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DXC Technology Co (DXC)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 FY26 revenue was $3.16B, down 2.4% YoY (organic -4.3%); Adjusted EBIT margin was 6.8%, and non-GAAP diluted EPS was $0.68, above guidance but modestly below Street consensus; bookings rose 14% YoY to $2.8B with 0.90x book-to-bill .
  • Management raised FY26 reported revenue guide to $12.61–$12.87B (FX tailwind) and increased FY26 non-GAAP EPS to $2.85–$3.35 (from $2.75–$3.25), while maintaining adjusted EBIT margin at 7–8% and FCF at ~$600M .
  • Segments: CES and GIS declined organically (-4.4% and -5.7% respectively), while Insurance grew organically (+3.6%); CES bookings strength (1.19x) supports H2 revenue improvement; GIS bookings were modest with deferred large deals expected to close in coming quarters .
  • Street context: consensus revenue ~$3.167B* and EPS ~$0.697*; actual revenue ~$3.159B and non-GAAP EPS $0.68—slight misses vs estimates despite beating internal guidance .
  • Narrative/catalysts: guidance raise, third consecutive quarter of double-digit bookings growth, and expanded AI initiatives (Gartner recognition; 50k engineers trained; 92% AI readiness) may support sentiment; watch Q2 on closing deferred GIS deals and CES conversion of backlog .

What Went Well and What Went Wrong

What Went Well

  • Non-GAAP EPS above internal guidance high end ($0.68 vs $0.55–$0.65 guide) with adjusted EBIT margin 6.8% at top of guided range; CEO: “non-GAAP EPS exceeding expectations” .
  • Bookings up 14% YoY to $2.8B; third straight quarter of double-digit bookings growth; CES bookings +32% YoY, book-to-bill 1.19x (TTM CES ~1.2) supporting H2 trajectory .
  • AI execution: Gartner recognized DXC as an emerging leader in GenAI consulting; 50,000 engineers trained, 92% AI readiness; management highlighted additive AI solutioning and proactive frameworks for clients .

What Went Wrong

  • Revenue down 2.4% YoY (organic -4.3%) with GAAP diluted EPS only $0.09 due to higher tax expense (GAAP ETR 73.1%); Insurance segment profit margin contracted to 10.5% (-430 bps YoY) .
  • Street comparison: revenue ~$3.159B vs ~$3.167B* and non-GAAP EPS $0.68 vs ~$0.697*—minor misses vs consensus despite beating internal guidance .
  • GIS organic decline (-5.7%) persisted; Insurance bookings down 19% YoY (book-to-bill 0.54x), and Insurance SaaS transition not yet material—implies near-term topline pressure and backlog-heavy revenue coverage .

Financial Results

Consolidated Results vs Prior Periods and Estimates

MetricQ3 FY25Q4 FY25Q1 FY26
Revenue ($USD Billions)$3.23 $3.17 $3.16
GAAP Diluted EPS ($)$0.31 $1.43 $0.09
Non-GAAP Diluted EPS ($)$0.92 $0.84 $0.68
EBIT Margin (%)4.5% 11.0% 2.4%
Adjusted EBIT Margin (%)8.9% 7.3% 6.8%
Book-to-Bill (x)1.33 1.22 0.90
Cash from Operations ($USD Millions)$650 $315 $186
Free Cash Flow ($USD Millions)$483 $111 $97

Results vs Wall Street Consensus (S&P Global)

MetricQ1 FY26 ConsensusQ1 FY26 ActualDelta
Revenue ($USD Billions)$3.167*$3.159 -$0.008B (miss)
Non-GAAP EPS ($)$0.697*$0.68 -$0.017 (miss)
# EPS Estimates9*——
# Revenue Estimates8*——

Values with asterisk (*) retrieved from S&P Global.

Segment Breakdown (Q1 FY26)

SegmentRevenue ($USD Millions)YoY GrowthSegment Profit ($USD Millions)Margin (%)
CES$1,246 -2.7% $105 8.4%
GIS$1,600 -3.5% $97 6.1%
Insurance$313 +5.4% $33 10.5%

KPIs (Q1 FY26)

KPIValue
Bookings ($USD Billions)$2.8
Book-to-Bill (x)0.90
Cash from Operations ($USD Millions)$186
Free Cash Flow ($USD Millions)$97
Shares Repurchased ($USD Millions)$50

