Slowing growth and execution challenges for Cognizant (CTSH) may well allow Infosys to overtake the former after a decade, a report by Business Standard stated. As per the report, Cognizant had first marched ahead of Infosys in terms of revenue in the first quarter of the financial year 2012-13 (Q1FY13).
"The Nasdaq-listed IT services firm’s performance in Q3FY22 and the guidance for Q4FY22 and full-year 2022 suggest that it could take time for Cognizant to see the expected improvement in performance from its decision to restructure. Cognizant follows a January-December financial year," noted BS.
According to a report by Kotak Institutional Equities, Cognizant has enjoyed a comfortable lead over Infosys in revenues and that lead is narrowing, with the gap in revenues between the two companies down to just 6.6 percent.
Infosys’ quarterly revenue run-rate of $4.555 billion is just $300 million away from CTSH’s revenues, it added.
"We would not be surprised if Infosys reclaims revenue leadership over CTSH in the coming quarters,” the brokerage said.
The report explained that this comes in the backdrop of falling revenue targets. Cognizant indicated that revenue could decline by 0.2-1.2 percent in Q4. The company now expects its FY22 guidance to be 7 percent in constant currency from the earlier 8.5-9.5 percent.
In Q3, Cognizant reported revenue of $4.9 billion, which was a growth of 5.6 percent in constant currency terms. This was lower than expected and did not meet the lower end of the company’s own Q3 guidance, noted the report. Cognizant had guided for revenue of $4.98-$5.03 billion.
The Kotak report stated: “Financial services is a large vertical for all companies. CTSH has been losing its share to competitors in large banking accounts. The anemic growth does indicate continuing loss of share. The healthcare vertical’s growth has also slowed to 5.5 percent, while peers continue to grow at a higher rate, indicating a relative loss of wallet share.”
The larger issue, however, appears to be attrition. Till a few quarters ago, attrition at its offshore centres had impacted operations, this time the management said onshore attrition and the uncertain economic condition impacted performance, said the report.