Lately, IT services have been the talk of the town. The International Data Corporation (IDC) estimated that in 2011, the market was more than $855 billion and estimates that it can increase at a compound annual growth rate of 4.6% through 2018. Cognizant Technology Solutions Corp (NASDAQ:CTSH) is an IT services company that is rising with the market.
Cognizant Technology Solutions Corp (NASDAQ:CTSH) provides consulting, business process outsourcing services, and information technology, in order to aid the world’s leading companies build their businesses. It has over 50 delivery centers worldwide, with its headquarters in Teaneck, New Jersey. Cognizant Technology Solutions Corp (NASDAQ:CTSH) has a market cap of $22 billion and I think earnings will continue to grow as long as there is still a strong demand for its broad range of services.
Cognizant Technology Solutions Corp (NASDAQ:CTSH)’s revenue rose 3.7% sequentially and 18.1% year-over-year. Cognizant intends on utilizing its $1.5 billion in cash for expansion of current operations and potential acquisitions of related businesses. Cognizant Technology Solutions Corp (NASDAQ:CTSH) is a cash rich business and doesn’t require the use of debt in its day to day operations.
The Board of Directors increased the stock repurchase program from $1 billion to $1.5 billion and extended the term. As of May 8, 2013, it repurchased $940 million of its shares under the old authorization.
Cognizant Technology Solutions Corp (NASDAQ:CTSH)’s rivals, Wipro Limited (ADR) (NYSE:WIT) and Infosys Ltd ADR (NYSE:INFY) are having a prosperous time too. In the first quarter Wipro Limited (ADR) (NYSE:WIT)’s revenue increased 5% year-over-year. But, Wipro’s forward outlook is dismal, which is kind of surprising considering the industry is expected to rise by 12% to 14% according to the National Association of Software and Services Companies (NASSCOM). Still, Wipro Limited (ADR) (NYSE:WIT) increased its net income, income from continuing operations, and its IT services revenue in the first quarter.
Infosys Ltd ADR (NYSE:INFY) missed analyst’s revenue estimates, but it posted quarter-over-quarter growth and year-over-year growth. But its profitability has wavered when compared to Cognizant. Infosys Ltd ADR (NYSE:INFY) has dropped 2.2% in its profit margin, while at the same time, Cognizant has maintained its margin around 14%.
Kid in a candy store
Cognizant has increased its penetration with existing customers, including strategic clients. It finished the quarter with roughly 1,000 active clients, compared to roughly 805 last year, and increased the number of strategic clients by seven, bringing the total number to 221. Cognizant describes a strategic client as one offering the potential to generate a minimum of $5 million to $50 million or more in annual revenue.