2024-10-18 05:30:06 :
Bangalore: Infosys Ltd’s latest quarterly revenue helped Cognizant Technology Solutions Corp. regain its position as India’s second-largest IT services company after 14 years of leading Infosys.
Bengaluru-based Infosys on Thursday said its dollar revenue in the September quarter rose 3.8% to $4.894 billion from the April-June period. Cognizant expects September quarter revenue of $489 to $4.94 billion after its January-December fiscal year ends, up from $4.85 billion in the April-June period.
Cognizant is scheduled to report its September quarter financials on Oct. 30.
New Jersey-based Cognizant, which is listed on Nasdaq, is known as an Indian legacy IT services company with three-quarters of its 336,300 employees in India. From April to June 2012, it surpassed Infosys to become India’s second-largest IT company, behind Tata Consultancy Services Ltd.
Fourteen years later, Infosys looks set to turn things around.
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This potential change in priorities highlights the transformation of Infosys Chairman Nandan Nilekani and CEO Salil Parekh. It also underscores the growth pains facing Cognizant, which has gone through three CEO changes in the past seven years.
Infosys appointed Parekh to the top post on January 2, 2018. Between October and December 2017, Infosys had revenue of US$2.775 billion and operating profit of 24.3%. Cognizant’s revenue at that time was $3.828 billion, with a profit margin of 17.2%.
Briefly: Seven years ago, the quarterly revenue gap between Infosys and Cognizant was $1.05 billion.
Under Parekh’s leadership, Infosys achieved a compound quarterly growth rate of 2.12% over 27 quarters. However, Infosys’ profitability fell by 320 basis points to 21.1%.
“This tremendous growth (by Infosys) says a lot of things. First, it strengthens customers’ confidence that the company is attracting the right talent and delivering superior solutions. Second, it reaffirms the confidence of its employees because of superior growth It means faster career development,” said a senior executive in the IT industry. “Ultimately, it is an indicator for investors and industry analysts and a guide to future stock prices.”
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Cognizant’s growing pains
Francisco D’Souza, who co-founded Cognizant in 1994, resigned in March 2019 and was succeeded by Brian Humpries. Succession planning went awry, and Cognizant’s board fired Humpries in January 2023 and appointed former Infosys executive S. Ravi Kumar as boss.
Instability at the top has hurt Cognizant, which has delivered compound quarterly revenue growth of 0.91% over 26 quarters. As of June 30, its operating margin fell 260 basis points to 14.6%.
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With revenue of $29.1 billion in the fiscal year ending 2023-24, TCS is India’s largest IT services company. Cognizant’s revenue as of 2023 is $19.35 billion. Infosys ranks third with annual revenue of $18.56 billion. HCL Technologies Ltd surpassed Wipro Ltd in June 2018 to become the fourth largest IT services company in the country.
Infosys, which like TCS, HCLTech and Wipro follows an April-March fiscal year, is expected to post 3.75-4.5 per cent growth on a constant currency basis for the current year.
Fixed currency does not take into account exchange rate fluctuations.
Cognizant expects full-year revenue this year to be between $19.3 billion and $19.5 billion.
Encouraging investors in Infosys, the company’s higher revenue growth and profitability have boosted its valuation by 270% since January 2, 2018. As of Thursday’s close, Infosys’ market capitalization reached $97.3 billion. Cognizant’s market capitalization increased 4% during this period, to $38.46 billion.
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