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Cognizant Technology Solutions reported a 17 per cent drop in net profit to $367 million for the first quarter ended March 31, compared to $441 million in the year-ago quarter. The drop was on account of multiple factors including Covid-19, sales hiring, incentive-based compensation, restructuring, one-time salary adjustment, realignment charges and exit from a part of the content business, said a company spokesperson.
Quarterly revenue increased by 3 per cent to $4.2 billion from the year-ago quarter, including a negative 50 basis points impact from the exit of certain content services business, says a press release by the US-based software company that has large presence in India.
Financial services revenue grew 1 per cent year-on-year (y-o-y), healthcare 2.5 per cent, products and resources 4.4 per cent, and communications, media and technology 5.2 per cent y-o-y, the release said.
“We executed well in what was a challenging quarter, and posted our strongest quarterly signings since 2017,” said Brian Humphries, CEO, Cognizant, in the release.
Covid-19 business implications
During the first quarter, Covid-19-related disruptions reduced revenue in March, reflecting delays in project fulfilment as Cognizant rapidly enabled the shift to work-from-home capabilities across its delivery teams.
Entering the second quarter, the pandemic and resulting economic slowdown are dampening demand across industries, most significantly within the travel, hospitality, retail, automotive, energy, and media and entertainment. At the same time, the pivot to digital is accelerating as companies look to quickly modernise and increase their competitiveness, migrate more of their workloads to the cloud, and fundamentally rethink their core business processes, the release said.
Business outlook
As communicated in the April 9 update, due to the continued uncertainty around the duration of the Covid-19 pandemic and its impact on the company’s ability to forecast performance, Cognizant said that it was not providing guidance at this time.
In late April, Cognizant announced a security incident involving its internal systems resulting from a Maze ransomware attack. The company believes it has contained the attack and that the actor is no longer operating in the company’s environment.
CEO Humphries told analysts while discussing the financial results that the company aims to invest in the business by protecting and developing digital skills, continuing to build out the commercial team and continuing to correct the employee pyramid by on-boarding approximately 20,000 entry-level hires.
The onboarding of trainees will taken place in the third quarter depending on the lockdown and school schedules, the spokesperson said.
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