Cognizant Technology Solutions said its current quarter was seeing a continuation of the uptick in demand that helped its second quarter, indicating that third quarter results could be better than expected. When we gave our third quarter guidance back in early August, one of the things we stated was that guidance includes contingencies for the strength not continuing at the pace seen in the second quarter, Chief Financial Officer, Gordon Coburn said in an analyst presentation on Wednesday.
Cognizant, usually conservative with its outlook, had forecast a third-quarter adjusted profit of 44 cents, on revenue of at least $800 million, saying that it was not assuming any surge or backend demand recovery, even though IT budgets looked firm for the rest of the year.
We are pleased to note that the demand environment remains positive and that the trend towards increased demand for our services, which we observed in the second quarter of this year, has continued into the third quarter, Chief Executive Officer Francisco D'Souza said in a release late on Tuesday. In the past month, the consensus view of analysts has also risen. Analysts now expect adjusted profit of 41 cents a share, on revenue view of $803 million, according to Reuters Estimates
Cognizant had also raised its 2009 outlook last month, but like its peers Infosys Technologies and Tata Consultancy Services remained cautious about a surge in demand this year.
A couple of things that were a drag on growth seem to have stabilized, Coburn said.
The key for us is stability in the market. You don't have to have a major return in overall spending but you just have to have people understand what levels they have and migrate towards using those dollars as efficiently as possible, said Coburn.
On Wednesday, Cognizant also said it acquired the assets of Pepperweed Advisors, the IT consulting arm of Pepperweed Consulting to strengthen its consulting capabilities in the IT infrastructure services space.
As the IT offshore business has slowed down in the recession, firms are looking at acquisitions to supplement growth, especially since deals could come cheap.
The company's shares, which have almost doubled in the past six months, rose more than 4 percent to a new year-high of $37.58 before closing at $37.46 Wednesday on Nasdaq. (Reporting by Savio D'Souza in Bangalore, Editing by Saumyadeb Chakrabarty)