Cognizant Technology Solutions, an information technology (IT) consulting and outsourcing company, projected full-year revenue below estimates on Tuesday. This highlights the ongoing challenges associated with subdued demand for IT services. The company, which draws the bulk of its revenue from customers in North America and Europe, said it expected to generate revenue of $19 billion to $19.8 billion, representing a decline of up to 2% from a year earlier or a growth of up to 2% on constant currency terms.
The lower-than-expected revenue guidance could reflect a continued slowdown in IT services demand, which has been weighed on by macroeconomic uncertainty and a focus among businesses on cutting costs. Various sectors are cutting technology and outsourcing expenses while bringing some processes in-house as they struggle to deal with the effects of sticky inflation and higher interest rates. That has led to a slowdown in the IT services sector, with peers Tata Consultancy Services and Infosys missing profit targets in their latest quarterly results.
For the quarter ended December, Cognizant posted a 7% increase in net profit to $558 million, beating expectations and up from $521 million a year earlier. The company’s revenue, however, fell 1.7% to $4.76 billion, below analysts’ estimate of $19.8 billion. Revenue from its top two customer segments, financial services and health sciences, fell 5.8% and 2.1%, respectively.
Revenue from the company’s Americas region, which accounts for nearly half its total revenue, declined by 6% in the fourth quarter to $11.8 billion. Clients tightened their budgets and reduced discretionary spending. The region is a crucial driver for the company’s growth as it serves some of the world’s largest enterprises across various industries.
The company’s revenue from the rest of the world, representing about one-third of its overall business, was flat at $26.3 billion. The rest of the world is a less resource-intensive market, and the company has invested heavily in resources to develop this part of its business.
During the quarter, Cognizant also announced several new initiatives and projects. It launched Flowsource, a generative AI-enabled platform to fuel the next generation of software engineering for enterprises, and Shakti, a unified framework of women-centric programs and policies to accelerate careers and boost women’s leadership in technology. It also partnered with NASSCOM to establish and prioritize best practices on diversity and inclusion in the IT industry.
