Growth jitters for Cognizant in 2024

Cognizant Technology Solutions Corp. on Wednesday predicted weak revenues for 2024, as businesses cut back on IT spending amid high interest rates and persistent inflation. The company said it may end the year with a revenue of $19-19.8 billion, against $19.8 billion estimated by analysts.

- Jas Bardia

The Nasdaq-listed IT firm also expects its first quarter (January-March) revenue to decline by 3-1.5% in constant currency terms. Constant currency does not account for currency fluctuations.

"Discretionary spend, if you take the industry view, is the most in the banking, financial services and insurance (BFSI) sector. That is the sector that is burdened with high interest rates and because of that, there is a 'wait and watch' kind of a pause on discretionary wealth," Cognizant chief executive S. Ravi Kumar said in a post-earnings call with analysts. Kumar added that discretionary spend might start to return if interest rates are cut over one or two repeated cycles.

In tough times, IT spends are seen as discretionary, which can be delayed. Discretionary spends falling in BFSI hurts Cognizant as the segment has been the top revenue earner for the company historically. In the year ended December 2023-Cognizant follows a January to December fiscal year-financial services brought in $5.8 billion of its $19.35 billion revenue.