In Q2, Cognizant delivered its best quarterly revenue: Rajesh Nambiar

Cognizant Technology Solutions Corp. raised its annual revenue growth forecast to 9-10% in constant-currency terms from 5.6-7.6% it had predicted earlier as customers continued to spend on digital transformation projects. The New Jersey-based firm said Q2 revenue rose 12% to $4.6 billion from a year earlier, driven by a 20% growth in digital revenues. Cognizant, which employs more than 200,000 people in India, reported its highest quarterly revenue and the fastest quarterly growth since 2015. In an interview, Rajesh Nambiar, president of digital business and technology and India chairman and managing director, spoke about the demand environment, growth drivers and acquisition strategy. Edited excerpts:

How do you see the overall demand environment in the next quarters?

At the macro level, the demand for digital looks robust. The pandemic proved to be a turning point, and following more than a year of turbulence, a business environment ripe for reinvention has emerged. Clients are investing in modernizing their legacy environments, embracing the cloud and investing in innovation. We continue to believe that the next phase of digital is about transforming processes to become agile, intelligent and automated. Additionally, hyper-personalization is fuelling significant demand in analytics, artificial intelligence (AI) and machine learning (ML). Moreover, in the post-pandemic world, modernizing businesses is much more than being “digital-first”. It also means building resilience as a capability to thrive against all odds and maintain business continuity in rapidly changing market realities and environment. We have been long evangelizing a shift from legacy to modernizing businesses to help our clients gain richer returns and benefits across the board. We are excited about the overall demand environment in the coming quarters.

What drove growth in Q2?

In the second quarter, we delivered our highest-ever quarterly revenue, accelerated by double-digit growth in digital revenue and bookings. Our quarterly growth rate was the largest since 2015. We registered revenue of $4.6 billion, representing growth of 15% year-over-year or 12% in constant currency and beat expectations with strong execution and delivering upside to our revenue guidance. We witnessed strong double-digit year-on-year constant currency growth in communications, media and technology, products and resources, and healthcare. We have achieved a double-digit CAGR over the past four years in communications, media and technology and remain optimistic about our growth prospects. This industry is now home to some of our largest clients.

Additionally, we continued to post excellent growth in manufacturing, logistics, energy and utilities within products and resources. Through targeted investments, we have been shifting our portfolio to faster-growing market segments, which is resulting in double-digit year-on-year growth.

What’s the strategy to grow your digital business?

We define digital business as the process of applying digital technology to reinvent business models and transform a company’s products and customer experiences—innovating products that create new value and connecting people with things, insights and experiences. Our strategy is to focus on delivering exceptional business outcomes using digital technologies—bringing them together to solve customer problems. For example, if a client in retail wants to improve their customer experience to increase their revenue spent, we are able to support them with not just one single digital solution like a customer retention app or just customer segmentation analysis. We are able to help them develop a solution that solves all relevant components driving this—getting real-time data from IoT (internet of things) devices, analysing it by correlating with other sales channels. We are able to build applications to improve engagement based on these insights, run on scalable systems across the globe.

Shifting our business to high-growth categories and our success in expanding our portfolio with strategic acquisitions has not only made us more competitive but has encouraged more clients to engage us to execute their transformation agendas. With our extended portfolio, we are now able to orchestrate software, data, platforms and programs to transform high-value interactions into personalized experiences that drive business results.

Cognizant has been very aggressive in mergers and acquisitions. Will we see more deals in 2021?

One of our strategic priorities is “accelerating digital”, and we are doing exactly that by sharpening our ability to support clients as they transform into software-driven enterprises. Since 2019, we have invested more than $2 billion in mergers and acquisitions to accelerate our progress against our targeted digital battlegrounds. Last week, we acquired TQS Integration to enhance our smart manufacturing offerings—marking 14 acquisitions over the past 18 months. All are focused on our strategic priorities of digital engineering, data and AI, cloud and IoT—capabilities that enable our clients to compete as modern digital businesses. Seven of those acquisitions were cloud-related. We have also been able to extend our portfolio, partner ecosystem and elevate our market position. We are thrilled to have a world-class portfolio of solutions and capabilities to bring to bear for our clients, and you can expect us to continue to pursue M&A as part of our strategy of continuing to enhance that portfolio.