Cognizant cuts outlook but may pip Infosys soon

IT firm Cognizant continues to perform well. Its March quarter results, announced on Monday, showed revenue growth of 2.9 per cent over the December 2011 quarter, the highest among the leading Indian IT companies. Revenues stood at $1.71 billion.  

However, the company moderated its full year 2012 growth guidance citing "slower than anticipated acceleration in demand". In an indication that IT buying may be cooling, it revised its 2012 revenue growth downwards from 23 per cent earlier to 20 per cent. Even so, Cognizant's 20 per cent growth guidance for 2012 is double of what Infosys anticipates it will generate in 2012/13. 

In April, Infosys had cited slowdown in deal closures as well as in deal ramp downs in the banking and financial services sector, Indian IT's bread and butter business segment, contributing to upto 40 per cent of the revenues for many top tier firm as reason for poor revenue growth.   

Cognizant's second quarter guidance suggests that the company will match Infosys in quarterly revenues in June. While Infosys expects June quarter revenues in the range of $1.77 to 1.78 billion, Cognizant on Monday guided to a slightly higher number for the quarter: $1.79 billion. Before Monday's announcement, analysts were expecting Cognizant to pull in revenues of $1.84 billion in the June quarter, beating Infosys hands down. 

"Due to a slower than anticipated acceleration in demand as we entered the second quarter, we are adopting a more conservative stance for the remainder of the year and revising our guidance to at least 20 per cent revenue growth for 2012," Francisco D'Souza, CEO, Cognizant said in a statement. "We continue to believe that we have the right portfolio of services to sustain our industry leading growth and also meet the changing demands in the market as clients continue to grapple with their dual mandates of cost containment and innovation/business transformation."

For the March quarter, Cognizant reported a net income of $243.7 million or $0.79 a share compared to $208.3 million or $0.67 a share in the year-ago period. On a yearly basis, revenues jumped 24.8 year cent.