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Cognizant delivers strong Q1, raises full year revenue growth guidance

Company's net profit grows 9.7% in March quarter; revenue growth beats own estimates

BS Reporter Chennai
IT services company Cognizant on Monday delivered a healthy set of numbers for its first quarter ended March 31, 2015 apart from raising its full year revenue guidance.

The Nasdaq-listed IT services company which fiercely competes with most of the tier-I Indian IT services provider posted 9.7% growth in its net profit for the quarter to $382.9 million when compared with the corresponding period last year. The company beat its own revenue guidance for the quarter, posting $2,911.4 million in revenues, a growth of 20.2% over the same quarter in the previous year, backed by strong performance across key verticals especially the Healthcare segment and key geographies.

 

On a sequential quarter (compared with the trailing quarter) basis, the company's net profit grew 5.5% while revenues went up 6.2%.

During the quarter, Cognizant's healthcare vertical which now accounts for over 30% of the company's overall revenues posted a healthy year-on-year growth of 42.7% and sequential growth of 13.8% while Financial Services segment grew 13.4% on annualized basis and 3.6% on sequential basis. Financial Services makes up to close to 40% of the US-based company.

"Our strong revenue performance this quarter versus our guidance was driven primarily by organic growth of our core businesses and is a reflection that our strategy and offerings are resonating with our clients," said Karen McLoughlin, Chief Financial Officer.

In terms of geographies, North America which accounted for 78.7% of the overall revenues saw a growth of 24.8% on YoY basis and 7.4% QoQ basis. Within Europe, United Kingdom grew 2.7% and 2.3% on YoY and sequential quarter basis, respectively.

"The investments we have made in digital, automation, utility-based delivery models, consulting and industry-specific expertise, are clearly paying off. Given how fast the landscape is changing, clients typically don't have the skillsets to manage this transformation in-house and are turning to Cognizant to help them re-architect their core business and organizational models," said Francisco D'Souza, Chief Executive Officer of Cognizant.

The company also raised its full year revenue guidance by 30 basis points saying that it was expecting the revenues for 2015 to be at least $12.24 billion. For the second quarter ending on June 30, 2014, Cognizant said it was expecting its revenues to be at least $3.01 billion, indicating a sequential growth of around 3.4%.

Cognizant's strong show in the January-March quarter and strong revenue guidance, at least in the June quarter seen as a solace to Indian IT services companies which had seen their growth rate declining in the past quarter. Among the Indian firms, Wipro, the only company which gives quarterly growth guidance had said that it was expecting its June quarter revenues to be flat or grow 1%.

"Cognizant approach of helping clients from setting strategy, to implementing and maintaining technology, to transforming and running business operations is enabling us to establish greater mindshare and market leadership," said Gordon Coburn, President. "It's evident across all geographies and industries that businesses are being forced to manage growth, innovation and scale while simultaneously managing costs," he added.

During the quarter, Cognizant improved its operating margin by 40 basis points to 19.8%, over the previous quarter. The company added 6,200 people on net basis during the quarter which took its global headcount to 217,700.

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First Published: May 04 2015 | 4:10 PM IST

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