Cognizant Q3 FY24 net up 10.8%; narrows revenue growth guidance for FY24

IT company reports 'large deals' in the quarter and 'momentum' in its AI services

Nasdaq-listed information technology (IT) major Cognizant Technology Solutions beat Wall Street estimates for third-quarter profit and narrowed the guidance thanks to the Belcan acquisition in August.

  The IT major now expects annual revenue between $19.7 billion and $19.8 billion. “Full-year 2024 revenue guidance narrowed to growth of 1.4 per cent to 1.9 per cent on constant currency, unchanged at the midpoint,” the company said.

  The company announced a net income of $582 million in Q3, up 10.8 per cent year-on-year (Y-o-Y). Sequentially, the net income grew 0.8 per cent compared to Q2FY4. Cognizant follows a January-December financial reporting period.

 

  In Q3FY24, revenue increased by 2.7 per cent on a constant currency basis, reaching $5 billion, while reported revenue grew by 3 per cent. This revenue growth in Q3 exceeded the guidance provided by the company in Q2.

  The company’s health sciences business grew 7.8 per cent, and banking, financial services, and insurance was up 

0.7 per cent Y-o-Y. The product and resources segment grew 5 per cent, but communications, media, and technology was down 3.7 per cent Y-o-Y.

 

In North America, business grew by 3.8 per cent Y-o-Y, and the rest of the world saw 4.3 per cent growth. However, Europe continued to struggle, declining by 0.3 per cent.

 

“We think this is a very strong quarter considering how the market has been. We see a return of organic growth this quarter. I think we are at a good inflection point in our journey. A lot of this was on the back of large deals and the momentum we see on our artificial intelligence (AI) platforms,” said Ravi Kumar, chief executive officer of Cognizant.

 

 

The company signed 19 large deals in the first three quarters of FY25, up from 17 in FY23.

 

“Investments in AI-driven platforms, such as our Neuro suite and Flowsource, are resonating with our clients and supporting our large deals success. In the third quarter, we signed six deals with a total contract value of more than $100 million each, bringing our year-to-date count to 19, which is more than we signed in the full-year 2023,” said Kumar.

 

“In August, we officially welcomed Belcan, an engineering, research and development (ER&D) service provider acquired for $1.3 billion, to the Cognizant family, and we are excited about the opportunities to jointly expand our presence in the growing ER&D market,” Kumar.

 

Bookings for the quarter remained flat Y-o-Y. On a trailing 12-month basis, bookings declined by 2 per cent Y-o-Y to $26.2 billion, representing a book-to-bill ratio of around 1.3x. During the quarter, the company signed six deals, each with a total contract value of $100 million or greater.

 

“While we have seen a strong momentum at the top end of the deal bracket. We are also seeing stability and pickup in small deals. However, there is volatility and softness, and hence on the aggregate level we are flatish and on a Y-o-Y the momentum on deals looks soft. Overall, we are leading the deal activity and participating across,” said Jatin Dalal, chief financial officer, Cognizant.

 

The total headcount at the end of the third quarter was 340,100, including Belcan, reflecting an increase of 3,800 from Q2 and a decrease of 6,500 from Q3. The company plans to begin campus recruitment next year. Attrition for the quarter stood at 14.6 per cent.