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Cognizant, the US-based IT company with a large presence in India, reported a 16 per cent increase in net profit to $629 million for the third quarter of 2022 as against $544 million in the third quarter of 2021. It reported a revenue increase of 2.4 per cent to $4.85 billion ($4.74 billion) with all segments growing.
“Revenue and bookings were below our expectations as company specific fulfillment challenges were compounded by the impact of an uncertain macroeconomic backdrop. We are confident the steps we are taking will return the company to accelerated growth over the medium to long term,” said the company’s CEO Brian Humphries in a release.
Cognizant ended the third quarter with 349,400 employees, an YoY addition of 31,000. Voluntary annualised attrition was 29 per cent.
The company’s board has approved an increase of $2 billion to the share repurchase authorization, the release said.
Uncertain economic conditions
Meanwhile, Humphries, while discussing the company’s financial results with analysts said while “a non-certain macroeconomic backdrop” impacted bookings and revenue, the primary driver of the revenue shortfall relates to a reduction in US onshore billable resources in recent quarters, following a period of elevated attrition, a reduction in visa travel and a Covid-induced shift in the near and offshore delivery centers. “Financial impact of this headcount reduction is magnified given this is our highest revenue and margin dollar per head population.,” he said.
Clients are closely scrutinizing and slowing their investment decisions in the backdrop of uncertain economic conditions. However, there are some early signs of slowing in discretionary digital projects.
Industry-wise, there is a weakness in banking, especially in the mortgage segment, health sciences and retail. While the UK remains solid, deal cycles are slowing and Continental Europe is showing signs of weakness, he said.
“Despite a strategy to sell solution and deliver client outcomes, we remain exposed to time and material engagement across all industries. We have seen clients curtailing this spending, and we expect furloughs to impact the fourth quarter. These factors contributed to a decline in bookings of 2 per cent year-over-year in the third quarter,” Humphries said.
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