Cognizant gives weak 2024 forecast as IT services weakness persists; shares fall

Cognizant Technology Solutions, forecast full-year revenue below estimates on Tuesday, underscoring persistent weakness in demand for IT services and sending its shares down 4 per cent in extended trading. Businesses across sectors are cutting technology and outsourcing expenses while bringing some processes in-house, as they deal with the effects of sticky inflation and higher interest rates.

That has led to a slowdown in the IT services sector. Last month, peer Tata Consultancy Services, reported its slowest profit growth since 2020, while Infosys missed profit targets in the most recent quarter.

Cognizant, which draws the bulk of its revenue from customers in North America and Europe, said it expected revenue of $19 billion to $19.8 billion in 2024. Analysts were expecting $19.8 billion, according to LSEG data. Its forecast for full-year adjusted profit and first-quarter revenue were also below expectations.

Cognizant's revenue fell 1.7 per cent to $4.76 billion in the quarter ended Dec. 31, but was in line with expectations, while adjusted earnings came in 14 cents higher than expectations at $1.18. Revenue from financial services and health sciences - its top two customer segments - dropped 5.8 per cent and 2.1 per cent, respectively.