Cognizant Announces Major Layoffs
It has been reported that the software giant, which was once regarded as a benchmark for industry growth, will be cutting 3,500 jobs and vacating several million square feet of office space in an effort to reduce costs.
The company’s new CEO, Ravi Kumar S, faces a challenging task in revitalizing the Nasdaq-listed IT company, which competes with Accenture, TCS, and Infosys.
It seems that most of the company’s operations are located in India, despite being listed on the US stock exchange.
Lowest Margins In Industry
The company has issued its revenue forecast, projecting earnings of $19.2 to $19.6 billion for the full year, representing a decline of 1.2% to 0.8% in reported terms or a growth rate of -1% to 1% in constant currency.
In the second quarter, it anticipates a revenue range of $4.83 to $4.88 billion, indicating a decline of -1.6% to -0.6%, or a drop of 1% to a flat rate in constant currency.
Cognizant’s margins, currently at 14.6%, are some of the smallest in the IT sector and are comparable to Tech Mahindra’s margins.
Additionally, the company has provided guidance that its adjusted operating margin for the year will range from 14.2% to 14.7%.
Change In Game
During the first quarter of FY23, which was mainly overseen by CEO Ravi Kumar, the company outperformed analyst predictions.
Kumar assumed the CEO position in a sudden move on January 12th, after former CEO Brian Humphries was “involuntarily terminated.”
The leadership and board chair changes come at a difficult moment for the industry, which is grappling with several challenges.
On a year-over-year basis, the IT services provider reported a 3% increase in net profit to $580 million, and its profits rose by 11.2%.
While Cognizant’s revenue decreased by 0.3% YoY to $4.81 billion, it grew by 1.5% in constant currency, surpassing the company’s guidance of $4.71-$4.76 billion.
The company’s bookings for the quarter reached $25.6 billion on a trailing-twelve-month basis, up from $24.1 billion in Q4FY22.
CEO Kumar stated in a press release, “Our accelerated bookings growth in the quarter, which included several large deals and a healthy mix of new and expansion work, reflects the strengths of our services, our brand, and the longstanding relationships we have with our clients.”
Kumar’s statement is noteworthy, considering that he met with over 100 clients in 100 days last quarter and made it a priority to oversee large deals, which helped enhance the company’s ability to secure such deals.
Previously, the company refrained from engaging in significant deals due to its high attrition rates.
