February 6, 2024 – Cognizant Technology Solutions Corporation has forecasted full-year revenue below expectations, indicating a persistent weakness in demand for IT services. This announcement has caused a 4% drop in the company’s shares during extended trading.

Businesses across various sectors are reducing technology and outsourcing expenses while bringing certain processes in-house due to the impact of sticky inflation and higher interest rates. Consequently, the IT services sector has experienced a slowdown. Peer company Tata Consultancy Services reported its slowest profit growth since 2020, while Infosys missed profit targets in the most recent quarter.

Cognizant, which primarily generates its revenue from customers in North America and Europe, anticipates revenue of $19 billion to $19.8 billion in 2024, below analysts’ expectations of $19.8 billion according to LSEG data. The company’s forecast for full-year adjusted profit and first-quarter revenue also fell short of expectations.

In the quarter ended December 31, 2023, Cognizant’s revenue declined by 1.7% to $4.76 billion, in line with expectations. However, adjusted earnings surpassed expectations by 14 cents, coming in at $1.18. Revenue from financial services and health sciences, the company’s top two customer segments, dropped by 5.8% and 2.1% respectively.

This forecast from Cognizant Technology Solutions Corporation reflects the ongoing challenges in the IT services sector, as businesses grapple with economic uncertainties and evolving market dynamics.