Cognizant revenue forecast weak on subdued discretionary spending | India News – Times of India

by The Technical Blogs


BENGALURU: Cognizant has joined Infosys and HCL in reducing the revenue forecast for the ongoing fiscal year. The Nasdaq-listed firm expects its 2023 revenue to grow in the range of $19.3 billion to $19.4 billion, a decline of 0.7% to flat, compared to the prior range of $19.2 billion to $19.6 billion, or -1% to 1% in constant currency. The guidance includes a contribution of 110 basis points from acquisitions.
Company CFO Jan Siegmund said, “We have narrowed our full-year revenue guidance range, which now reflects recent discretionary spending pressure and its impact to our near-term revenue expectations.We have also updated our adjusted operating margin guidance to approximately 14.7%, which is the high-end of our prior range, reflecting our continuing focus on enhancing operational discipline.”
For the December quarter, Cognizant expects its revenue in the range of $4.6 billion to $4.8 billion billion, a decline of 4% to 1.2% in constant currency.
Cognizant CEO Ravi Kumar said considering the uncertainty on discretionary spending and furloughs in the December quarter, the firm took a slightly broader range.
“This is an unusual time. The period of change and the period of uncertainty are coming together. The period of uncertainty is related to factors like inflation, higher interest rates and the geopolitical situation. The period of change is related to businesses having to protect themselves with the power of generative AI,” Kumar added.
The company’s September quarter revenue inched up by merely 0.2%. The resale of third-party products in the financial services vertical contributed 120 basis points to this growth. Kotak Institutional Equities in its report noted that the decline in financial services would have been sharper, but for the third-party software resale.
When TOI asked Kumar if Cognizant was bundling software and hardware assets and booking it as revenue, he said, “It’s not as much hardware in our books. But when you do large deals, multiple things come with it, including infrastructure, people takeover, productivity commitments. They all are an integral part of different swimlanes in large deals,” he said.
He noted that the $1 billion deal with ServiceNow is a bundle of software, reusable assets and services, and it is a managed services model. “That’s the opportunity we are pursuing. And as the large deals come, in one quarter you could have software, while downstream you could have services,” he said.
On a year-on-year basis, financial services and healthcare declined 4% and 0.8%, while communication, media, and technology (CMT) and products & resources grew 7.1% and 3.7%, respectively.
Bookings in the third quarter grew 9% year-on-year and on a trailing-twelve-month basis, bookings grew 16% year-over-year to $26.9 billion. The bookings included three large deals above $100 million each. Kumar said bookings remain strong, with more deals focused on cost efficiency and vendor consolidation.
Total headcount grew by 1,000 sequentially to 346,600, but it represents a decline of 2,800 from the corresponding period last year. Voluntary attrition declined to 16.2%, from 19.9% in the preceding quarter, and 29.2% in the year-ago period.


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