Cognizant Posts Negative Revenue, 1st Time Ever In History; These Verticals Suffered Huge Losses

Cognizant, which is one a IT giant, headquartered in Teaneck, US is in the news due to reporting a decline in revenue.

There has been a -0.7 per cent year-on year (yoy) decline in revenue.  In 2019, the revenue clocked at $16.78 billion, whereas it was $16.65 billion in 2020.

For the same period, there has been a decline to 14.4 per cent from 16.6 per cent in the adjusted operating margins also. In the constant currency terms, the company recorded revenues of $4,184 million down -3.0 per cent yoy for the fourth quarter ending December 31.

The Exit Of Large Customer Hit Hard

In continental Europe, there was an offer made to settle and exit large customer engagement in the financial services segment, which impacted the quarter by 250 basis points, eventually hitting revenues by $107 million and additional expenses of $33 million.

After the exit of certain content services, an impact of 120bps was created. CEO of Cognizant, Brian Humphries said that with the strong cash flow and increased gross margins, the company has done well in the fourth quarter and has delivered against our expectations and our guidance, if the impact from the anticipated exit from a client engagement is excluded.

Cognizant showed a rather subdued, 4.0-7.0 per cent  constant currency growth  full year growth for 2021 (5.5-8.5 per cent in dollar terms), especially after when the Q3 results of the Indian IT services companies indicated that this financial year should see robust growth, most probably in double digits.

Optimistic In The First Half Of 2021 : CEO

In the first half of 2021, driven by our strategic product portfolio, a strong outlook in life sciences and a reinvigorated US health care business, the company is anticipating growth acceleration. In 2021, operating margins are expected to be in the range of 15.2-16.2 per cent.

For the year 2020, Segments like healthcare and communications media and technology witnessed marginal growth of 3.1 per cent  and 1.6 per cent  respectively on a yoy basis. Financial services which was down 4 per cent yoy — in constant currency, was one of the segments which witnessed largest decline in revenues.

Reasons like customer exits, cyber-attack as well as many senior executives leaving the organizations plagued the growth of organization in 2020, and caused the company to struggle.

In the mid of ‘multi-year project to reposition the company’ and keeping in mind the goal to drive shareholder value, CEO said that he was pleased with how the team has come together.