Cognizant Technology Solutions has reported better revenue growth in the first quarter ended March 31, 2015, when compared to its Indian peers Tata Consultancy Services, Infosys and Wipro. It has marginally increased the revenue guidance for the year 2015.
The US-based company with large presence in India reported a 9.74 per cent increase in net income to $382.9 million for the first quarter ended March 31, 2015, compared with $348.9 million in the corresponding quarter last year.
Revenue was up 20.2 per cent to $2.91 billion ($2.42 billion) thanks to a 42.7 per cent increase in revenue from the healthcare practice to $879.1 million. The revenue during the quarter was slightly higher than the guidance of $2.88 billion that the company projected at the end of the previous quarter.
There was a strong traction for its digital approach called Digital Works and increased demand for traditional services in areas such as legacy modernisation and integration as a result of clients deploying digital technologies, the company said.
“Our strong revenue performance this quarter versus our guidance was driven primarily by organic growth of our core businesses and is a reflection that our strategy and offerings are resonating with our clients,” said Karen McLoughlin, Chief Financial Officer. “In addition, we are pleased to increase our full year revenue and EPS guidance to reflect the over-performance during the first quarter.”
Cognizant added 6,200 employees, mostly in India, in the first quarter taking the global headcount to 2.17 lakh as of March 31, 2015.
Francisco D'Souza, CEO, Cognizant, in a press release said the investments the company made in digital, automation, utility-based delivery models, consulting and industry-specific expertise are paying off.
Given how fast the landscape is changing, clients typically don’t have the skill sets to manage this transformation in-house and look at Cognizant to help them re-architect their core business and organisational models.
Guidance Cognizant said the second quarter 2015 revenue is expected to be at least $3.01 billion and fiscal 2015 revenue expected to be at least $12.24 billion, up at least 19.3 per cent compared with 2014. This is slightly higher than the projection at the end of fourth quarter when it said that the 2015 revenue expected to be at least $12.21 billion, up at least 19 per cent compared with 2014.
For Cognizant, 78 per cent of revenue came from North America, 16.3 per cent from Europe and the balance from other geographies during the first quarter.
Consulting and technology services and outsourcing services represented 56 per cent and 44 per cent of revenue respectively.
The company added seven strategic customers in the quarter, defined as clients that have the potential to generate $5 million to $50 million or more in annual revenue. This brings the total number of strategic clients to 278, McLoughlin told analysts.
The overall pricing was stable during the quarter, she said.
US focus Cognizant’s first quarter earnings demonstrate the success of its ongoing reinvestment of profits to drive peer-leading revenue growth. Its concentration of business in the US makes it less vulnerable than its India-centric peers to currency fluctuations, said Jennifer Hamel, Analyst, Technology Business Research, US.
Realigning strategy and technology capabilities in the Digital Works unit focuses Cognizant’s digital transformation message and positions the company well as a lower-cost alternative to solutions-led competitors IBM, Accenture and Deloitte, she said.