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Cognizant CEO: Company’s Shift to Digital Services Continued to Pay Off in Q2

Cognizant again saw growth in digital-related revenue during the second quarter (ended June 30) as the company continued its shift to digital services and solutions, according to CEO Francisco D’Souza.

Three of the company’s four business segments were “strong contributors” to the increased revenue that it reported for the quarter, as its communications, media and technology segment, along with healthcare and products/resources, each “averaged double-digit growth rates,” he said Aug. 3 on an earnings call with analysts. Digital-related revenue, meanwhile, “continued to grow well above company average,” he told analysts.

Cognizant shares were up 1.71% at $69.69 in afternoon trading after it reported total revenue grew to $3.7 billion from $3.4 billion a year ago. That was at the “high end” of its forecast range and an 8.9% year-over-year increase, D’Souza noted. Profit increased to $470 million (80 cents a share) from $252 million (41 cents a share).

Communications, media and technology revenue jumped 16.8% to $467 million, while products and resources revenue grew 13.2% to $747 million and healthcare revenue increased 9.5% to $1.1 billion despite continued concerns about that overall sector. Revenue in its fourth segment, financial services, grew a more modest 4.1% to $1.4 billion.

The three components of Cognizant’s plan to accelerate its shift to digital are to invest in and scale its digital practices to solve clients’ current and emerging challenges, continue to invest in its core business, and implement margin improvement and capital return programs, D’Souza said.

Now that digital has become mainstream, enterprise transformation is no longer an option for companies – but required of them to compete effectively, he told analysts. Clients, as a result, are seeking Cognizant’s expertise to transform their businesses, he said.

The company labels its overall digital effort across its various divisions Cognizant Business & Technology Consulting, which includes Digital Business, Digital Operations and Digital Systems & Technology. Digital Business is focused on developing virtual channels with customers and creating smart products.

Through Digital Operations, Cognizant is helping clients “reengineer, digitize, manage and operate their core business processes to lower costs and deliver growth,” D’Souza said, adding: “Along with building industry utilities, we’re continuing to push the envelope on the intelligent automation of clients’ repeatable vertical processes. Examples include mortgage document processing, insurance claims processing and medical claims management. In these cases, we’re applying artificial intelligence and machine learning to bring significant efficiencies to tasks such as adjudicating and processing claims, reconciling invoices, and retrieving and comparing complex data.”

In addition, Cognizant robots based on its own automation technology and “other intelligent automation solutions now process hundreds of thousands of transactions a day for several of our customers across industries,” he said.

With Cognizant Digital Systems & Technology, the company is working with clients to simplify, modernize and secure their heritage IT infrastructures and applications, he said, adding: “Cloud migration and operation has become a significant opportunity” for Cognizant. To that end, in May, the company moved its flagship TriZetto products to the Microsoft Azure cloud and launched the TriZetto Healthcare Cloud Solution, a secure compliant Software as a Service (SaaS) platform for healthcare companies of any size, he said.