Many analysts see an uptick in tech spending this year amid strong global growth. Besides that some frontline IT companies like TCS and Infosys posted good earnings for the December quarter. The management commentary has also been positive. This has helped to improve the sentiment in IT stocks, which had underperform last year.
Teaneck, New Jersey-based Cognizant has been spending heavily to bolster its digital services, a strategy that has driven much of its revenue in recent years. Its total revenue rose 10.6 percent to $3.83 billion, edging past analysts' average estimate of $3.82 billion, according to Thomson Reuters I/B/E/S.
The company said revenue from the healthcare sector rose 12 per cent in the fourth quarter ended Dec. 31, while financial services revenue climbed 5.4 per cent. Most of Cognizant's revenue comes from these two industries, but while financial services form a bigger chunk, healthcare has grown faster over the past year.
The company has invested substantially in key healthcare products including its TriZetto software suite. Last year, it acquired TMG Health, a large provider of IT services for government-sponsored health plans.
"Healthcare is an area of deep strength at Cognizant ... I continue to feel very confident that we have a very strong position in that market," Chief Executive Francisco D'Souza said in an interview.
D'Souza said Cognizant was also benefiting from winning larger-scale projects.
Cognizant forecast revenue of $3.88 billion to $3.92 billion for the first quarter ending March. Analysts were expecting $3.88 billion.
The company recorded a net loss of $18 million in the fourth quarter compared to a net income of $416 million a year earlier. Results included a one-time expense of $617 million related to new U.S. tax laws.
Excluding one-time items, Cognizant earned $1.03 per share, topping analysts' expectations of 97 cents per share. (With Reuters Inputs)