Cognizant to lay off 3,500 employees and reduce office space to save costs
In response to the projected revenue decline in 2023, Cognizant has revealed plans to address the challenges faced by the industry, particularly as the US represents the bulk of its revenue. These measures will include laying off 3,500 employees and relinquishing millions of square feet of office space to reduce costs.
Ravi Kumar S, the recently appointed CEO, has a challenging task ahead of him to revamp the company and contend with industry titans such as Accenture, TCS, and Infosys. Despite being listed in the US, the majority of Cognizant's operations are situated in India.
Cognizant has issued revenue projections of $19.2 - $19.6 billion for the entire year, resulting in a -1.2% to 0.8% decrease in reported terms or -1% to 1% growth in constant currency. In the second quarter, the company anticipates a revenue range of $4.83 - $4.88 billion, indicating a -1.6% to -0.6% decline or a decline of 1% to flat in constant currency.
Presently, Cognizant's profit margins are at 14.6%, similar to Tech Mahindra, and considered one of the least favourable in the IT industry. The company has forecasted an adjusted operating margin of 14.2-14.7% for the entire year.
During the first quarter of FY23, Cognizant exceeded analyst predictions, marking the first quarter where CEO Ravi Kumar S was mainly in charge. Kumar assumed the position on January 12 following the "involuntary termination" of former CEO Brian Humphries.
The transition in leadership and board chairman occurred during a difficult period for the industry, which is experiencing numerous obstacles.
Cognizant's net profit rose by 3% year-on-year, with a sequential increase of 11.2%. Despite revenue of $4.81 billion, reflecting a 0.3% year-over-year decline or 1.5% constant currency growth, the company exceeded its forecast of $4.71-$4.76 billion.