Cognizant reports 3.9% rise in June quarter revenue on growth in health care and financial services

India's second-largest IT exporter Cognizant met analyst expectations for its second quarter ended June, but lowered its full-year growth guidance citing client issues.

The company's June quarter revenue rose 3.9 per cent over the March quarter to $2.52 billion on the back of strong growth in health care and financial services, its bread and butter businesses that total nearly 68 per cent of its business mix.

In contrast, larger rival TCS had reported 5.5 per cent growth in the June quarter. Infosys' revenues had inched up two per cent while HCL Technologies reported 3.4 per cent growth during the quarter.

Cognizant also hit the $10 billion revenue run rate, the second Indian company after TCS to achieve the milestone. Cognizant reported profits of $371.9 million, up 6.6 per cent over the previous quarter. However, Cognizant's lower growth warning left investors disappointed.

The company now expects to grow 14 per cent in 2014, down from 16.5 per cent growth it hoped to muster at the end of the March quarter.

Malcolm Frank, Cognizant's Executive Vice President of Strategy and Marketing, told Business Today that the company revised the guidance downwards because of client-specific issues. "It is not a ramp down. Senior executives in a number of our client organisations are transitioning. Whenever that happens, there is a slowdown in sales cycles," he explained.

Demand for outsourcing services, he says, remains robust -as indicated by the company's strong net hiring of 8,800 people during the quarter.

At 7.25 p.m. India time, shares of Cognizant were trading at $42.12 on the Nasdaq stock exchange, down 15.74 per cent. To illustrate that the market remains robust, the company announced three "transformational deals" totaling $3.5 billion in contract value.