Cognizant cuts growth outlook to 8.9%

Cognizant Technology Solutions Corp. appears to be at a crossroads, and a slowing revenue growth is just one of its challenges.

A bigger headache for the Nasdaq-listed company is the management prioritising profitability over revenue growth, leading to some heartburn among investors, according to some analysts. Over the last year, Cognizant shares have under-performed Nasdaq or the firm’s larger peer Accenture Plc or smaller Indian rival, Infosys Ltd.

The company now runs the risk of growing at its slowest pace in a year, after it lowered its fullyear revenue growth outlook to 8.9%, just three months after it reaffirmed faith in its earlier outlook of growing at-best 10% in 2018.

Cognizant, which follows the January-December financial year, said on Tuesday revenue in the three months ended 30 September grew 8.3% from a year earlier, and improved 1.7% from the preceding June quarter, to $4.08 billion.

Net profit fell 3.6% to $477 million, from $494 million a year earlier, but rose 4.6% from the $456 million in the June quarter.

Analysts polled by Bloomberg had expected Cognizant to post revenue of $4.08 billion and profit of $658.15 million. The Teaneck, New Jersey-based company expects revenue in the December quarter to be between $4.09 bil-

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lion and $4.13 billion, a sequential increase of 0.24% and 1.2%.

This translates into the fullyear revenue to range between $16.09 billion and $16.13 billion, a growth of between 8.6% and 8.9%. At the start of the year, Cognizant had outlined a full-year growth of 8-10% and maintained it until the second quarter. Cognizant may grow at 8.6% in 2018, the lowest since it grew at a similar pace in 2016, if it grows at the lower-end or a 0.24% sequential rise in the December quarter. To be sure, Cognizant’s at-best 8.9% growth will be envied by shareholders of Infosys and Wipro Ltd, as both the Bengaluru-based firms will grow at a much lower pace.

Again, even after slashing its full-year revenue guidance, Cognizant