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Cognizant revenues up 6.7% in Sept quarter, overtakes TCS in North America revenues

The IT services exporter's revenues jumped 6.7 per cent sequentially to $2.31 billion for the September quarter, ahead of Street estimates. It reported a net profit of $319.6 million for the quarter, or $1.05 a share.

Cognizant, India's second largest IT services exporter, has reported encouraging numbers for its September quarter and rounded up what proved to be an excellent season for almost all Indian technology companies.

The company's revenues jumped 6.7 per cent sequentially to $2.31 billion for the quarter, ahead of Street estimates. Analysts, on an average, were expecting the company to pull in revenues of $2.26 billion.

Cognizant clearly beat every other top tier company in terms of September quarter growth - in comparison, Tata Consultancy Services (TCS), India's largest IT services company, grew its top-line measured in dollars by 5.4 per cent, Infosys by 3.8 per cent, HCL Tech 3.5 per cent and Wipro 2.7 per cent.

It was a landmark quarter for Cognizant for another reason - for the first time, it went past TCS in North American revenues. While TCS had revenues of $1,775 million from the geography in the September quarter, Cognizant pulled in revenues of $1,783 million.

The company, expectedly, revised its full year 2013 guidance upwards to a growth of 20.3 per cent over 2012 versus 19 per cent it predicted earlier. The firm now expects to clock a top-line of at least $8.84 billion during the year.

This implies the company will grow the fastest in the Indian IT sector, even ahead of TCS, and much ahead of Nasscom's export estimates for the year. Analysts expect TCS to report full year revenue growth of between 16 per cent and 18 per cent. Nasscom expects export revenues from India's IT and business process outsourcing sector to grow 12 per cent to 14 per cent for the year ending March 2014.

Cognizant's financial calendar, however, ends in December.

The company's numbers on Tuesday reinforce the broader recovery in the technology spending market where discretionary spending is back. Every company, including laggards such as Infosys and Wipro, has reported broad-based growth.

"Our performance during the quarter was stronger than anticipated due to a faster ramp up in demand for outsourcing services and strong discretionary spend on consulting and technology services," Gordon Coburn, President of the company, noted in a press statement. "Our continuous reinvestment in our business continues to help us strengthen our capabilities to address our clients' dual mandate of driving greater performance in their current businesses, while positioning them better for future success," he added.

In terms of margins, all IT companies reaped the benefits of favourable currency movements during the quarter. However, Cognizant appears to have invested most of the gains back in the business - its GAAP (Generally Accepted Accounting Principles) operating margins for the quarter was at 19.0 per cent while non-GAAP margins were at 20.4 per cent. During the June quarter, the company's GAAP operating margins came in at 19.7 per cent while non-GAAP operating margins were at 21.4 per cent.

TCS' operating margins for the September quarter were at an all-time high, expanding by more than 300 basis points to 30.2 per cent. Wipro's operating margins increased to 22.5 per cent from 20 per cent in the June quarter.

Cognizant reported net profit of $319.6 million for the quarter, or $1.05 a share, versus $300.4 million or $0.99 a share in the June quarter.