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India-centric Cognizant Technology Solutions has become the largest IT company in terms of revenue from North America in July-September, edging out Tata Consultancy Services.
The company, based in the US but operating mostly from India, and has historically grown ahead of its rivals, raised its annual revenue growth guidance to 20.3% from 19%, the second time that it has upped its guidance this year. This is far ahead of the 12-14% growth that industry body NASSCOM has forecast for Indian IT in 2013-14.
North America market is among the largest markets for IT companies. Cognizant’s North America revenue of $1.783 billion was ahead of $1.775 billion reported by Mumbai-based TCS.
Its strong showing caused the stocks of top Indian software service exporters such as TCS, Infosys and Wipro to rise on Wednesday. While the National Stock Exchange Nifty ended down 0.6%, the CNX-IT index rose 1.4%.
Most of Cognizant’s growth in the US is driven by the healthcare vertical, where business has been growing on the back of Obamacare. Cognizant’s total revenue rose 22% to $2.31 billion.
The discretionary demand appears to be sustainable and conversations with clients suggests budgets could have a modest upward bias going into next year, Francisco D’Souza, Cognizant’s chief executive said on a conference call.
Analysts reckon that what works for Cognizant could also work for its Indian rivals.
“Cognizant (forecast) ... is encouraging and provides positive cues for FY2015 growth forecast,” Kotak Institutional Equities said, adding the strong growth has reinforced its positive view on Indian IT industry.