Cognizant Announces Revenue Decline and Job Cuts in 2023, While CEO Ravi Kumar S Faces Industry Challenges
- ByStartupStory | May 4, 2023
Cognizant, a leading technology and consulting company, has projected a decline in its revenues for 2023. This underscores the challenges currently confronting the industry, particularly as its primary source of revenue is the United States market. In an effort to reduce costs, Cognizant plans to cut 3,500 jobs and relinquish millions of square feet of office space.
Cognizant has launched the NextGen program in Q2 2023, aimed at streamlining its operating model, optimizing corporate functions, and adjusting office space to accommodate the hybrid work environment after the pandemic. The program will involve laying off around 3,500 employees, representing roughly 1% of its global workforce, mostly non-billable and corporate personnel. The company made this announcement in a statement.
Ravi Kumar S, the recently appointed CEO, is faced with a challenging task of revitalizing the company and competing with industry leaders like Accenture, TCS, and Infosys, despite the company being listed in the US, with most of its operations based in India.
Cognizant has issued its revenue guidance for the full year, with an estimated range of $19.2 billion to $19.6 billion, reflecting a potential decline of 1.2% to a growth of 0.8% or a decrease of 1.0% to a growth of 1.0% in constant currency. Meanwhile, for the second quarter, the company has projected a revenue range of $4.83 billion to $4.88 billion, indicating a possible decline of -1.6% to -0.6% or a drop of 1% to flat in constant currency.
Cognizant’s operating margins, which currently stand at 14.6%, are comparable to those of Tech Mahindra and are among the lowest in the IT industry. The company has forecasted its adjusted operating margin for the full year to be in the range of 14.2% to 14.7%.
During the first quarter of FY23, Cognizant exceeded analyst expectations, marking the first quarter in which CEO Ravi Kumar S led the company for the majority of the period. Kumar assumed the position on January 12, following the “involuntary termination” of former CEO Brian Humphries. The leadership change, along with the appointment of a new chairman of the board, has come during a difficult time for the industry, which is grappling with several challenges.
Cognizant’s net profit increased by 3% YoY and 11.2% sequentially, while its revenue was $4.81 billion, declining by 0.3% YoY but growing by 1.5% in constant currency. These results surpassed the company’s guidance range of $4.71-$4.76 billion for the quarter.
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