The company narrowly beat street estimates in terms of revenue growth and marginally increased its revenue guidance for the full year 2021.
Cognizant’s revenue growth performance lags its rivals TCS and Infosys for the comparable period. TCS posted around 15% YoY revenue growth (CC terms) and Infosys revenues grew almost 19% in the quarter.
Unprecedented demand-supply mismatch
An unprecedented demand-supply mismatch in the IT job market continues to impact the IT bellwether’s talent retention efforts as attrition climbs to record highs.
Quarterly annualised attrition stood at 37% compared to 31% in the previous quarter and 18% in the same quarter last year. Out of this, voluntary attrition (annualised) stood at 33% compared to 29% in the June quarter. The company, in the earnings call, explained that voluntary attrition is highest in the mid-junior levels, primarily in India across certain skills.
“I’m pleased with our third quarter performance. While the industry faces an unprecedented competition for talent, we attracted a record number of employees to Cognizant, and stayed focused on delivering against our client commitments and our strategic repositioning,” Brian Humphries, Chief Executive Officer, Cognizant, said. “We continue to make important investments to ensure Cognizant is well positioned to serve our clients as they embrace digital business models.”
Despite the elevated attrition, Cognizant increased its net headcount in the period by over 17,000 sequentially. “In the fourth quarter, we expect to make offers to 45,000 new graduates in India for on-boarding and 2022. Retention and recruitment have our leadership’s full attention,” Humphries said in the earnings call.
Cognizant expects full-year revenue of $18.5 billion, representing 9.8% growth in constant currency, thus guiding towards the high-end of guidance it offered in the previous quarter. This outlook assumes a favorable currency movement impact of 130 basis points and includes a 330 basis points contribution from inorganic revenue.
“During the third quarter, we drove strong bookings growth and maintained our revenue momentum in a robust demand environment. We are pleased with our ongoing investments in recruiting, which enabled us to support accelerating demand by meaningfully scaling our headcount,” Jan Siegmund, CFO, Cognizant, said.
For the July-September period, financial Services revenue grew 4.3% in constant currency, healthcare revenue grew 9.8% , and Products and Resources segment revenue grew 18.1%. Communications, Media and Technology was the best growing segment at 19.1% growth.
In October, the company declared a quarterly cash dividend of $0.24 per share for shareholders of record on November 19.
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