COGNIZANT RETAINS POSITION AS REVENUE GROWTH LEADER AMONG PEERS AS ORGANIC AND INORGANIC INVESTMENTS PAY OFF - Sponsored Whitepaper

Cognizant's focus remains on driving revenue growth; margins are neglected due to aggressive hiring to preserve position as a revenue growth leader

Cognizant's top-line growth continued to decelerate for the third consecutive quarter in 3Q11. Despite the slowdown in growth, the firm managed to increase revenue by 31.6% year-to-year in 3Q11 to $1.6 billion (compared with 34.4% in 2Q11 and 42.6% in 3Q10) – above Infosys' 16.7%, Wipro ITS' 20.6%, HCLT's 24.7%, and TCS' 26% during the quarter. Cognizant's revenue earned per quarter remained higher than Wipro ITS' for the second consecutive quarter, allowing Cognizant to retain its title as No. 3 Indian-centric vendor in terms of revenue. TBR attributes the firm's growth to its willingness to invest in client relationships with growth potential, ensuring high-value expertise is onsite to provide added value and identify opportunities for future engagements.

Profit-wise, Cognizant's operating margin decreased to 18.3% in 3Q11 from 18.8% 3Q10 as a result of hiring, including college hires in the U.S. Due to Cognizant's strict focus on top-line growth, it lags the majority of its Indian peers in terms of operating margin, with Infosys at 28.1%, TCS at 27.1%, Wipro ITS at 20%, and HCLT at 14.3%. TBR expects Cognizant's operating margin to dip in 3Q11 as hiring is expected to continue at a fast pace.