Cognizant margins expand despite revenue dip in Q1
NEW JERSEY, UNITED STATES — IT services and consulting company Cognizant Technology Solutions reported its financial outcomes for the first quarter of 2024, revealing a slight decline in revenue but significant strides in operational efficiency and strategic deal-making.
The company’s revenue was $4.8 billion, down 1.1% year-over-year but above the high end of the firm’s guidance range.
Operational highlights and strategic deals
Despite the revenue dip, Cognizant achieved a stable operating margin of 14.6% and an adjusted operating margin of 15.1%, which expanded by 50 basis points compared to the previous year.
This improvement is attributed to the company’s NextGen program, which focuses on enhancing operational excellence and cost discipline.
Ravi Kumar S, CEO of Cognizant, emphasized the company’s adaptability in a fluctuating economic landscape, stating, “During the first quarter, we delivered revenue above the high-end of our guidance range and continued to make progress against our strategic priorities.”
He highlighted the signing of eight significant deals, each with a contract value of at least $100 million, as a testament to the company’s robust deal-making capability.
Financial performance and shareholder returns
Bookings declined 6% year over year in the first quarter, although they grew by 1% to $25.9 billion in the trailing twelve months, maintaining a book-to-bill ratio of approximately 1.3x.
In terms of capital return, Cognizant repurchased 1.4 million shares for $110 million and declared a quarterly cash dividend of $0.30 per share, payable at the end of May 2024.
Workforce dynamics and future outlook
Cognizant reported a reduction in total headcount, ending the quarter with 344,400 employees, down 7,100 workers from the comparable period. However, the company saw a significant improvement in voluntary attrition rates in its tech services, which dropped to 13.1% from 23.1% a year earlier.
Looking ahead, Cognizant expects second-quarter revenue to range between $4.75 billion and $4.82 billion, reflecting a potential decline of up to 2.9%.
For the full year of 2024, revenue projections are set between $18.9 billion and $19.7 billion, with an adjusted operating margin forecast of 15.3% to 15.5%.
Strategic acquisitions and market positioning
Jatin Dalal, CFO of Cognizant, also noted the acquisition of Thirdera, an industry-leading ServiceNow partner, which he said is already fostering new growth opportunities and expanding the company’s pipeline.
This move is part of Cognizant’s balanced capital allocation strategy aimed at accelerating growth and diversifying its portfolio.
Cognizant combines technologies like IoT, AI, and cloud to help clients stay ahead of workforce and market changes. It ranked #6 in the OA500 2024, an objective index of the world’s top 500 outsourcing companies.
