Sign in

You're signed outSign in or to get full access.

DT

DXC Technology Co (DXC)·Q2 2026 Earnings Summary

Executive Summary

  • Q2 FY26 revenue was $3.16B, down 2.5% YoY (organic -4.2%); Non-GAAP EPS came in at $0.84 and GAAP EPS at $0.20, as adjusted EBIT margin reached 8.0% and GAAP EBIT margin 4.4% .
  • Wall Street consensus was beaten on EPS (actual $0.84 vs $0.70*), while revenue was roughly in line/slightly below (actual $3.161B vs $3.167B*); EBITDA missed (actual $422M* vs $445M*) — a modest positive surprise on earnings but mixed on top line and EBITDA. Values retrieved from S&P Global.
  • FY26 guidance was refined: revenue range tightened to $12.67–$12.81B (organic -4.5% to -3.5%), free cash flow raised to ~$650M (from $600M), while adjusted EBIT margin (7–8%) and Non-GAAP EPS ($2.85–$3.35) were maintained; Q3 FY26 guide set at revenue $3.18–$3.22B, adj. EBIT margin 7–8%, Non-GAAP EPS $0.75–$0.85 .
  • Management emphasized the “Core Track” and “Fast Track” strategy and launched the Xponential AI framework; pipeline is robust with TTM book-to-bill >1.0 (1.08x), and buybacks continued ($75M in Q2), supporting investor confidence in free cash flow and capital return cadence .

What Went Well and What Went Wrong

What Went Well

  • Adjusted EBIT margin (8.0%) and Non-GAAP EPS ($0.84) exceeded guidance, reflecting disciplined cost management and operating execution; free cash flow was strong at $240M, up $192M YoY .
  • Strategic narrative progressed: formalized two-track operating model (Core vs Fast Track), unveiled Xponential AI blueprint to move clients from pilots to scaled outcomes; early client case studies referenced in press communications and call .
  • TTM book-to-bill remained above 1.0 (1.08x), supporting medium-term revenue trajectory; Q3 book-to-bill expected to exceed 1.0, with CFO citing a robust pipeline of large opportunities .

Management quotes:

  • “We delivered Adjusted EBIT margin and Non-GAAP diluted EPS above our guidance and generated very strong free cash flow” – Raul Fernandez .
  • “We continue to have a strong pipeline and anticipate a third-quarter book-to-bill ratio greater than one” – Rob Del Bene .

What Went Wrong

  • Revenue and bookings undershot internal expectations; book-to-bill was 0.85x in Q2 with slower conversion, particularly in discretionary custom application projects (CES) and longer sales cycles in GIS .
  • Segment margins compressed YoY in Insurance (8.8% vs 12.1%) and CES (11.6% vs 13.7%) as DXC invested in cloud-based software, AI-enabled applications, and advisory capabilities; adjusted EBIT margin declined YoY by ~60 bps .
  • Non-GAAP EPS declined YoY (from $0.93 to $0.84), primarily on lower adjusted EBIT and higher taxes, despite cost actions and share count benefits .

Financial Results

Consolidated Results vs Prior Periods

MetricQ2 FY25 (Sep 30, 2024)Q4 FY25 (Mar 31, 2025)Q1 FY26 (Jun 30, 2025)Q2 FY26 (Sep 30, 2025)
Revenue ($B)$3.241 $3.169 $3.159 $3.161
GAAP Diluted EPS ($)$0.23 $1.43 $0.09 $0.20
Non-GAAP Diluted EPS ($)$0.93 $0.84 $0.68 $0.84
Adjusted EBIT Margin (%)8.6% 7.3% 6.8% 8.0%
GAAP EBIT Margin (%)3.4% 11.0% 2.4% 4.4%

