Cognizant Technology Solutions Corporation reported 2.1 per cent revenue growth sequentially in the June 2024 quarter with lower headcount. In other words, higher employee utilisation, coupled with adoption of automation and artificial intelligence helped the company, says CEO S Ravi Kumar.
In Q2, Cognizant reported revenue of $4.85 billion and headcount of 336,300, down by 8,100 from Q1 2024 and by 9,300 from Q2 2023. A majority of the employees are based in India.
“We sequentially dropped by 8,000-odd people and year-on-year dropped by 9,000 people, but we sequentially (revenue) grew by 2 per cent. This gave a strong boost to the operating margin. It came on the back of employee utilisation and the application of automation and artificial intelligence,” he told mediapersons. “We are continuing to apply automation and AI; pop up the utilisation and have sequential growth, which, if continues, the employee addition will start happening,” he added.
Employee metrics
| Period | Headcount | Attrition (%) * | Utilisation (%) | Revenue ($ bn) |
|---|---|---|---|---|
| Q2'24 | 3,35,300 | 13.6 | 83 | 4.85 |
| Q1'24 | 3,44,400 | 13.1 | 82 | 4.76 |
| Q4'23 | 3,47,700 | 13.8 | 81 | 4.75 |
| Q3'23 | 3,46,600 | 16.2 | 84 | 4.89 |
| Q2'23 | 3,45,600 | 19.9 | 84 | 4.88 |
| Q1'23 | 3,51,500 | 23.1 | 84 | 4.81 |
Source: Company data
* Trailing 12-month voluntary attrition — tech services
In Q1’24 the company introduced blended utilisation, excluding trainees
Kumar further explained that when the headcount falls, it means that when people leave the company voluntarily, you don’t need to fill in. If there is headroom on utilisation, you could continue to increase volume growth by improving utilisation, he said.
“We had headroom in utilisation improvement and we leveraged it. If we have automation and application of AI, you can do projects with less headcount and continue to grow. Effectively, we grew 2 per cent sequentially with lower headcount,” he said.
Deal value
Jatin Dalal, CFO, Cognizant, told analysts, “We still have some headspace for sure, as we exit quarter two. This is the third quarter of improvement in utilisation. We are continuing to improve it. We have some space. I wouldn’t say it’s a significant space. We are managing the supply chain with that visibility of headspace and the demand which is coming in the door. We are confident that we will be able to manage the demand and supply chain equation well, as we execute through the second half of the year.”
On deals, Kumar said that in addition to the five deals, each with total contract value (TCV) of over $100 million, Cognizant signed two deals that were above $90 million each. “In the first half of this year, we have signed 13 deals, each with TCV of over $100 million, well ahead of our 2023 pace, which included 17 deals of this size for the entire year,” he said.
GenAI business
On GenAI, Kumar said that, over the past few quarters, the company has become more deeply involved in clients’ GenAI journeys. As of end June quarter, the company has over 750 early client engagements, up from 450 in Q1, and over 600 opportunities in the pipeline, compared to 500 last quarter. These early engagements are across verticals with healthy activity in products and resources along with financial services and health sciences, he said.
“We are seeing demand across four key areas: customer and employee experience; content summarisation; content generation; and, finally, tech-for-tech to accelerate innovation and technology development cycles,” he said.
Cognizant is building a strong partnership ecosystem to support its GenAI strategy, he said. In the June quarter, it was selected as an AWS GenAI competency partner based on its capabilities in addressing complex industry problems and expertise in AWS-specific GenAI solutions. Cognizant also signed a collaboration agreement with AWS to bring to market smart manufacturing solutions powered by GenAI and transform manufacturing operations across industries, he told analysts.
Dalal told mediapersons that the company would roll out a wage hike from August 1.