Cognizant Technology Solutions CTSH recently announced that it has been selected by global law firm Freshfields Bruckhaus Deringer to manage its global IT operations and support its international expansion plans.
Under the multi-year agreement signed by both companies, Cognizant will provide round-the-clock managed services of Freshfields IT infrastructure and applications and oversee its service desk. Further, Cognizant will aid Freshfields in its digital transformation, reduce operational costs and drive investments in other parts of its business.
Cognizant has been constantly expanding its partner base by signing multi-year deals with firms like Organon and Albertsons Companies. This has helped CTSH to drive its revenue growth with constant client acquisitions.
The adoption of digital solutions has been slower in legal service firms. However, the firms are at an inflection point with changing dynamics in the world of commerce and geopolitics and are transitioning to digital operating models. In order to benefit from this, Cognizant has inked this strategic partnership with Freshfields to benefit from the new trends in the market amid the fourth industrial revolution.
Cognizant Technology Solutions Corporation Price and Consensus
Cognizant Technology Solutions Corporation price-consensus-chart | Cognizant Technology Solutions Corporation Quote
Cognizant Addressing New Trends to Aid Share Price
Cognizant’s recent investments in developing its digital business model has helped the company address the changing dynamics and contribute to its top-line growth.
In the second quarter of 2022, revenues of $4.9 billion grew 9.5% at constant currency (cc). The growth was led by digital revenues, which accounted for 50% of revenues and increased 13% year over year.
However, Cognizant’s shares have been negatively impacted by the current macroeconomic situation and geopolitical tensions. Various factors like labor cost inflationary pressure, interest rate hikes by the U.S. Federal Reserve and the Russia-Ukraine war have negatively impacted its outlook.
Shares of Cognizant have lost 30.2% year to date compared with the Zacks Business-Software Services industry’s decline of 36.1%.
Further complicating the situation, Cognizant is also facing a significant threat in the AI industry and the cloud space from companies like International Business Machines IBM and Accenture ACN.
IBM is poised to benefit from strong demand for hybrid cloud and AI, which will drive its top-line growth. IBM recently expanded its collaboration with the U.S. federal government to address current problems like cybersecurity and supply chain sustainability via its data fabric solutions and IBM Watson.
Accenture is improving its market share in the industry with its recent acquisition of digital engineering and operational technology from Trancom ITS. This will help Accenture provide customers with cloud-based logistics systems and merge warehouse operations with IoT and sensor technology.
However, Cognizant, currently carrying Zacks Rank #3 (Hold), will benefit from significant growth in its digital business operations, which is outgrowing the BPO market, reflecting momentum in AI, AR, automation, blockchain, IoT, quantum computing and as-a-service solutions. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
The company has been building a strong partner base to develop solutions to bring digitization to industries that have been slow in adopting digitization, automation and cloud services, like the healthcare industry and legal institutions.
Cognizant has been strategically partnering with tech giant Microsoft MSFT to capitalize on the opportunity of intersection between health and cloud services.
Cognizant has collaborated with Microsoft to leverage their Cloud for Healthcare solution and built a new solution to aid in remote patient monitoring for improved medical care. This will help Cognizant earn market share in the healthcare industry and increase revenue growth in the coming quarters.
Cognizant expects third-quarter 2022 revenues to be between $4.98 and $5.03 billion, indicating growth of 7.5-8.5% on a cc basis. For the third quarter, the Zacks Consensus Estimate for revenues is pegged at $5.01 billion, indicating year-over-year growth of 5.64%.
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