Cognizant posts muted Q1 numbers; to layoff 3,500 employees
Cognizant will undertake deep cost reduction measures focused on reducing employee headcount and office space.
US-headquartered IT services company , with a large employee presence in India, has given a grim picture going forward as it plans to layoff employees and reduce its real estate space even as it reported a 3% rise in net profit for the first quarter of 2023.
During the announcement of its financial performance for the January to March period of 2023, Cognizant said it plans to reduce employee headcount by 3,500, which is about 1% of its total staff strength. In addition, it aims to save $100 million by giving up 11 million square feet of space, most likely in India.
These measures come under its new initiative called the “NextGen programme” where Cognizant aims to simplify its operating model, optimise corporate functions, and consolidate its office space to reflect the post-pandemic hybrid work environment.
These changes would also mean that Cognizant will incur costs of around $400 million, which will be spread across this year and 2024. The savings through office space contraction is expected to reflect only in 2025.
Cognizant also reported a very muted financial performance for the first quarter of 2023, given the dull macro economic environment. The revenue growth on a year-on-year basis for this period remained flat at $4.8 billion. The company also saw a decline in operating profit margins to 14.6% on a YoY basis.
The net profit for the first quarter of 2023 stood at $580 million as compared to $563 million in the comparable period a year ago.
In addition, it also provided a weak revenue guidance for the second quarter and for the full year. It expects the revenue growth to remain more or less flat.
Cognizant has undergone considerable churn in the recent past with a new CEO taking over and steadying the organisation given the various macro economic challenges.
“Having spent more than three months assessing the business, meeting with over a hundred clients and thousands of employees, I firmly believe Cognizant has a strong foundation for accelerating growth,” said Ravi Kumar S, CEO, Cognizant.
The financial performance of Cognizant is on similar lines with its peers like TCS, Infosys, HCL Technologies, and Wipro, where everyone is struggling to register strong revenue growth while trying to maintain a healthy operating profit margin.
Edited by Megha Reddy