Cognizant's Record Q2 Growth Lifts Infosys, TCS

Cognizant Technology Services on Wednesday beat Street estimates with a record 6 per cent sequential rise in revenues in the June quarter. New Jersey-based Cognizant also raised its full-year revenue and profit forecasts, which sent its shares higher by as much as 9.6 per cent.

Cognizant's impressive results indicate rising demand for IT services, and lifted shares of India-based outsourcers on Thursday. The IT sub-index on the Bombay Stock Exchange traded 0.8 per cent higher, outperforming the broader Sensex.

Infosys, which had reported 4.4 per cent growth in constant currency revenue in the June quarter, was the top gainer in the 50-share Nifty. The stock traded 1.3 per cent higher. HCL Tech and TCS also saw buying interest in early trade.

Cognizant Fastest Growing Big IT Company

Cognizant said its second quarter revenue growth of 6 per cent was the best in its history. Cognizant also raised its forecast for full-year adjusted profit to at least $3.00 per share from $2.93 and its forecast for revenue to at least $12.33 billion, from $12.24 billion.

Cognizant's healthcare business, which accounts for nearly a third of its total revenue, has been driving the company's growth this year. The solid performance in the healthcare business is being helped by Cognizant's acquisition of healthcare IT services provider TriZetto Corp.

Revenue from Cognizant's healthcare clients surged 39 per cent to $897.3 million in the second quarter ended June 30, while revenue from its core financial clients rose 18.1 per cent to $1.25 billion. The company's healthcare business accounted for 29.1 per cent of revenue in the quarter, compared with 25.6 per cent in the same quarter of 2014.

Robust performance in the consulting division also helped Cognizant, said domestic brokerage Nirmal Bang.

"Consulting to outsourcing split was 57:43. Interestingly, Cognizant stated that in many deals (likely digital) in recent times, it is not competing with India-listed players but with global MNC players. We reiterate that Cognizant's performance is market share gain-driven rather than a reflection of offshore information technology (IT) services demand," the brokerage said.