Cognizant Q3 net slips 30% to $348 million

US-based IT services major Cognizant Technology Solutions, which has significant workforce presence in India, has reported a 30% year-on-year decline in its third quarter net profit to $348 million, while revenue fell 0.1% to $4.2 billion, in the wake of exiting certain content services. The company had reported a net profit of $ 497 million in the September quarter of 2019.

The company which follows a January-December accounting year, expects its full year 2020 revenue to be at the higher end of the previously guided range at approximately $16.7 billion – a decline of 0.4% in constant currency. This assumes an estimated negative 10 basis points foreign exchange impact and a negative 110 basis points impact from the exit of certain content services, it said.

Brian Humphries, CEO, Cognizant, said, “Against a challenging demand environment, we continued to strengthen our portfolio, execute our digital strategy and increase our competitiveness. Clients are realising they can distinguish themselves if they embrace disruption and transform. We are committed to making that easy for them.” The company’s digital revenue as a percentage of total revenue was 42% for the quarter, approximately 13% growth y-o-y.

“We are accelerating digital with increased bookings, strategic M&A, and partnerships with industry heavyweights. The industry is at an inflection point in digital adoption. We see growing client interest in realising more immediate customer and business value by identifying use-cases to shift to agile digital workflows. That means transforming processes to become agile, data-driven, and automated. As more clients implement agile digital workflows, the digital services market is evolving into a third phase,” Humphries further said in an earnings call.

Financial services that accounts for 34.6% of the revenue, decreased 1.5% year-over-year, or 2.2% in constant currency, driven by declines in both banking and insurance. Growth in regional banks and capital markets in North America was offset by weakness in select global banking accounts and in Europe.

Healthcare, which accounts for 29% of revenues, grew 4.8% y-o-y, or 4.2% in constant currency, driven by life sciences. The products and resources that have 21.9% share of revenues decreased 4% y-o-y, or 4.6% in constant currency. The decline was driven by retail, consumer goods, travel and hospitality clients that were particularly adversely affected by the pandemic, partially offset by double-digit constant currency growth in manufacturing, logistics, energy and utilities.

Communications, media and technology, that brings 14.5% of revenues increased 0.2% y-o-y, or a decline of 0.2% in constant currency. Growth within the company’s communications and media clients was more than offset by a negative 920 basis point impact from its 2019 strategic decision to exit certain content-related services.

“Our cost discipline and strong year-to-date cash flow enabled continued investments in growth initiatives. We took further actions to increase our financial flexibility in support of our strategic priorities. Since the beginning of the third quarter, we returned over $800 million of capital to shareholders through share repurchases and dividends,” Jan Siegmund, CFO, Cognizant said.