IT major Cognizant Technology Solutions has managed to overtake Infosys as the second largest Indian IT software services in revenue terms, after TCS, as it reported higher profit in the second quarter on increased demand for its outsourcing services.
This reflects Cognizant’s successful strategy of reinvesting a part of its operating profit back in the business thereby intentionally keeping profitability at a relatively lower level.
The information technology services provider also raised its full-year adjusted profit forecast. The company now expects full-year adjusted earnings of at least $3.64 per share, up from its previous forecast of $3.62 per share. It reaffirmed its revenue forecast for 2012 of at least $7.34 billion, up 20 percent against last year.
This is way higher than Nasscom’s growth guidance of 11-14 percent. In Q3, revenue is anticipated to be at least $1.875 billion, up 4.5%. This reflects strong momentum. Its closest peer Infosys stayed away from giving any guidance for the quarter.
Even Wipro Wipro’s posted a worse-than-expected dip in dollar revenue following a decline in most of its businesses and geographies.
“We are pleased to maintain our full-year revenue guidance as we continue to execute as we expected,” said Karen McLoughlin, Cognizant’s Chief Financial Officer. “Our reaffirmed full-year revenue guidance includes absorbing more than $20 million of negative currency impacts during quarters two through four as a result of currency movements since we last provided guidance in early May. In addition, we repurchased over $358 million of shares during the second quarter, reflecting our strong cash flow and confidence in the strength of our business.”
The revenue growth and the affirmation of the whole year guidance is a major positive, especially when its peers are not doing too well and are missing guidance.
If Cognizant manages to meet its guidance for the full year, Cognizant and Infosys will be locked for the second spot in terms of dollar revenues for the full year too as Infosys sees its revenue in dollar terms rising 5 percent to $7.34 billion in the year to March 2013.
For the past five quarters, Cognizant has seen double-digit year-over-year percentage revenue growth, while its net income has risen in three straight quarters.Given its strong traction in the past and the slack in Infosys’ momentum, it could just be few quarters before Cognizant surpasses Infosys in annual income too.