Cognizant posted revenues of $1.79 billion in the quarter ending 30 June 2012, becoming India’s 2nd largest IT services provider after TCS. The year on year (YOY) 20% increase in revenues met the IT giant’s guidelines and edged over Infosys’ $1.75 billion for the same period this year.
In terms of percentage growth, Cognizant’s 4.9% increase was unmatched by any of its peers as Infosys revenues fell 1.1% while Wipro’s fell 1.4% to $1.51 billion. India’s largest IT service provider TCS’ revenues increased by 3% to $2.73 billion. Cognizant also added approximately 4,700 employees to its global workforce of about 1.45 lakh employees, nearing Infosys’ global workforce head count exceeding 1.5 lakh.
The growth in sales saw Cognizant crawl its way into the number two spot, marginally edging over Infosys’ quarterly revenues of $1.752 billion. However Cognizant still has catching up to do as its trailing 12 month revenues are at $6.77 billion while Infosys’ are $7.07 billion. In an interview with Forbes, CEO Francisco D’Souza talked about the economy being ‘bumpy’ in the latter half of 2012, but still expected a 20% growth in 2012.
The management at Cognizant has given guidelines for Q3 and full year 2012. Q3 revenues are expected to increase to $1.875 billion. Full year 2012 revenues for Cognizant are expected to be around the $7.3 billion mark, aligning with the CEO’s growth expectation of 20% overall.
Analysts are pegging this surge in revenues to Cognizant’s business strategy of reinvesting a significant chunk of revenues in sales, marketing, operations and training. It is also believed that the company has tapped emerging and niche markets of social media and cloud computing. Apart from flexible margins, Cognizant has also expanded its clientele in various verticals including banking and financial services, health care, communications, retail, manufacturing and logistics, etc.
Even during these times of uncertainty in the financial markets, the company draws more than 40% of its revenue from the financial services industry. Healthcare (27.3%) and Manufacturing, Retail and Logistics (19.7%) are also some of the other major verticals that contribute to increasing revenues, as per the company’s revenue mix for Q1 2012.
In fact, a 2012 Corporate Fact Sheet for quarter ending March 2012 stated that Cognizant had the following in its client kitty: 27 of the top 30 Global Pharmaceutical companies, 15 of the top 20 U.S. Healthcare Plans, 9 out of the top 10 Biotech companies, 4 of the top 5 Online companies, 6 of the major U.S. Movie studios, 7 of the top 10 Global insurers and 8 out of the top 10 European financial institutions among many others.
The last few quarters have not been the best for Infosys with disappointing results, reduced hiring activity, salary freezes and uncertain economic conditions adding to their woes.
The company has not given a quarterly guidance and has been facing tough times. Early this year, Infosys announced a salary freeze on variable pays for most of its employees. In comparison, Cognizant rewarded its top performing employees by giving them 200% of their variable pay of 2011.
In the last six months, the NSE listed stock has come from the Rs. 2,800 mark down to Rs. 2,200 levels.
Fast fingered analysts may put down this spurt in growth at Cognizant as a sign of things to come in the very near future. However it could be too soon to put down Mr. Narayana Murthy’s 1981 founded Infosys which has consistently been one of India Inc’s most admired companies. While Cognizant deservingly steals the limelight this quarter, we await full year figures to see how the two global IT giants line up against each other.