Cognizant Technology Solutions Corp. reported better-than-expected growth for the June quarter, driven by improving business from financial institutions and healthcare companies, despite signaling that the market for technology services remains challenging.

The company’s management in a post-earnings call maintained a muted commentary, raising questions about Cognizant's ability to sustain its growth, particularly due to its biggest headcount decline in a three-month period.

Key Performance Highlights

Revenue Growth: Nasdaq-listed Cognizant reported a 1.9% sequential rise in revenue, ending the April-June quarter with $4.85 billion in revenue. However, on a yearly basis, revenue declined by 0.74%. This performance edged past the median expectations of 25 analysts polled by Bloomberg, who projected $4.8 billion in revenue.

Sector Contributions: Financial institutions fueled 69% of the company’s $90 million incremental revenue for the June quarter. Cognizant’s largest cash cow, its health sciences business, added $45 million in incremental revenue, giving the company $1.46 billion in revenue. Together, these two verticals account for 60% of Cognizant’s overall revenue.

Chief Executive Officer Ravi Kumar S. noted, “Although the demand environment remains challenging and clients' discretionary spending behavior is unchanged from recent quarters…” This statement underscores the ongoing market difficulties despite the company's positive revenue performance.

Also Read : Adani Enterprises Q1 Results: Two-Fold Surge in Net Profit

Future Outlook

Cognizant has narrowed its growth outlook in the previous quarter and now expects to end 2024 with $19.3-19.5 billion in revenue. This outlook is similar to Bengaluru-based Infosys Ltd, which, based on its constant currency guidance, also expects to end the year with $19.3 billion in revenue.

It's important to note that Cognizant’s guidance does not include any impact from its second-largest acquisition, that of engineering, research, and development service provider Belcan, for about $1.3 billion.

Summary

Cognizant's Q2 results highlight a better-than-expected performance fueled by financial institutions and healthcare companies, despite a challenging market environment for technology services. The company's future outlook remains cautiously optimistic, with expected revenue between $19.3-19.5 billion for 2024.

Also Read : Sun Pharma Q1 Results: Consolidated Net Profit Surges 40.2% YoY

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