4 million in the fourth quarter from $362.9 million in the year-ago period, said the company, which follows a January-December accounting year.

Analysts polled by Bloomberg had expected Cognizant to report October-December quarter revenue of $3.24 billion and net income of $476.6 million.

The Teaneck, New Jersey-based company estimates revenue to be between $3.18 billion and $3.24 billion in the January-March period—about the same as in the fourth quarter.

In the year-ago period, Cognizant reported 6.2% sequential growth in the January-March period. This further underlines why the company may fail to repeat its stellar performance of last year (calendar year 2015).

Understandably, investors dumped Cognizant shares as on Monday. The stock was trading 7.16% lower at $54.35 at 9.10pm IST while the Nasdaq composite index was down 2.21% at 4,267.70 points.

“We are pleased with our strong performance in 2015," Francisco D’Souza, chief executive officer, said in a post-earning conference call. “Our outlook for 2016 reflects some softness in banking and financial sector and healthcare space."

Cognizant’s expectations that it would grow between 10% and 14.3% this year translates into revenue of between $13.65 billion and $14.20 billion, compared with Indian IT industry body Nasscom’s estimates of 10-12% growth in the financial year beginning 1 April.

This growth forecast is lower than the company’s 21% growth recorded last year (2015), when Cognizant added $2.15 billion in incremental revenue to end the year with revenue of $12.42 billion.

Cognizant did more new business last year than the $1.96 billion in new revenues put together by India’s three largest software services companies—Tata Consultancy Services Ltd, Infosys Ltd and Wipro Ltd.

“Business globally is becoming very difficult to predict," said one board member at an Indian IT firm, who spoke on the condition of anonymity. “We don’t know if it is safe to even give any guidance or range."

Cognizant said that it will be “incorrect" to say that the company forecast revenue within a range on account of macroeconomic uncertainty, and said that its soft outlook was just a reflection of some weakness in client spending, especially large banks.

“We have a very healthy pipeline," Rajeev Mehta, chief executive officer of IT Services at Cognizant, told Mint. “So other than some banks which have put on hold some of their technology spends, the rest of the sectors continue to do well. We started on a slow note but we believe healthcare will come back and so we believe we should have a good 2016 as well."

At the core of Cognizant’s soft outlook is the slow client spending among global banks and the healthcare space. D’Souza said macroeconomic uncertainty was impacting banks while less business was being outsourced to IT vendors by companies in the healthcare space, which is witnessing consolidation, leading many to defer technology work.

Gordon Coburn, president of Cognizant, said that though the year has started on a slow note, the company is “well positioned on account of the capabilities" the company has built, referring to Cognizant’s early embrace of new-age technologies, including having smart intelligent platforms and a strong consulting practice.

“The long-awaited guide lower has occurred," Keith Bachman, analyst with BMO Capital Markets, wrote in a note on Monday after Cognizant declared its earnings. Bachman was referring to his earlier note, dated January 13 where the analyst had—bravely—put out a lower guidance for Cognizant, on account of low spending from clients in the healthcare space. “The mid-point of Cognizant calendar year 2016 guidance of $13.93 billion is about 50 basis points lower than our current revenue target of $14.0 billion (consensus estimates of $14.12 billion)...We believe that CTSH used a range rather than an “at least" guidance to try and lower very aggressive and unrealistic revenue assumptions by some on the sell side.

“The March quarter revenue guidance is more of a surprise—revenue guidance of $3.21 billion at the mid-point, or 10.1% y/y growth, compares with our estimate of $3.27 billion and consensus of $3.32 billion," Bachman wrote.

Cognizant’s 1.4% sequential revenue growth in the October-December period is respectable when compared with the 0.6% growth recorded by Infosys and Wipro’s 0.3% growth. TCS recorded a 0.3% decline in revenue.

Cognizant’s growth was driven largely by a 1.8% sequential improvement in business from clients in the insurance and banking and financial space, which now accounts for 40.5% of the company’s revenue.

Client spending in Europe, which accounts for 16% of revenues, improved 2.3% while the US, which brings in 78.4% of Cognizant’s business, inched up 0.9%.

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