3Q23 results above street estimates
- 3Q23 adjusted net income of US$586m (+5.0% q-o-q, -3.2% y-o-y) was 7% above street estimates due to margin surprise.
- Revenue of US$4,897m (+0.2% q-o-q, +0.8% y-o-y) in 3Q23, was inline with street estimates, revenue growth was led by all geographies and verticals except for Health sciences sector.
- 4Q23F revenue guidance of US$4,690m-US$4,820m (-3.1% to -0.4% y-o-y) is inline with street estimates of US$4,800m
3Q23 adjusted net income of US$586m (+5.0% q-o-q, -3.2% y-o-y) was 7% above street estimates due to margin surprise. Cognizant Technology Solutions Corp (CTSH) reported Adjusted net income of US$586m (+5.0% q-o-q, -3.2% y-o-y) in 3Q23 excluding the one off restructuring charges related to Next Gen program. Net income was 6.7% above street estimates due to margin surprise driven by lower-than-expected SG&A expenses arising from savings from CTSH’s Next Gen program. SG&A expenses in 3Q23 stood at US$801m (-3.5% q-o-q, -4.4% y-o-y). CTSH reported Adjusted operating income of US$758m (+9.2%, -5.0% y-o-y) in 3Q23, 7.5% above street. Adjusted operating margin improved to 15.5% in 3Q23 compared to 14.2% in 2Q23. CTSH reported revenue of US$4,897m (+0.2% q-o-q, +0.8% y-o-y) in 3Q23, inline with street estimates and the guidance. Sequential revenue growth was led by all geographies and verticals except for Health sciences sector which dropped -2.4% q-o-q (flat y-o-y) on softer discretionary spending among some clients. CTSH ended 3Q23 with a trailing 12-month (TTM) bookings of US$26.9bn, up 16% y-o-y and a strong book-to-bill ratio of 1.4x (unchanged q-o-q). In 3Q23, 30% of the bookings were large deals, of which three of them exceeded US$100m each.
4Q23F revenue guidance of US$4,690m-US$4,820m (-3.1% to -0.4% y-o-y) is inline with street estimates of US$4,800m. CTSH highlighted that the 4Q23F revenue guidance range has widened compared to historical quarterly guidance, reflecting a heightened level of uncertainty regarding client discretionary spending and recent pace of decision-making heading into FY23F. Adjusted operating margin guidance for 4Q23F is ~14.5% (15.5% in 3Q23 and 14.2% in 4Q22) inline with streets estimates of 14.4%. 4Q23F adjusted operating income margin is lower than 3Q23, due to seasonality.