Cognizant Technology Solutions Corp forecast current-quarter revenue above market expectations after an 18% rise in the first quarter, helped by strong demand from Europe.
The IT service provider is also benefiting from an increase in demand from its global banking customers, who have stepped up spending to comply with stricter regulations.
“We are now three quarters into pretty good growth in the banking sector, and we expect to continue to see that growth throughout the year,” chief financial officer Karen McLoughlin told Reuters.
Financial services contributed 40% to the company’s sales in 2012, with more than half of that coming from the banking industry.
First-quarter sales from Europe rose 23%, outpacing a 16% growth in North America. Europe accounts for nearly a fifth of Cognizant’s revenue.
Instability in Europe has forced companies in the region to outsource and cut costs. But Cognizant, which operates on lower margins than its rivals, has been able to win a larger share of the business.
Chief Financial Officer Karen McLoughlin said the company continued to be “really bullish on long-term opportunities” in Europe.
“As we look across our business, while there continues to be pockets of weakness, we are encouraged that the majority of our businesses are experiencing positive demand and growth characteristics,” chief executive Francisco D’Souza said on a conference call with analysts.
Analysts said the company’s focus on the financial services and healthcare businesses allows it to differentiate itself from other in the industry.
Indian rivals such as Tata Consultancy Services, Infosys and Wipro reported mixed results for the first quarter, highlighting a shaky recovery in client demand.
Cognizant, which was founded in 1994 as a captive unit of Dun & Brad Street in India, forecast revenue of at least $2.13bn for the second quarter.
Analysts on average were expecting revenue of $2.11bn, according to Thomson Reuters I/B/E/S.
Cognizant forecast earnings of 97¢ per share, in line with analysts’ estimates.
First-quarter net income rose 18% to $284.2mn, or 93¢ per share. Revenue rose to $2.02bn from $1.71bn.
Analysts on average had expected earnings of 93 cents per share on revenue of $2.01bn.
Shares of IT services companies took a hit last month on news that the US Senate Judiciary Committee was debating a draft immigration bill that could hurt Indian outsourcing firms’ businesses in the US.
The proposals, which include a sharp cut in the number of foreign workers who can be sent to the US by companies such as Infosys and TCS, have won support from rival US firms including IBM and Accenture.
Cognizant is one of the top applicants for green cards in the US and analysts have estimated that about 65% of Cognizant’s employees in the US work on H-1B or L-1 visas, or work permits.
