Cognizant Q2 net profit declines 29% to $361 million on Covid, ransomware attack impact

The company said the full year 2020 revenue expected to be in the range of $16.4-16.7 billion, or a decline on a constant currency basis of 2-0.5%.

US-based IT services major Cognizant Technology Solutions, which has significant workforce in India, has reported a 29% drop in its net profit to $361 million for the second quarter of 2020, against $509 million in the corresponding quarter of the last fiscal, impacted by the Covid-19 pandemic and the ransomware attack.

Revenue of the company, which follows the calendar year, stood at $4 billion, down 3.4% including a negative 210 basis points (bps) impact from the exit of certain content services business and the ransomware attack . Revenue across verticals was negatively impacted by the pandemic and ransomware attack, primarily in April.

However, revenue and bookings improved sequentially through May and June, with increased client demand in areas such as cloud and enterprise application services, IT modernisation and digital engineering, Cognizant said.

The company said the full year 2020 revenue expected to be in the range of $16.4-16.7 billion, or a decline on a constant currency basis of 2-0.5%. This assumes an estimate of a negative 20 bps foreign exchange impact and a negative 110 bps impact from the exit of certain content services business.

Brian Humphries, CEO, Cognizant, said: “We delivered a solid second quarter performance whilst continuing to improve our competitiveness. Against an uncertain economic backdrop, we remain steadfast in investing in our clients and our associates, and in executing our digital strategy to position Cognizant for accelerated momentum.”

The revenue of financial services, which contribute 34.9% to company’s revenues, decreased 5.2% year-on-year with decline in both banking and insurance. North America saw mixed trends with relatively better performance in banking, driven by regional banks.

The health care (28.9%) revenue grew 2% y-o-y, or 2.2% in constant currency. Segment revenue growth was driven by increases from life sciences clients, specifically by revenues from its acquisition of Zenith. The products and resources (21.7%) revenue decreased 6.5% y-o-y with its retail, consumer goods, travel and hospitality clients particularly adversely affected by the pandemic and partially offset by double-digit constant currency growth in manufacturing, logistics, energy and utilities.

The communications, media and technology (14.5%) revenue decreased 4.4% y-o-y, or 3.2% in constant currency, from a negative 790 bps impact due to its strategic decision to exit certain content-related services. Communication and media was flat, with growth of certain communications clients offset by weakness with entertainment clients exposed to studios, cable TV and theme parks. “We made progress against our cost structure initiative allowing us to fund investments aligned to our long-term growth strategy and delivered solid operating performance in a challenging environment,” said Karen McLoughlin, chief financial officer.