Cognizant beats estimates as demand for outsourcing grows

IT services firm Cognizant Technology Solutions Corp reported a better-than-expected 22 percent rise in quarterly revenue as businesses, especially financial firms and companies in Europe, outsourced more work and increased spending on consulting.

Instability in Europe has forced companies there to cut costs by outsourcing. Cognizant, which operates on lower margins than its rivals, has been able to win a larger share of the business.

The company also gained from an uptick in discretionary technology spending in North America, which accounts for more than three quarters of total revenue.

Cognizant's Indian rivals, Infosys Ltd and Tata Consultancy Services , also reported a jump in quarterly profit, helped by growing demand from financial clients and from Europe.

"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," Cognizant President Gordon Coburn said.

The company, which also raised its full-year forecast for both profit and revenue, said third-quarter sales rose 22 percent to $2.31 billion.

Revenue from Europe increased 37 percent to $414.7 million, while revenue from North America rose 18.5 percent to $1.78 billion.

The company's net income rose to $319.6 million, or $1.05 per share in the third quarter, from $276.9 million, or 91 cents per share, a year earlier.

Analysts on average had expected earnings of $1.01 per share on revenue of $2.26 billion, according to Thomson Reuters I/B/E/S.

The company said it expects earnings of at least $4.01 per share on revenue growth of at least 20.3 percent to $8.84 billion.

It had previously forecast earnings of at least $3.96 per share on revenue growth of at least 19 percent to $8.74 billion.

Analysts on average expected earnings of $3.98 per share on revenue of $8.76 billion.

Shares of Teaneck, New Jersey-based Cognizant, which has most of its employees in India, closed at $86.85 on the Nasdaq on Monday.

(Reporting by Sruthi Ramakrishnan in Bangalore; Editing by Saumyadeb Chakrabarty)