Home > Industry > Infotech > Cognizant Q4 net profit falls 17%, revenue in line with guidance
Front view of Cognizant's Mangaluru facility.
Front view of Cognizant's Mangaluru facility.

Cognizant Q4 net profit falls 17%, revenue in line with guidance

  • The Teaneck, New Jersey-based firm’s revenue for the March quarter stood at $4.2 billion in constant currency, up 3.5% YoY
  • Cognizant derives more than 60% of its business from financial services and healthcare sectors

BENGALURU: Cognizant Technology Solutions Corp on Friday posted a nearly 17% decline in net profit to $367 million for the first quarter ended March, compared to the same period of 2019, due to higher expenses and costs.

The company follows the calendar year.

The Teaneck, New Jersey-based firm’s revenue for the March quarter stood at $4.2 billion in constant currency, up 3.5% from the year-ago quarter, in line with the company’s revised guidance of 3.4-3.6% growth. The operating margin for the fourth quarter was at 15.1%.

Last month, Cognizant withdrew its full-year 2020 guidance of 2-4% in constant currency provided on 5 February along with the firm's December quarter and full-year earnings, citing lack of visibility due to the impact of covid-19.

“While we expect a challenging demand environment throughout 2020, we believe the pandemic is accelerating the secular trends of core modernisation and cloud migration as companies shift to digital business models. These and other related IT trends play directly to Cognizant’s strategy. I am confident we will emerge from this crisis in a position of strength," said Brian Humphries, chief executive officer (CEO), Cognizant.

Cognizant derives more than 60% of its business from financial services and healthcare, and thus, is less exposed to some of the hardest-hit industries, including travel, hospitality, retail and automotive, Humphries said.

Revenue from financial services (34.3% of the total revenue) and healthcare (28.3%) grew in lower single digits during the quarter ended March. Financial services revenue grew 1% year-on-year (YoY). The growth was driven by the contribution of the partnership with three Finnish financial institutions to transform and operate a shared core banking platform and regional banks in North America. Healthcare revenue grew 2.5% from the year-ago period due to double-digit growth in life sciences, including the contribution of Zenith Technologies, which was acquired in July 2019.

Revenue from products and resources (22.6% of the total revenue) rose 4.4% YoY led by gains across retail and consumer goods, manufacturing, logistics, energy and utilities. This was partially offset by softness in the travel and hospitality industries.

Communications, media and technology (14.8% of the total revenue) increased 5.2% YoY due to broad-based growth across all the industries in this segment. Revenue growth in technology was negatively impacted by its previously-announced decision to exit certain portions of the content services business.

Humphries said they have been able to contain the Maze ransomware attack announced in April though “we expect the vast majority of revenue and margin impact from the ransomware impact to be in the second quarter. However, ongoing remediation cost will ensue through subsequent quarters."

During the first quarter, Cognizant completed the acquisitions of cloud company Code Zero and digital marketing firm Lev and repurchased about 8 million shares. Since 31 March, Cognizant has not initiated any new share repurchase programs.

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