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Billions)FY26$12.18–$12.44 $12.61–$12.87 Raised
Adjusted EBIT Margin (%)FY267.0–8.0 7.0–8.0 Maintained
Non-GAAP Diluted EPS ($)FY26$2.75–$3.25 $2.85–$3.35 Raised
Free Cash Flow ($USD Millions)FY26~$600 ~$600 Maintained
Revenue ($USD Billions)Q2 FY26N/A$3.15–$3.18 New
Adjusted EBIT Margin (%)Q2 FY26N/A6.5–7.5 New
Non-GAAP Diluted EPS ($)Q2 FY26N/A$0.65–$0.75 New
Net Interest Expense ($M)Q2/FY26N/A~$12 / ~$60 New
Non-GAAP Tax Rate (%)Q2/FY26N/A~40 / ~35 New
FX AssumptionsQ2/FY26N/AEUR/USD $1.15; GBP/USD $1.35; AUD/USD $0.66 New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 FY25, Q4 FY25)Current Period (Q1 FY26)Trend
Bookings momentumQ3: B2B 1.33x; raised FY25 margin/EPS guides ; Q4: B2B 1.22x; >20% bookings growth Third straight quarter of double-digit bookings; 0.90x in Q1; TTM B2B ~1.06 Improving TTM; seasonal moderation in-quarter
AI/technology initiativesScaling innovation; no specific AI metrics in PRsGartner GenAI recognition; 50k engineers trained; 92% AI readiness; additive solutioning Accelerating investment/positioning
Segment mix/trajectoryGIS mid-single-digit decline; GBS/GBS mix improving in Q3/Q4 CES/GIS organic declines persist; Insurance mid-single-digit growth expected Mixed; CES improvement expected H2
Pricing/win ratesNot highlighted in PRsWin rates up low–mid single digits in CES/GIS; pricing stable Positive
Insurance SaaS transitionNot disclosedSaaS transition not yet significant; backlog provides revenue coverage Neutral near-term; strategic planning underway
Margin cadenceHistorical seasonal improvementLess 1Q→2Q seasonality this year; margins expected to improve in H2 Back-half uptrend

Management Commentary

  • CEO: “We delivered first quarter results at the high end of our guidance for both organic revenue growth and adjusted EBIT margin, with non-GAAP EPS exceeding expectations… For the third straight quarter, we reported double digit bookings growth” .
  • AI leadership: “Training over 50,000 Gen AI-enabled engineers and achieving AI readiness across 92% of our technical teams… recognized by Gartner as an emerging leader in generative AI consulting” .
  • Client wins: Unicaja Bank modernization leveraging GenAI; German automotive supplier SAP consolidation; strategic Boomi partnership to drive AI-driven integration automation .
  • CFO on profitability optics: reclassification between COGS and SG&A expanded non-GAAP gross margin by 140 bps and increased SG&A by 230 bps; adjusted EBIT remains clearest profitability lens near term .
  • H2 setup: CES trailing 12-month B2B ~1.2 expected to translate into improving revenue in H2 FY26 and FY27; GIS large deals deferred but expected to close .

Q&A Highlights

  • Free cash flow confidence: working capital improvements and potential modest benefit from tax legislation not yet in the guide; reiterated ~$600M FY26 FCF .
  • Bookings/pipeline: strong non-mega pipeline (<$100M) across CES; opportunity to expand TTM book-to-bill again in Q2 .
  • Macro and guidance posture: FY26 -3% to -5% organic decline guide leaves room for worsening macro; no deterioration observed; CES declines expected to narrow through year .
  • Insurance dynamics: backlog-heavy revenue coverage; bookings below 1.0x not tightly linked to near-term revenue; SaaS transition not material yet but strategic planning underway .
  • Contracts/margins: approach renewals to improve pricing/terms rather than exit; better win rates and proactive solutioning to drive mix shift .
  • AI impact: additive to demand; current coding gains offset by higher QA/testing requirements; focus on replicable AI frameworks with industry hooks .

Estimates Context

  • Q1 FY26 results modestly missed Wall Street consensus on revenue ($3.167B*) and normalized EPS ($0.697*) despite beating internal guidance; DXC highlighted execution progress and raised FY26 revenue/EPS guidance .
  • Estimate implications: CES bookings strength suggests potential H2 EPS upside if conversion accelerates; GIS deferred deals closing would support top-line; Insurance margin recovery is a watch item given bookings softness .
    Values with asterisk (*) retrieved from S&P Global.

Key Takeaways for Investors

  • Guidance-positive quarter: Raised FY26 revenue and non-GAAP EPS guidance despite modest Street misses; internal execution and FX tailwinds underpin outlook .
  • Bookings quality improving: Three consecutive quarters of double-digit bookings and higher win rates in CES/GIS; watch Q2 bookings breadth and closure of deferred GIS deals .
  • AI differentiation building: Recognitions and scale of internal readiness support narrative; look for revenue translation via proactive solutioning and replicable frameworks in H2/FY27 .
  • Margin cadence: Expect back-half margin improvement; adjusted EBIT remains best profitability indicator amid reclassification effects .
  • Segment focus: Monitor CES backlog conversion, GIS stabilization, and Insurance margin recovery (bookings down 19% YoY); Insurance SaaS transition timeline still to be unveiled .
  • Cash return/ balance sheet: FCF of $97M in Q1; plan to repurchase ~$150M in FY26; ongoing debt/lease reductions strengthen flexibility .
  • Trading setup: Near-term catalysts include Q2 bookings/TTM B2B expansion and deferred GIS deals; narrative momentum from AI and improved win rates vs valuation depends on delivering H2 revenue inflection in CES .