Cognizant posts 12.7% rise in Q2 net

Bengaluru: IT major Cognizant Technology Solutions posted muted second quarter performance as high attrition dented its revenue and operating margin numbers.

Nasdaq-listed Cognizant, which has a majority of its employees operating out of India, also became the first major IT services company to lower its revenue guidance for 2022 to 8.5-9.5 per cent in constant currency at $19.7-19.9 billion, from the 9-11 per cent guided earlier.

During April-June period, Cognizant posted 12.7 per cent rise in net profit to $577 million from $512 million a year ago. Its revenues grew 9.5 per cent in constant currency from the year-ago period to $4.9 billion. "In a period of unprecedented labor market conditions characterized by elevated attrition and significant wage inflation, we focused on our client commitments and delivered balanced financial results in the second quarter," said Brian Humphries, CEO of Cognizant. "As we position the company for sustained success, we will continue to invest in our talented employees, our clients and our capabilities," he said.

Operating margin of the IT major stood at 15.5 per cent, 30 basis points expansion over the same period of last year. Cognizant continued to lose more employees with attrition number remaining elevated during the quarter. The voluntary annualized attrition rate increased to 31 per cent from 26 per cent in the preceding quarter amid strong demand for technology talent across the industry. Total headcount of the company stood at 3,41,000 employees by the end of June quarter.

During the quarter, digital revenue grew around 13 per cent year-over-year, representing 50 per cent of total revenue for the second consecutive quarter.

The company witnessed three per cent decline in order bookings with trailing 12-month bookings coming at $23.2 billion. On prevailing demand environment, CEO, Brian Humphries said the company was monitoring the impact of a worsening economy in the pipeline. "That said, as we serve some of the largest clients in the world, we are aware that should they see slowing earnings growth, non-essential projects or those with longer RoI may be paused," he said. Among verticals, revenue from financial services grew 5.1 per cent in constant currency from a year ago on the back of growth in the US regional banking clients, strength in the UK, and solid performance within insurance segment. Healthcare revenue grew 7.6 per cent annually in constant currency driven by digital services among pharmaceutical clients and sustained demand for integrated software solutions among our healthcare clients.