News

Published: July 31, 2024
Updated: July 31, 2024

Cognizant Exceeds Revenue Expectations with Strong Financial Services Performance

Q2 Financial Highlights

Cognizant Technologies, listed on Nasdaq, outperformed market expectations in its April-June quarter with revenue reaching $4.9 billion, surpassing the anticipated $4.8 billion. This achievement was driven by gaining market share amidst a stable demand environment and a recovery in its financial services vertical.

Annual Revenue Guidance Raised

Reflecting its improved revenue visibility, Cognizant has raised its annual revenue guidance. The company’s net profit for the quarter surged by over 22 percent year-on-year (YoY) to $566 million.

Performance Metrics

Despite a 0.5 percent YoY decline in revenue in constant currency terms, Cognizant's results exceeded both market and internal guidance. Sequentially, the company saw a 2.1 percent revenue increase in constant currency terms.

The Chief Financial Officer highlighted that the company is successfully securing new deals, indicating a consistent market share gain.

Financial Services Recovery

Revenue from the financial services vertical saw a marginal decrease of 0.8 percent to $1.45 billion in constant currency terms. This vertical had trailed behind the health sciences vertical for three consecutive quarters, a first in the company's history. However, the management remains optimistic about recovery, especially in the North American market.

Margin Improvement

Cognizant’s operating margin rose by 280 basis points YoY to 14.6 percent, reflecting improved efficiency and cost management. This improvement was partly attributed to revenue growth, better operating leverage, and enhanced utilization rates.

Future Revenue Projections

For the third quarter, Cognizant projects revenue to be flat to 1.5 percent up in constant currency terms, an improvement from its previous guidance. The full-year forecast now ranges from a 0.5 percent decline to 1 percent growth in constant currency, incorporating a 70 basis points inorganic contribution from the acquisition of digital engineering firm Belcan.

Workforce and Utilization

The company’s headcount decreased by 8,100 sequentially and 3,300 YoY, ending with 336,300 employees in Q2. Attrition dropped to 13.6 percent, and utilization rates improved to 83 percent. The management noted an encouraging trend of former employees returning to the company.

Generative AI Initiatives

Cognizant reported over 750 early engagements involving Generative AI, up from 450 in the previous quarter, with 600 more PoCs in the pipeline. The company has integrated over 200 clients on its AI platforms, indicating sustained momentum in this technology segment.

Cognizant's strong performance in Q2, particularly in its financial services vertical, along with raised revenue guidance, reflects robust market positioning and operational efficiency. The company continues to innovate with Generative AI, setting a strong foundation for future growth.