Cognizant, along with Infosys and HCL, has reduced its revenue forecast for the ongoing fiscal year. The Nasdaq-listed firm now expects its 2023 revenue to grow in the range of $19.3 billion to $19.4 billion, compared to the previous range of $19.2 billion to $19.6 billion. This represents a decline of 0.7% to flat growth. The revised guidance takes into account recent discretionary spending pressure and its impact on near-term revenue expectations.
Cognizant’s Chief Financial Officer, Jan Siegmund, explained, “We have narrowed our full-year revenue guidance range, which now reflects recent discretionary spending pressure and its impact on our near-term revenue expectations. We have also updated our adjusted operating margin guidance to approximately 14.7%, which is the high-end of our prior range, reflecting our continuing focus on enhancing operational discipline.”
Cognizant CEO, Ravi Kumar, acknowledged the current uncertainty and period of change in the industry. He highlighted factors such as inflation, higher interest rates, and the geopolitical situation as contributing to the uncertainty. Kumar also emphasized the importance of businesses leveraging generative AI to protect themselves during this period of change.
In the September quarter, Cognizant’s revenue only increased by 0.2%. The resale of third-party products in the financial services vertical played a significant role in this growth. However, the decline in financial services would have been more significant without the contribution from third-party software resale.
Addressing concerns about how Cognizant books revenue, Kumar clarified that it includes various components when dealing with large deals. These components may involve hardware infrastructure, people takeover, productivity commitments, and more. Kumar mentioned the $1 billion deal with ServiceNow as an example, highlighting that it involves software, reusable assets, and services in a managed services model.
On a year-on-year basis, Cognizant experienced a decline in financial services and healthcare of 4% and 0.8% respectively. However, communication, media, and technology (CMT) grew by 7.1%, and products & resources by 3.7%. Bookings in the third quarter showed a year-on-year growth of 9%, and on a trailing-twelve-month basis, bookings grew 16% year-over-year to $26.9 billion. Notably, Cognizant secured three large deals valued above $100 million each. Kumar highlighted that although challenges exist, bookings remain strong, with a focus on cost efficiency and vendor consolidation.
Cognizant’s total headcount increased by 1,000 sequentially to 346,600. However, there was a decline of 2,800 from the corresponding period last year. The company has seen a decrease in voluntary attrition, which declined to 16.2% compared to 19.9% in the previous quarter and 29.2% in the year-ago period.
Despite the challenges posed by discretionary spending pressure, Cognizant remains optimistic about its bookings and initiatives focused on cost efficiency and vendor consolidation.
