Cognizant sees slower growth ahead

Summary:Cognizant said it was seeing weaker demand from financial services firms and pharmaceutical companies.

Cognizant Technology Solutions signaled that growth is slowing in what is becoming a common refrain among Indian outsourcing companies.

On the surface, Cognizant's quarter looked fine. The company delivered first quarter earnings of $243.7 million, or 79 cents a share, on revenue of $1.71 billion, up 24.8 percent from a year ago.

Wall Street was looking for first quarter earnings of 79 cents a share on revenue of $1.71 billion.

However, Cognizant said that it was seeing weaker-than-expected demand. Francisco D'Souza, CEO of Cognizant, said in a statement:

Due to a slower than anticipated acceleration in demand as we entered the second quarter, we are adopting a more conservative stance for the remainder of the year and revising our guidance to at least 20% revenue growth for 2012.

As a result, Cognizant projected second quarter revenue of at least $1.79 billion with earnings of 80 cents a share (87 cents a share non-GAAP). Wall Street was looking for earnings of 83 cents a share on revenue of $1.83 billion. The Cognizant news comes just a few weeks after Infosys flagged slower demand.

For 2012, Cognizant projected earnings of $3.36 a share ($3.62 non-GAAP) on revenue of $7.34 billion. Wall Street was looking for earnings of $3.45 a share on revenue of $7.54 billion.

Specifically, Cognizant said it was seeing weaker demand from financial services firms and pharmaceutical companies. Wells Fargo analyst Edward Caso said large banks are "becoming more sensitive to the ups and downs of their IT spending."

Cognizant shares were hammered in early trading Monday.

Topics: Banking, Enterprise Software

About

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

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