Cognizant makes a fast start to FY25

Cognizant has kicked-off FY25 with a robust Q1 performance. Above top end of guidance revenue growth saw company turnover increase by 8.2% yoy to $5.1bn for the three months ended 31st March. As we flagged in our commentary on Cognizant’s FY24 results (see here), the purchases last year of Belcan and Thirdera contributed significantly to the top line uptick, Recent acquisitions accounted for around a half of the first quarter revenue improvement. Adjusted operating margin increased by 40 bps yoy to 15.5%.

The boost from inorganic growth was enjoyed most both in Cognizant’s North America region and by the company’s Products & Resources vertical unit. Sales in these facets of the business were up by 9.7% and 13.6% to $3.85bn and $1.28bn respectively. Demand from the firm’s Health Sciences clients also held up well. Turnover in this sector, now Cognizant’s largest industry segment by revenue, increased by 11.4% yoy to $1.57bn.

There was also a notable acceleration in Cognizant UK & Ireland’ growth during first quarter. A c.4% qoq increase in sales lifted turnover in the territory to $457m for the period. This was thanks mainly to increasing momentum in the region’s Retail & Consumer Goods, Financial Services and Public Sector verticals with Q1 wins including deals at  MacDonalds, Home Office and Ministry of Housing, Communities and Local Government. The geography’s yoy top line improvement was limited to 1% due to a technicality relating to a change to internal revenue recognition for a particular contract.

Despite the better than expected start to the year in terms of revenue, the company’s bookings for the period proved less resilient. These dipped by 7% yoy in Q1 to leave them up by just 3% on a trailing twelve-month basis at $26.7bn. Cognizant has left guidance for FY25 unchanged with turnover projected to grow at between 3.5% and 6% at constant currency to between $20.5bn and $21.0bn.

Posted by: Duncan Aitchison at 09:27

Tags: results   offshore   IT+services