Cognizant faces cost pressure despite 3.4% revenue growth

Cognizant said its revenue was $4.14 billion (+3.4 percent) with operating margin of 14.9 percent (16.7 percent) and net income of $509 million ($456 million) in the second quarter of 2019.
Cognizant employees
“We are taking the necessary steps to position Cognizant for improved commercial and financial performance,” said Brian Humphries, chief executive officer of Cognizant.

Cognizant said its Financial Services (35.6 percent of revenues) revenue grew 0.3 percent — driven by modest improvement in banking, primarily from the contribution of the previously announced partnership with three Finnish financial institutions.

Cognizant said it Healthcare (27.4 percent of revenues) revenue declined 1.9 percent – due to industry consolidation as well as the accelerated movement of work to a captive at a large North American client.

Products and Resources (22.4 percent of revenues) revenue grew 10.4 percent, driven by solid growth across all of our industries including retail and consumer goods, travel and hospitality, and manufacturing, logistics, energy and utilities.

Communications, Media and Technology (14.6 percent of revenues) revenue grew 12.2 percent, led by growth in Technology. Communications and Media revenue growth was negatively impacted by spending reductions at a few large clients.

Cognizant is expected to achieve revenue growth of 3.8-4.8 percent in constant currency in the third quarter 2019 and 3.9-4.9 percent in full year 2019.

Karen McLoughlin, chief financial officer of Cognizant, said the IT service company is taking actions in the second half of the year to lower its existing cost structure and make investment in growth, talent, and digital solutions.