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DXC Technology Q1 Earnings Miss Estimates, Revenues Decline Y/Y
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Key Takeaways
DXC reported Q1 EPS of 40 cents, missing estimates, while revenues fell 5.1% year over year.
DXC posted 5% booking growth, a 0.99x book-to-bill ratio and $314 million in free cash flow.
DXC reaffirmed FY27 revenues, margin and EPS outlook, while raising free cash flow guidance.
DXC Technology (DXC - Free Report) reported first-quarter fiscal 2027 non-GAAP earnings of 40 cents per share, which declined 41.2% year over year and missed the Zacks Consensus Estimate by 4.8%.
Revenues decreased 5.1% year over year to $3 billion but beat the Zacks Consensus Estimate by 0.46%.
The quarter was highlighted by a 5% increase in bookings, a 0.99x book-to-bill ratio, robust free cash flow generation of $314 million and continued momentum in the company's AI-enabled platform strategy.
DXC Continues AI Push Amid Weak IT Spending
Management said enterprise customers remain cautious on discretionary technology spending, particularly for short-duration infrastructure projects. However, DXC continues to invest in agentic AI capabilities, highlighting growing customer interest in its AI-enabled platforms, including Oasis and AgenTxSOC.
DXC Technology Company. Price, Consensus and EPS Surprise
The company noted that AI deployments are accelerating customer engagement, while partnerships such as Anthropic are helping expand its engineering capabilities. Management believes these initiatives position DXC for improved growth once enterprise spending normalizes.
Segment Performance Reflects Mixed Demand Trends
Consulting and Engineering Services ("CES") revenues were $1.23 billion, down 1.2% year over year (down 3% organically). Segment profit declined 4.8% to $100 million, while bookings fell 18.5%, resulting in a book-to-bill ratio of 0.98x.
Global Infrastructure Services ("GIS") revenues decreased 9.4% year over year to $1.45 billion (down 11.1% organically). Segment profit plunged 60.8% year over year to $38 million, reflecting weaker discretionary infrastructure spending. Despite the revenue decline, GIS bookings increased 34.7% year over year, driving a healthy book-to-bill ratio of 1.11x.
Insurance Software & Services remained the bright spot. Revenues increased 1.9% year over year to $319 million (up 1.4% organically), while segment profit rose 3% to $34 million. Bookings increased 3.6% year over year.
Balance Sheet and Cash Flow
DXC generated $418 million in operating cash flow during the quarter. Free cash flow jumped to $314 million from $97 million in the year-ago quarter, benefiting from $214 million of litigation-related proceeds.
The company returned $70 million to shareholders through share repurchases during the quarter. Management also highlighted continued focus on strengthening the balance sheet through debt reduction.
DXC Maintains FY27 Outlook
For fiscal 2027, DXC continues to expect revenues between $12.10 billion and $12.35 billion, representing an organic decline of 5% to 3% year over year. The company reaffirmed adjusted EBIT margin guidance of 6-7% and non-GAAP earnings per share guidance of $2.40-$2.90. Free cash flow guidance was raised to approximately $685 million, reflecting litigation-related cash proceeds.
For the second quarter of fiscal 2027, DXC expects revenues between $2.97 billion and $3.00 billion, implying an organic decline of 6.5-5.5% year over year. The company projects an adjusted EBIT margin of approximately 6% and non-GAAP earnings per share of about 55 cents.
Shares of Analog Devices have rallied 37.1% year to date. The Zacks Consensus Estimate for ADI’s fiscal 2026 earnings is pegged at $12.42 per share, up by 10 cents over the past 30 days, indicating an increase of 59.4% year over year.
Shares of Applied Materials have skyrocketed 101.1% year to date. The Zacks Consensus Estimate for AMAT’s fiscal 2026 earnings is pegged at $12.14 per share, up by 4 cents over the past 30 days, indicating a rise of 28.9% year over year.
Cisco Systems shares have surged 48.7% year to date. The Zacks Consensus Estimate for CSCO’s fiscal 2026 earnings is pegged at $4.28 per share, unchanged over the past 30 days, indicating an increase of 12.3% year over year.
