Cognizant Q2 profit up 12.7%, lowers revenue guidance as attrition rises

Nasdaq-listed IT services firm Cognizant on Thursday reported a net profit of $577 million for the second quarter ended June 30, up 12.7 per cent from the year-ago period. The company’s attrition was highest compared to peers.

Revenue was at $4.9 billion, up 9.5 per cent in constant currency on a year-on-year (YoY) basis.

Cognizant, which follows the calendar year, said it had clocked growth for the fifth consecutive quarter and made the highest quarterly revenue to date. Growth was driven by geographies and verticals. North America grew 8.4 per cent YoY, and Europe was up 2 per cent. Communications, media and technology led the growth with 16.1 per cent YoY, followed by products and resources that was up 8.1 per cent YoY, health sciences 6.3 per cent and BFSI 2.7 per cent YoY.

Cognizant lowered its full-year guidance in the range of 8.5 per cent to 9.5 per cent in constant currency and 6.3 per cent to 7.3 per cent in reported terms, making that statement two days after its industry peer Infosys upped its outlook.

Cognizant, in the last quarter, had guided for full year revenue guidance of 9-11 per cent in constant currency and 7.2 per cent -9.2 per cent in reported terms.

The company said its Q2 bookings declined 3 per cent year-over-year. This resulted in trailing 12-month bookings of $23.2 billion, which represented a book-to-bill of approximately 1.2x.

“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,” said Brian Humphries, chief executive officer of Cognizant. “As we position the company for sustained success, we will continue to invest in our talented employees, our clients and our capabilities.”

Q2 attrition was 32 per cent compared to 29 per cent in Q1. “This increase was slightly above the seasonal uptick we anticipated entering the quarter, impacting second-quarter revenue performance. While we have seen some signs of improvement in July resignation rates, we continue to expect elevated attrition for the remainder of the year. As I’ve mentioned on prior calls, attracting, retaining and rallying our talented employees is one of our top priorities,” said Humphries in an earnings call.

Cognizant’s attrition is highest compared to peers TCS (19.7 per cent), Infosys (28.4 per cent), HCL Technologies (23.8 per cent) and Wipro (23.3 per cent).