Cognizant is expecting to reach around 22 per cent in adjusted margins next year and estimated its digital revenue growth to be 20-25 per cent year-over-year
Cognizant, a global provider of IT services, including digital, technology, operations and consulting services, estimated its midterm growth to accelerate to 7-11 per cent in continuous currency terms. The US-based IT major also enhanced its buyback authorisation to US$ 5 billion by 2020.
The IT major chalked out its goals for the coming 3-5 years, including expenditure on a quarter of the company’s free cash flow on merger & acquisitions, in its first investor day held last week.
Karen McLoughlin, Chief Financial Officer (CFO), Cognizant, told analysts that the company sees growth potential to accelerate in the medium-term as digital opportunities is expanding.
The New Jersey-based company estimated 6-9 per cent organic growth in constant currency and a further revenue growth of 1-2 per cent from acquisitions in the medium term. The company would also work towards incremental expansion of 10 basis points of margin year-over-year in the medium term.
Digital revenue to grow 20-25 per cent
The IT services company has already said that it is expecting to reach around 22 per cent in adjusted margins next year. The company estimated its digital revenue growth to be 20-25 per cent year-over-year.
The company has also tried to address concerns regarding its banking and financial services business. Cognizant’s estimated revenue from its top-five banking customers declined from US$ 900 million during the year till September 2017 to $790 million up to September next year.
Cognizant has also outlined the plans for using its capital. The company said it will utlilise 20 per cent of its free cash flow for paying dividends, 25 per cent for mergers and acquisitions, 30 per cent for buybacks and the 25 per cent remaining will stay in India.
In addition, the company is planning to push its localisation strategy in the US and other domestic markets.
