Bengaluru: Infosys Ltd’s latest quarterly revenue has helped it reclaim the position of India’s second-largest IT services firm, 14 years after Cognizant Technology Solutions Corp. raced ahead of Infosys.
On Thursday, Bengaluru-based Infosys said its dollar revenue jumped 3.8% from the April-June period to $4.894 billion in the September quarter. Cognizant, which follows a January-December fiscal year, has projected a revenue of $4.89-4.94 billion for the September quarter, up from $4.85 billion in April-June.
Cognizant is scheduled to declare its September-quarter financials on 30 October.
New Jersey-headquartered Cognizant, which is listed on Nasdaq, counts three-fourths of its 336,300 employees in India, and for this reason, is called an Indian-heritage IT services firm. It raced past Infosys in April-June 2012 to become India’s second-largest IT company, behind Tata Consultancy Services Ltd.
Fourteen years later, Infosys seems set to turn the tables.
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This potential change in the pecking order underscores Infosys’s transformation by chairman Nandan Nilekani and chief executive Salil Parekh. It also underlines the growth pangs faced by Cognizant, which has witnessed three CEO changes in the last seven years.
Infosys named Parekh to the top post on 2 January 2018. In the October-December period of 2017, Infosys had revenue of $2.775 billion and an operating profit of 24.3%. Cognizant at the time made $3.828 billion in revenue and had a profitability of 17.2%.
Put simply: Seven years ago, the quarterly revenue gap between Infosys and Cognizant was $1.05 billion.
Under Parekh’s watch, Infosys has managed a compounded quarterly growth rate of 2.12% over 27 quarters. However, Infosys’s profitability has slipped by 320 basis points to 21.1%.
“This outsized growth (at Infosys) demonstrates a variety of things. First, it reinforces confidence among customers that a company is attracting the right talent and delivering superior solutions. Second, it reaffirms confidence among employees as superior growth implies faster career progressions,” said a senior IT industry executive. “Finally, it’s a marker to investors and industry analysts and is a guidepost to future share price.”
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Cognizant’s growth pangs
Francisco D’Souza, who co-founded Cognizant in 1994, stepped down in March 2019 to be succeeded by Brian Humpries. That succession planning went wrong, and the Cognizant board sacked Humpries in January 2023 and appointed former Infosys executive S. Ravi Kumar as the boss.
This instability at the top has hurt Cognizant, which managed a compounded quarterly revenue growth of 0.91% in 26 quarters. Its operating margin declined 260 basis points to 14.6% at the end of 30 June.
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TCS, which ended 2023-24 with $29.1 billion in revenue, is India’s largest IT services firm. Cognizant ended 2023 with $19.35 billion in revenue. Infosys, with $18.56 billion in annual revenue, ranked third. HCL Technologies Ltd, which surpassed Wipro Ltd in June 2018, is the country’s fourth largest IT services firm.
Infosys, which follows an April-March fiscal year, as do TCS, HCLTech, and Wipro, has outlined a growth of 3.75-4.5% in constant currency terms in the current year.
Constant currency does not take into account exchange rate fluctuations.
Cognizant expects full-year revenue to be between $19.3 billion and $19.5 billion this year.
Hearteningly for investors of Infosys, the company’s higher revenue growth and profitability have seen its valuation rise by 270% since 2 January 2018. Infosys ended with a market cap of $97.3 billion at the end of Thursday. Cognizant’s market cap has improved by 4% to $38.46 billion during this time.
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