Rounding off the top five IT services companies’ results on a sparkling note, Nasdaq-listed Cognizant Technology Solutions on Tuesday raised its full-year revenue guidance for the second time this year to $8.84 billion, or 20.3%, compared with 19% ($8.74 billion) in the last quarter.
Cognizant also beat top tier peers on the earnings front, reporting revenues of $2.31 billion in Q3, up 6.7% sequentially and 21.9% from the year-ago quarter.
The company’s net profit rose 15% during the reporting quarter to $319.6 million from $276.9 million a year earlier. Its financial year runs January-December.
Francisco D’Souza, CEO of Cognizant, attributed this to exceptional performance in consulting (with Cognizant Business Consulting being a market differentiator) and outsourcing, which grew 50.8% and 49.2%, respectively, as well as gains of $10 million in 2013 from the recent acquisition of Equinox Consulting. Social, mobile, analytics and cloud (SMAC) are also expected to generate revenues of $500 million this year for Cognizant.
The rebid market, too, looks promising.
Interestingly, despite its peers seeing a pick-up in discretionary spends in US, Cognizant continues to see higher growth from Europe. In Q3, North America grew 6% sequentially and 19% year on year, while Europe grew 7% sequentially and 37% yoy. Continental Europe contributed 7.3% to overall revenue and grew 9.7% sequentially and 57.1% yoy.
R Chandrasekaran, group chief executive, technology and operations, Cognizant, said, “We are finding an increased appetite from clients in Europe to move more work to a global delivery model. The overall European IT services market is roughly the same size as the North American market, yet the penetration of the global-delivery model in Europe is currently a fraction of that in North America.”
In an earnings call, D’Souza said, “Our C1 acquisition in Germany has aided in improving our competitiveness for discretionary and outsourcing deals in continental Europe – especially key markets of France and Germany.”
He said going forward Cognizant would continue to look at ‘tuck-under’ acquisitions, like Equinox, that would fill the gaps in its offerings, but they would increasingly be larger acquisitions, focusing on SMAC.
Vertical-wise, financial services and healthcare grew 5% qoq and 20% yoy, and 11% qoq and 24% yoy, respectively. Cognizant added seven new $50 million-plus accounts in the quarter.
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