Cognizant revenues meet estimates, but profit falls 3%

Information technology (IT) services major Cognizant’s June quarter earnings met Street expectations as the company reported a healthy rise in its revenue, which was in line with its guidance coupled with improvement in operating margin.

However, the Nasdaq-listed firm saw a 3 per cent decline in its net profit at $456 million on year-over-year (YoY) basis for the quarter ended June 2018, owing to net non-operating foreign exchange losses of $80 million arising from rupee depreciation along with initial funding for the Cognizant US Foundation. It dropped 12.3 per cent sequentially.

During the quarter, revenue of the firm that competes with large Indian IT firms like TCS and Infosys rose 9.2 per cent to $4.01 billion, compared to $3.67 billion reported in the same period of last year. The revenue figure was largely in line with its guidance of $4-4.04 billion given for June quarter. On a sequential basis, the revenues went up by 2.55 per cent.

While Cognizant’s YoY revenue was slightly ahead of industry body Nasscom’s growth projection of 7-9 per cent, its larger Indian peer TCS reported a better dollar term revenue growth of 10 per cent. It was 6.8 per cent for Infosys . “As our second-quarter results confirm, we are making solid progress on our plan to accelerate our shift to digital services and solutions,” said Francisco D’Souza, CEO and vice chairman of the Board at Cognizant.

Operating margin profile of the firm improved significantly with 200 basis points rise year on year and 170 basis points sequentially at 22 per cent in the June quarter.

In the June quarter, TCS and Infosys saw a dip in their operating margin in quarter-onquarter basis by 40 basis points and 100 bps, respectively. “YoY non- GAAP operating margin expansion reflects strong operational execution and positions us well to absorb planned investments in the second half,” said Karen McLoughlin, chief financial officer of Cognizant.