The next three year looks brighter for Cognizant. It has provided a strong financial outlook for 2022-2024 with annual constant currency revenue growth of 8% to 11% and yearly operating margin expansion of 20 to 40 basis points. This comes in the backdrop of strong third-quarter financial results.
The US-based technology company with large employees working in India told investors on Thursday that nearly 50 per cent of free cash flow expected to be deployed will be on strategic acquisitions, 25 per cent on share repurchases and 25 per cent on dividends.
Cognizant reported a 56 per cent increase in net profit to $544 million in the third quarter of 2021 as against $348 million in the same period last year. It reported double-digit revenue growth of 12 per cent YoY to $4.74 billion in Q3, with all segments growing against $4.24 billion in the corresponding period of last year. Q3 bookings grew 24 per cent year-over-year, bringing year-to-date bookings growth to 13 per cent. Digital revenue represented 44 per cent of total revenue, growing at 18 per cent in Q3.
The fiscal Year 2021 guidance is for 11 per cent revenue growth to $18.5 billion, which would be Cognizant’s highest annual revenue to date.
"We continue to make strong progress in positioning the company for sustained revenue growth and margin expansion," Brian Humphries, CEO, Cognizant, told investors. "By executing a growth strategy, which includes strengthening our digital portfolio, partnerships, and commercial engine, while investing in our global delivery network, people, and capabilities, we can help clients with their most strategic initiatives across their transformation journeys. I am excited about the global opportunities that lie ahead to accelerate our growth, expand margins, and deliver enhanced long-term shareholder value."
Humphries provided an update to investors on Cognizant's strategy to drive growth and long-term shareholder value. This includes accelerating digital, shifting the portfolio toward high-growth digital services; globalising Cognizant, scaling internationally; increasing relevance to clients; investing in industry expertise to help clients be successful; repositioning the brand and strengthening Cognizant's brand credentials.
Digital supports revenue growth, margin goals, increases our relevance to clients, and is core to the company’s employee value proposition. The company expects revenue from digital to increase to 55-60 per cent from the present 45 per cent.
Cognizant deployed $2.5 billion since 2019 on M&A in cloud, data, IoT, and digital engineering; completed 15 acquisitions in 2020-21, and 100 per cent aligned to the digital battleground. The addressable international market is around $900 billion, he said.