Cognizant presents strong outlook powered by digital strategy

Cognizant has provided a strong financial outlook for 2022-2024 with annual constant currency revenue growth of 8-11 percent and yearly operating margin expansion of 20-40 basis points.
Cognizant revenue growth forecastCognizant said it will deploy nearly 50 percent of free cash flow on strategic acquisitions, 25 percent on share repurchases and 25 percent on dividends.

Cognizant reported revenue growth of 12 percent to $4.74 billion in Q3, with all segments growing against $4.24 billion in the corresponding period of last year. Q3 bookings grew 24 percent. Digital revenue represented 44 percent of total revenue, growing at 18 percent in Q3.

Cognizant is expecting 11 percent growth in revenue to $18.5 billion in 2021.

“By executing a growth strategy, which includes strengthening our digital portfolio, partnerships, and commercial engine, while investing in our global delivery network, people, and capabilities, we can help clients with their most strategic initiatives across their transformation journeys,” Brian Humphries, CEO, Cognizant, told investors, said.

Brian Humphries said digital supports revenue growth, margin goals, increases relevance to clients, and is core to the company’s employee value proposition. The company expects revenue from digital to increase to 55-60 percent from the present 45 percent.

Cognizant has deployed $2.5 billion since 2019 on M&A in cloud, data, IoT, and digital engineering. Cognizant completed 15 acquisitions in 2020-21, and 100 percent aligned to the digital battleground. The addressable international market is around $900 billion.

Brian Humphries on strategies

“Core to our strategy is an investment in international markets where growth opportunities are larger. We’ve invested $2.5 billion in digital acquisitions. We’ve also turbocharged our investments for training and re-skilling, sales and marketing, and we brought in hundreds of more commercially oriented go-to-market client-facing teams.”

“About 50 percent of our current clients are only buying one of our current practices, 25 percent, two to four and 25 percent, five plus. So we have a huge opportunity to land and expand, to upsell, to cross-sell and we’re getting after that opportunity by putting in place much more sophisticated go-to-market customer segmentation, account plans, etc.”

“We’ve made investments in our commercial engine, not just in hiring of 500 commercially oriented resources that tend to have come in at a higher cost just because of the sophistication and the alignment and the expertise needed by industry to walk the corridors beyond the CIO and CTO office, but as we’re selling digital into the broader C-suite.”