Cognizant Reports 3% YoY Growth In Net Profit For Q1FY23, To Lay-off 3,500 Employees

Information Technology behemoth, Cognizant posted a 3 percent yearly growth in its net profit to $580 million for the March quarter of financial year 2023. However, the company reported a 0.3% decline in its revenue which stood at $4.8 billion in the quarter under review over last year.

The company reported a record 12-month bookings of $25.6 billion. In the first quarter of FY23, it witnessed a booking growth of 28% over last year. The company's operating cash flow stood at $729 million and free cash flow was at $631 million.

The company expects to pay around $1.4 billion to shareholders through share repurchases and dividends in 2023.

Cognizant's NextGen Program to Affect 3,500 Employees
The company will begin its NextGen program in the second quarter of FY23, to streamline its operational modal and corporate functions. As per the program, the company will operate with fewer layers to enhance agility.

In connection with the program, the company expects to record profits of approximately $400 million with approximately $350 million of such costs anticipated in 2023 and approximately $50 million in 2024.

Due to the NextGen program, the company would lay off around 3,500 employees.

The IT giant reported a total headcount of 3,51,500 in the March quarter which saw a decline of 3,800 employees during the same quarter in FY22. Its voluntary attrition rate declined to 23% in Q1FY23 from 30% in Q1 FY22.

Cognizant's FY23 guidance
Cognizant said that it expects the company's second-quarter revenue to be at $4.83 - $4.88 billion, a decline of 0.6% to 1.6%, or a decline of 1.0% to flat in constant currency.

The company expects its full-year revenue to decline by nearly 1.2% on a yearly basis. Full-year 2023 adjusted operating margin is expected to be within a range of 14.2% to 14.7%.

"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. I am also encouraged by the continuing reduction in our voluntary attrition," said Ravi Kumar S, Chief Executive Officer.

"We were pleased to deliver first-quarter revenue above the high-end of our guidance range and strong free cash flow that supports our capital allocation priorities," said Jan Siegmund, Chief Financial Officer.