Cognizant reports 12.7% profit growth QoQ, but lowers revenue guidance for the year

• IT services company Cognizant reported a healthy growth in revenue and profit for the June quarter.
• While its attrition rates remained highest in the industry, the company says it has been hiring a new employee every 56 seconds.
• Its attrition rates rose to 31% from 26% in the previous quarter, indicating no end to attrition.

Nasdaq-listed Cognizant’s net profit grew 12.7% sequentially to $577 million in the second quarter ended June 30, while revenues grew by 9.5% on year in constant currency to $4.9 billion.

This is the fifth consecutive quarter of revenue growth with highest quarterly revenue to date. Note Cognizant follows the calendar year as its financial year.

While the company delivered healthy earnings performance, elevated attrition remains core issue amid the inflationary environment similar to Indian IT companies that is sacrificing on profits due to rising wage hikes.

“During the quarter, we maintained a disciplined approach on pricing, while managing supply constraints and labor cost inflationary pressure. While quarterly bookings performance was below our expectations, our 1.2x book-to-bill supports our revenue growth outlook for 2022,” said Jan Siegmund, chief financial officer at Cognizant.

In fact, the company lowered its full year revenue growth guidance to 8.5-9.5% in constant currency at $19.7-19.9 billion, from the 9-11% growth it guided in the previous quarter.

Cognizant has the highest attrition rates in the industry and to tackle that it has also been hiring aggressively to an extent that it now claims a new employee is hired every 56 seconds.

Its attrition rates rose 31% from 26% in the previous quarter, indicating no near end to the attrition war in the IT space. It added over 900 employees sequentially and 40,100 staff since the same quarter last year, raising the headcount to over 3.41 lakh employees amid the intensely competitive labor market.

Amid the talent war, Cognizant commits to retaining employees by investing in employee benefits programs.

“In a period of unprecedented labor market conditions characterized by elevated attrition and significant wage inflation, we focused on our client commitments and delivered balanced financial results in the second quarter. As we position the company for sustained success, we will continue to invest in our talented employees, our clients and our capabilities,” said Brian Humphries, CEO of Cognizant.


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