View the Zacks #1 Rank List
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DXC Technology Q1 Earnings Miss Estimates, Revenues Decline Y/Y
Key Takeaways
DXC Technology (DXC - Free Report) reported first-quarter fiscal 2027 non-GAAP earnings of 40 cents per share, which declined 41.2% year over year and missed the Zacks Consensus Estimate by 4.8%.
Revenues decreased 5.1% year over year to $3 billion but beat the Zacks Consensus Estimate by 0.46%.
The quarter was highlighted by a 5% increase in bookings, a 0.99x book-to-bill ratio, robust free cash flow generation of $314 million and continued momentum in the company's AI-enabled platform strategy.
DXC Continues AI Push Amid Weak IT Spending
Management said enterprise customers remain cautious on discretionary technology spending, particularly for short-duration infrastructure projects. However, DXC continues to invest in agentic AI capabilities, highlighting growing customer interest in its AI-enabled platforms, including Oasis and AgenTxSOC.
DXC Technology Company. Price, Consensus and EPS Surprise
DXC Technology Company. price-consensus-eps-surprise-chart | DXC Technology Company. Quote
The company noted that AI deployments are accelerating customer engagement, while partnerships such as Anthropic are helping expand its engineering capabilities. Management believes these initiatives position DXC for improved growth once enterprise spending normalizes.
Segment Performance Reflects Mixed Demand Trends
Consulting and Engineering Services ("CES") revenues were $1.23 billion, down 1.2% year over year (down 3% organically). Segment profit declined 4.8% to $100 million, while bookings fell 18.5%, resulting in a book-to-bill ratio of 0.98x.
Global Infrastructure Services ("GIS") revenues decreased 9.4% year over year to $1.45 billion (down 11.1% organically). Segment profit plunged 60.8% year over year to $38 million, reflecting weaker discretionary infrastructure spending. Despite the revenue decline, GIS bookings increased 34.7% year over year, driving a healthy book-to-bill ratio of 1.11x.
Insurance Software & Services remained the bright spot. Revenues increased 1.9% year over year to $319 million (up 1.4% organically), while segment profit rose 3% to $34 million. Bookings increased 3.6% year over year.
Balance Sheet and Cash Flow
DXC generated $418 million in operating cash flow during the quarter. Free cash flow jumped to $314 million from $97 million in the year-ago quarter, benefiting from $214 million of litigation-related proceeds.
The company returned $70 million to shareholders through share repurchases during the quarter. Management also highlighted continued focus on strengthening the balance sheet through debt reduction.
DXC Maintains FY27 Outlook
For fiscal 2027, DXC continues to expect revenues between $12.10 billion and $12.35 billion, representing an organic decline of 5% to 3% year over year. The company reaffirmed adjusted EBIT margin guidance of 6-7% and non-GAAP earnings per share guidance of $2.40-$2.90. Free cash flow guidance was raised to approximately $685 million, reflecting litigation-related cash proceeds.
For the second quarter of fiscal 2027, DXC expects revenues between $2.97 billion and $3.00 billion, implying an organic decline of 6.5-5.5% year over year. The company projects an adjusted EBIT margin of approximately 6% and non-GAAP earnings per share of about 55 cents.
Zacks Rank & Stocks to Consider
DXC currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Zacks Computer and Technology sector are Analog Devices (ADI - Free Report) , Applied Materials (AMAT - Free Report) and Cisco Systems (CSCO - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Shares of Analog Devices have rallied 37.1% year to date. The Zacks Consensus Estimate for ADI’s fiscal 2026 earnings is pegged at $12.42 per share, up by 10 cents over the past 30 days, indicating an increase of 59.4% year over year.
Shares of Applied Materials have skyrocketed 101.1% year to date. The Zacks Consensus Estimate for AMAT’s fiscal 2026 earnings is pegged at $12.14 per share, up by 4 cents over the past 30 days, indicating a rise of 28.9% year over year.
Cisco Systems shares have surged 48.7% year to date. The Zacks Consensus Estimate for CSCO’s fiscal 2026 earnings is pegged at $4.28 per share, unchanged over the past 30 days, indicating an increase of 12.3% year over year.