M+E Connections

Cognizant reported strong results for its fourth quarter (ended Dec. 31) that were helped significantly by continued growth in its digital business.

“We had another quarter of solid execution, delivering against our commitment to clients and shareholders,” CEO Brian Humphries told analysts on an earnings call Feb. 2.

“Throughout 2021, clients have meaningfully accelerated spend on digital transformation initiatives, accelerating the demand for IT services,” he said.

Cognizant reported Q4 revenue grew 14.5% from a year ago in constant currency to $4.8 billion, which he noted was at the “high end of our guidance.” Income grew to $576 million ($1.10 a share) from $316 million (59 cents a share).

“Growth was led by digital, which grew 20 percent year over year,” Humphries said. “During the quarter, we also progressed against our key strategic initiatives, including scaling our digital capability, globalizing the company, helping our clients be successful by leading with greater industry insights and solutions and repositioning the Cognizant brand.”

In the company’s communications, media and technology segment, Cognizant saw “continued strength in technology, in particular, where we sustained strong double-digit growth over the past three quarters,” he told analysts. Revenue in that business grew 13.1% in constant currency.

Bookings grew 22% in Q4, representing “our second consecutive quarter of 20 percent-plus growth,” Humphries noted. “Throughout the year, our booking strength, which has been fueled by digital, has been broad-based across industries and geographies,” he added.

Of the macro demand environment, he said: “Industry demand remains robust and I expect this to continue throughout 2022. Clients are embracing digital operating models to become more efficient, agile, automated, scalable, innovative and indeed secure whilst also responding to the expectations of their customers and employees for hyper-personalized experiences…. Continuing to scale our digital capabilities is at the heart of our company strategy.”

Digital represented 45% of the company’s revenue mix in Q4,” he pointed out, reminding analysts: “As we noted during our recent investor briefing, we believe digital can become 55 to 60% of revenue in the coming years.”

He added: “Reflecting our strength in digital credentials, during the fourth quarter, we remained an industry leader in 17 new industry analyst reports. They highlighted the company’s client partnerships, scalability, digital capabilities and expertise as factors in recognizing our leadership.”

Digital represents “not only a driver of double-digit revenue growth and improved margins,” he said, explaining: “It also fosters greater client intimacy and higher levels of employee engagement as we partner on strategic transformation projects.”

There also continues to be “unprecedented competition for talent, reflective of the industry-wide demand, supply and balance in key digital skills,” he went on to say.

“Digital acquisitions have also brought incredible talent to Cognizant,” he said, noting that, in 2021, Cognizant “completed seven acquisitions that extend our digital leadership,” the most recent one being its Q4 acquisition of Devbridge.

That “software consultancy and product development firm expands our software product engineering capabilities and global delivery footprint by adding more than 600 engineers, designers and product managers in Lithuania, Poland, the U.K. and North America,” he said.

“This extension of our global delivery network complements recent announcements” in the U.K., Australia and Canada, he added.