Cognizant Technology Solutions Corporation on Thursday withdrew its revenue guidance for 2020 and lowered its first-quarter (January to March) revenue outlook as it grapples with uncertainty following the Covid-19 outbreak, with some of its customer segments affected by the novel virus.

Earlier, Accenture had lowered its revenue guidance for the year. Both these events signal bad news for the domestic IT services sector. Observers fear the impact will be felt more in the first and second quarter of the current fiscal in terms of discretionary spending or deal wins. Some of the listed companies, which include Infosys and Wipro, give out revenue guidance. But they are yet to give a clear picture on how the coronavirus is affecting their businesses.

Cognizant said its first-quarter revenue is expected to be $4.22-4.23 billion, up 2.7-2.9 per cent (3.4-3.6 per cent in constant currency) from the prior-year quarter, including a negative 50 basis point impact from the exit of certain content services.

It pointed out that financial performance in the first two months of the year was on track to exceed previous guidance, driven by the strong performance across North America. However, during the latter part of March, Covid-19 affected its business largely because of delays in project fulfilment as delivery, particularly in India and the Philippines, shifted to work-from-home.

The company added that there was reduced client demand, particularly in the travel and hospitality industries.

“Entering the second quarter, Cognizant expects the pandemic to reduce client demand. Our long-term fundamentals remain strong. However, we are withdrawing the 2020 guidance provided on February 5.”

In February, Cognizant had forecast that its first quarter revenue growth will be in the range of 2.8-3.8 per cent in constant currency, whereas the full year revenue growth will be in the range of 2-4 per cent in constant currency.

The company said it would pay its staff at the associate level an extra 25 per cent of its base pay in April. The move is expected to benefit over 1.30 lakh employees in India

'Additionally, Cognizant has standardised 14 days sick-leave coverage globally for Covid-19 cases or self-quarantine without impacting other sick leave or vacation programme,' it added.

Last month, Accenture had said that for fiscal 2020, it expects revenue growth to be in the range of 3-6 per cent in local currency against 6-8 per cent, estimated previously.