BackCognizant Q3 net profit down 30% even as digital biz grows
The company’s priority areas of digital engineering, artificial intelligence (AI) and analytics, cloud, and internet of things (IoT) are more relevant than ever to clients, as per Cognizant CEO Brian Humphries
PremiumBENGALURU: Cognizant Technology Solutions Corp. on Thursday reported a 30% year-on-year decline in its third quarter net profit to $348 million, while revenue fell 0.1% to $4.2 billion, a result of exiting certain content services.
The company follows a January-December accounting year.
The New Jersey-based firm expects its full year 2020 revenue to be at the higher end of the previously guided range at approximately $16.7 billion - a decline of 0.4% in constant currency. This assumes an estimated negative 10 basis points foreign exchange impact and a 110 basis points hit following the exit from some content services.
Cognizant's digital business grew 13% y-o-y and contributed 42% to total revenues for the third quarter as digital bookings continued to grow.
“Against a challenging demand environment we continued to strengthen our portfolio, execute our digital strategy and increase our competitiveness," said Brian Humphries, chief executive officer, Cognizant, said in a press statement. “Clients are realizing they can distinguish themselves if they embrace disruption and transform. We are committed to making that easy for them."
Cognizant’s priority areas of digital engineering, artificial intelligence (AI) and analytics, cloud, and internet of things (IoT) are more relevant than ever to clients, Humphries said. “We aim to lead in the third phase of digital, which will require continued investments in M&A, our commercial and delivery capabilities, offer management, talent and branding."
The operating margin for the fourth quarter narrowed to 15.9% from 17.3% in the year-ago quarter.
Revenue from financial services (34.6% of revenue) declined 1.5% y-o-y, driven by declines in both banking and insurance. Growth in regional banks and capital markets in North America was offset by weakness in select global banking accounts and in Europe.
Healthcare (29% of revenue) grew 4.8% y-o-y, driven by life sciences. Growth in biopharmaceutical clients and revenue from acquisition of Zenith Technologies offset weakness in medical device clients. “Within healthcare, performance among payer clients improved," the company said.
Revenue from products and resources (21.9% of revenues) decreased 4% y-o-y, led by retail, consumer goods, travel and hospitality clients that were particularly adversely affected by the pandemic, partially offset by double-digit constant currency growth in manufacturing, logistics, energy and utilities.
Revenue from communications, media and technology (14.5% of revenues) increased 0.2% y-o-y as “client growth was more than offset by a negative 920 basis point impact from our 2019 strategic decision to exit certain content related services."
Excluding that impact, communications, media and technology grew approximately 9% in constant currency terms.
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