Cognizant’s results helped ease worries over the outsourcing demand scenario. The Nasdaq-listed company reported a strong sequential revenue growth for this particular quarter and said the tempo would continue for the rest of the year.
Cognizant Technology solutions beat Infosys with revenue of $ 1,795 million as compared to Infosys’ $ 1,752 million in the June 2012 quarter. Indications are Cognizant could continue grow faster than Infosys even in the coming quarters. Five reasons that helped the company pip Infosys:
1. Good growth in financial services vertical, the vertical contributing the largest amount to revenues for both firms. Cognizant’s revenue from financial services clients grew 6% sequentially, while Infosys saw a sequential decline. Cognizant’s market share in financial services is also growing.
2. Higher investment in sales and marketing. The company follows a policy of keeping its margins at 19% – 20% and investing the rest in sales and future growth areas
3. More flexible on margins and pricing, giving Cognizant more opportunities to win projects and grow in verticals such as financial services, where players have become more cautious and are facing uncertainty because of specific events.
4. Cognizant has invested signficantly in building consulting capability in the last few quarters. Benefits from some of those investments could be kicking in by providing more downstream revenue for IT services.
5. Additionally, management commentary indicates that Cognizant may have been able to capture the spends in areas like mobility, big data, social and cloud more successfully.
Cognizant has given a guidance of at least $ 1,875 million for the September 2012 quarter. Infosys has not given a quarterly guidance for the first time, citing the uncertain environment and project postponements.
Cognizant has given an annual revenue growth guidance of 20% for its financial year ending December 2012. Infosys, which has a financial year ending March 2013, has given a growth guidance which is a fraction of it at 5%. Unless Infosys revises its guidance dramatically, Cognizant could end the year bigger than Infosys and capturing the second largest IT exporter status, which Infosys currently holds.