Cognizant Technology Solutions (CTSH) Q2 2016 Earnings Call

posted in: Earnings Call, Notes | 0

Cognizant Technology Solutions (CTSH) CEO Francisco D’Souza said clients are slowing their spending on discretionary IT services 

“As we enter the second half of the year, we see certain macroeconomic factors as well as some softness in clients’ discretionary spending that’ll affect our revenue growth primarily from financial services and healthcare clients. Additionally, we anticipate a further negative revenue impact of approximately $40 million for the second half of the year due to the weakening of the pound sterling following the Brexit vote.”

Low interest rates are hurting the willingness of financial services firms to spend on IT initiatives 

“First, as we indicated on our last two earnings calls, discretionary spending in the banking sector remained soft, weighed down by macroeconomic concerns and a prolonged low interest rate environment. While we did see a return to healthy sequential growth in the second quarter, we expect banking discretionary spending during the second half of 2016 to be slower than we anticipated three months ago.  We see the banking sector being more cautious in spending over the near-term.”

Every business is becoming a technology business

“The key I think factor to look at is that the world is becoming more technology-intensive not less technology-intensive. Across the industries we serve and also industries where we are less present, more energy and attention is being focused on technology than ever before. Technology has become not just a way of driving efficiency and operational effectiveness for businesses, but it’s become a core to most clients’ ability to differentiate, to grow revenue and to survive in the marketplace.”