Cognizant posts small loss due to one-time provisional income tax in US

For the year 2018, the company is expecting the revenue to be in the range of $16-16.30 billion

Information technology (IT) services major Cognizant on Wednesday reported a loss of $18 million in the quarter ended December 31, 2017, due to a one-time provisional income tax in the US.

In the corresponding quarter of 2016, it had posted a profit of $416 million. In the quarter ended September 30, 2017, the company’s net was $495 million.

Cognizant had an upbeat forecast for January-March, 2018, citing increased spending by clients in financial services and health care. These sectors have been primary clients of Nasdaq-listed Cognizant. 

In the quarter under consideration, the IT major’s revenues stood at $3.38 billion, up 10.6 per cent year on year, and 1.6 per cent sequentially. Operating margins for the quarter at 19.7 per cent had a marginal decline of 30 basis points.

For the whole of 2017 — Cognizant follows a January-December accounting year — net profit was flat at $1.5 billion. Revenues grew 9.8 per cent over 2016 to $14.81 billion. 

The National Association of Software and Services Companies, the trade body representing IT companies in India, had earlier said the sector would grow 7-8 per cent in FY 18.

Cognizant said it expected the March quarter revenue to be $3.8-3.9 billion — growth of about 1.3-2.3 per cent quarter on quarter. In 2018, it expects revenues to be about $16-16.3 billion, a growth rate of 8-10 per cent.

Revenues from digital products, solutions, and services accounted for about 27 per cent of Cognizant’s revenue in 2017, growing around 30 per cent — well above the company’s average growth.

Among the key segments, revenue from the financial services sector grew 5.4 per cent in the quarter and from health care grew 12 per cent, year on year.  Among the major geographies, North America grew 8.5 per cent and Europe 18.1 per cent year on year.

“Consistent and solid execution throughout 2017, along with continued investments to further accelerate the shift to digital during the year, gives us confidence that we can deliver a strong 2018,” said Francisco D’Souza, chief executive officer, Cognizant.

The company also announced an initial grant of $100 million to set up a non-profit foundation to support STEM (science, technology, engineering and math) and digital education in the US.