Coforge Q4 Profit Misses Estimates Amid 49% Cost Surge

Coforge, an Indian information technology services company, reported a fourth-quarter profit that fell short of expectations due to a significant increase in costs. The company's consolidated net profit grew by 16.8% to 26.1 billion rupees (approximately $31 million), missing analysts' estimates of 28.1 billion rupees. The surge in costs, primarily driven by expenses related to acquisitions and mergers, resulted in a 49% increase in total expenses.

Coforge's operating revenue increased from 231.8 billion rupees last year to 341 billion rupees, but this figure still fell short of analysts' expectations of 352 billion rupees. The company's order book revenue grew from $7.74 billion last year to $21 billion. Coforge has been actively pursuing acquisitions to boost its revenue, recently completing the acquisition of Cigniti Technologies in India, as well as Rythmos and Xceltrait in the United States.

In contrast, competitor Mphasis reported profits that exceeded expectations last week due to successful deal wins. However, larger peers such as Tata Consultancy Services and Infosys have indicated that the next year will be challenging due to cautious client spending amid global economic uncertainty. The industry, valued at $283 billion, faces challenges due to unpredictable tariff policies, which have created uncertainty among major clients and delayed their technology spending decisions.

Coforge's financial performance underscores the challenges companies face when pursuing rapid growth through acquisitions and mergers. While these strategic moves aim to enhance market position and service offerings, they can result in substantial financial outlays that impact profitability. The company's experience highlights the importance of balancing growth strategies with cost management to ensure sustainable financial performance. As Coforge navigates these challenges, it will be crucial for the company to optimize its cost structure and focus on operational efficiency to improve its bottom line in the coming quarters.