CHENNAI: IT major Cognizant on Thursday posted 12% revenue growth year-on-year in constant currency terms and around 4.5% in sequential terms for the April-June quarter.
Even as the company beat street estimates in terms of revenue growth and increased its outlook for the year, a hot tech job market is impacting the IT bellwether adversely as it reported life-time high attrition levels in the quarter.
Quarterly annualised attrition stood at 31% compared to 21% in the previous quarter and 24% in the same quarter last year. Further, voluntary attrition (annualised) stood at 29% compared to 18% in March and 11% in the same period last year.
At a revenue of $4.6 billion and growth of 12% in the quarter, the company’s performance lags rivals such as TCS and Infosys for the comparable period. TCS posted almost 19% YoY revenue growth (CC terms) and Infosys revenues grew around 16% in the quarter.
Cognizant’s net income was at $512 million up only marginally from $505 million in the last quarter but a jump from $361 million it made in the same period last year.
“We delivered a strong second quarter,” Cognizant CEO Brian Humphries said. “Through targeted investments, we’ve been shifting our portfolio to faster-growing market segments while extending our capabilities and partnerships to help clients build modern businesses. I see a stronger, more competitive Cognizant emerging, with growing commercial momentum. We are bullish on the industry and our prospects within it.”
Commenting on the attrition in the conference call with analysts, Humphries said: “We’ve seen primarily the attrition in the more junior levels of the organization or mid-levels in India, but it’s also a global phenomenon. It’s really one of the hottest markets we’ve seen or our team has seen over the last 10-plus years.”
Cognizant’s revenue from financial services increased approximately by 5%. Healthcare revenue increased 13%, and products and resources revenue grew 18%. Digital revenue grew approximately 20% year-over-year.
Buoyed by improved performance, Cognizant increased its revenue guidance for the full year 2021. The company expects 2021 revenue at $18.4-$18.5 billion; i.e., 9-10% growth in CC terms, compared to 5.5%-7.5% growth it guided to in the last quarter. However, this outlook factors in favourable impact from currency movements of 120 basis points (100 basis points = 1%) and approximately 320 basis points contribution from inorganic revenue.
“Second quarter top-line results exceeded our guidance, driven by improved demand for our services and momentum in our digital revenue, and we increased our full-year 2021 revenue growth to 10.2-11.2%,” Cognizant CFO Jan Siegmund said. “To meet the strong client demand for our services, we have continued to scale our recruiting capabilities and invest in our people.
Despite record attrition, in the April-June quarter, Cognizant crossed the 300,000 employees mark for the first time in its history with the majority of the employees in India.
“We now expect to hire approximately 100,000 laterals in 2021 and to train close to 100,000 associates. In addition, we expect to onboard approximately 30,000 new graduates in 2021 and make 45,000 offers to new graduates in India for 2022 onboarding,” Humphries said on the earnings call.
The company also said it has currently vaccinated 160,000 of its associates and families and set up nearly 1,000 Covid-19 hospital beds for communities in India.
Even as the company beat street estimates in terms of revenue growth and increased its outlook for the year, a hot tech job market is impacting the IT bellwether adversely as it reported life-time high attrition levels in the quarter.
Quarterly annualised attrition stood at 31% compared to 21% in the previous quarter and 24% in the same quarter last year. Further, voluntary attrition (annualised) stood at 29% compared to 18% in March and 11% in the same period last year.
At a revenue of $4.6 billion and growth of 12% in the quarter, the company’s performance lags rivals such as TCS and Infosys for the comparable period. TCS posted almost 19% YoY revenue growth (CC terms) and Infosys revenues grew around 16% in the quarter.
Cognizant’s net income was at $512 million up only marginally from $505 million in the last quarter but a jump from $361 million it made in the same period last year.
“We delivered a strong second quarter,” Cognizant CEO Brian Humphries said. “Through targeted investments, we’ve been shifting our portfolio to faster-growing market segments while extending our capabilities and partnerships to help clients build modern businesses. I see a stronger, more competitive Cognizant emerging, with growing commercial momentum. We are bullish on the industry and our prospects within it.”
Commenting on the attrition in the conference call with analysts, Humphries said: “We’ve seen primarily the attrition in the more junior levels of the organization or mid-levels in India, but it’s also a global phenomenon. It’s really one of the hottest markets we’ve seen or our team has seen over the last 10-plus years.”
Cognizant’s revenue from financial services increased approximately by 5%. Healthcare revenue increased 13%, and products and resources revenue grew 18%. Digital revenue grew approximately 20% year-over-year.
Buoyed by improved performance, Cognizant increased its revenue guidance for the full year 2021. The company expects 2021 revenue at $18.4-$18.5 billion; i.e., 9-10% growth in CC terms, compared to 5.5%-7.5% growth it guided to in the last quarter. However, this outlook factors in favourable impact from currency movements of 120 basis points (100 basis points = 1%) and approximately 320 basis points contribution from inorganic revenue.
“Second quarter top-line results exceeded our guidance, driven by improved demand for our services and momentum in our digital revenue, and we increased our full-year 2021 revenue growth to 10.2-11.2%,” Cognizant CFO Jan Siegmund said. “To meet the strong client demand for our services, we have continued to scale our recruiting capabilities and invest in our people.
Despite record attrition, in the April-June quarter, Cognizant crossed the 300,000 employees mark for the first time in its history with the majority of the employees in India.
“We now expect to hire approximately 100,000 laterals in 2021 and to train close to 100,000 associates. In addition, we expect to onboard approximately 30,000 new graduates in 2021 and make 45,000 offers to new graduates in India for 2022 onboarding,” Humphries said on the earnings call.
The company also said it has currently vaccinated 160,000 of its associates and families and set up nearly 1,000 Covid-19 hospital beds for communities in India.