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Cognizant healthcare revenue beats banking and financial services’

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BENGALURU: For the first time in Cognizant’s history, revenue from the healthcare sector has raced past banking and financial services (BFSI) in the December quarter signalling continued weakness in financial services that’s struggling with high interest rates. Cognizant’s BFSI revenue in the Dec quarter was $1,395 million, while healthcare revenue was $1,396 million. Cognizant started reporting its sectoral revenue from 2002.
BFSI has for long been the mainstay for TCS, Infosys, HCLTech and Wipro. Cognizant’s growth in financial services is under pressure due to challenges in some accounts, subdued macro-economic environment, and lower discretionary spending, providing a limited runway for growth. Cognizant has witnessed a deceleration in BFSI revenue growth for five quarters in a row,, with the sharpest drop being 6.6% YoY in constant currency in the Dec quarter.
“I would say the discretionary spend, if you take an industry view, is the most in banking, financial services, and insurance. That’s a sector which is burdened with high interest rates. And because of the high interest rates, there is a wait-and-watch and a kind of a pause on discretionary work. Remember… financial services are one of those sectors, which also has a strong technology retained organisation. So, what they outsource is dependent on how much is discretionary,” Cognizant CEO Ravi Kumar said in a recent earnings call.
Cognizant, which counts JP Morgan, UBS, First Data, Keycorp, and MetLife as some of its key customers, has lost some wallet share in a few accounts. With many banking customers expanding their tech centres in India and building capabilities in-house, it is chipping away at the business of some of IT firms. Swiss bank UBS, for instance, has over 7,000 employees in India. Before the acquisition, both Credit Suisse and UBS had a significant presence in India through their tech centres.
In a recent report, Kawaljeet Saluja of Kotak Institutional Equities said, “The financial services segment is where CTSH (Cognizant) has lost the most to other IT services companies… The recovery will take several quarters. We are unable to dissect the weakness between portfolio mix and wallet share loss – maybe it’s a mix of both.”
Hansa Iyengar, senior principal analyst in London-based Omdia, said Cognizant hasn’t picked up many sizeable deals in the BFSI segment for a while. “The sector has been challenging for many players in the past year. Moreover, given the acquisitions and capabilities, Cognizant has built in healthcare over the years… it’s one of their stronger verticals. Keep in mind that the difference between healthcare and BFSI revenues is not much (just about $100 million) and this can change in the coming months with one large deal,” she added.
Cognizant’s BFSI sector has seen a churn at the top in the last three years, leaving a leadership vacuum for managing client relationships and delivery management.

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