Segment Breakdown

SegmentQ1 FY26 Revenue ($M)Q1 FY26 Segment Margin (%)Q2 FY26 Revenue ($M)Q2 FY26 Segment Margin (%)Q2 FY26 YoY Organic Growth (%)
Consulting & Engineering Services (CES)$1,246 8.4% $1,255 11.6% -3.4%
Global Infrastructure Services (GIS)$1,600 6.1% $1,586 7.7% -6.3%
Insurance Services$313 10.5% $320 8.8% +3.6%

KPIs and Cash Flow

KPIQ1 FY26Q2 FY26
Bookings ($B)$2.8 $2.7
Book-to-Bill (x)0.90x 0.85x (TTM 1.08x)
Cash from Operations ($M)$186 $409
Free Cash Flow ($M)$97 $240
Share Repurchases ($M)$50 $75

Actuals vs Consensus Estimates (S&P Global)

MetricConsensusActualSurprise
Primary EPS ($)$0.70*$0.84 Beat*
Revenue ($B)$3.167*$3.161 ~Inline/Miss*
EBITDA ($M)$445*$422*Miss*

Values retrieved from S&P Global.
Number of estimates: Revenue (8); EPS (9).

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenue ($B)FY26$12.61–$12.87 $12.67–$12.81 Narrowed; midpoint slightly improved
Organic Revenue YoY (%)FY26-5.0% to -3.0% -4.5% to -3.5% Raised (less negative)
Adjusted EBIT Margin (%)FY267.0%–8.0% 7.0%–8.0% Maintained
Non-GAAP Diluted EPS ($)FY26$2.85–$3.35 $2.85–$3.35 Maintained
Free Cash Flow ($M)FY26~$600 ~$650 Raised
Net Interest Expense ($M)FY26~$60 $55 Lowered
Non-GAAP Tax Rate (%)FY26~35% ~37% Raised
FX Assumptions ($/€)FY261.15 1.16 Updated
Total Revenue ($B)Q3 FY26—$3.18–$3.22 New
Adjusted EBIT Margin (%)Q3 FY26—7.0%–8.0% New
Non-GAAP Diluted EPS ($)Q3 FY26—$0.75–$0.85 New
Segment Guide (Qualitative)FY26—CES low-single-digit decline; GIS mid-single-digit decline; Insurance mid-single-digit growth New
DividendFY26—Not disclosedN/A

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 FY25 and Q1 FY26)Current Period (Q2 FY26)Trend
AI/Technology initiativesBuilding replicable AI solutions; early ROI proof points; investments in sales/marketing and innovation Formalized Core/Fast Track; launched Xponential AI blueprint; examples across financial services (Core Ignite), GIS (Oasis) Accelerating from pilot to product; clearer framework and targets
Bookings/PipelineQ4: Book-to-bill 1.2x; bookings +20% YoY; TTM >1.0x ; Q1: bookings +14% YoY; B2B 0.90x Q2: bookings +2.4% YoY; B2B 0.85x; TTM 1.08x; expect >1.0x in Q3 Robust pipeline but slower near-term conversion; improvement expected
Pricing/macroPricing stable; widened guide ranges to reflect macro uncertainty Pricing remains stable; guide assumes no major macro shifts Stable pricing; macro-neutral plan
Insurance SaaS/R&D executionInsurance grew mid-single digits; investments continuing SaaS portfolio expanded from 30 to 45; plans to double SaaS revenue in each of next two years Increased investment; growth focus
GIS operationsCost optimization in software/data center; bookings strength Best two quarters of uninterrupted service; large-deal pipeline building; Oasis pilots upcoming Operational strength; productization
Working capital/FCFFY25 FCF $687M; FY26 guide ~$600M FY26 FCF raised to ~$650M; cadence more balanced; aided by working capital and tax legislation Strengthening FCF outlook

Management Commentary

  • Strategic focus: “Fast Track solutions have a goal to be 10% of our business within 36 months… highly replicable and built on proprietary methodologies” – Raul Fernandez .
  • AI productization: “We’re building our AI-powered orchestration platform… expect to introduce the Oasis platform to the broader marketplace in H1 calendar 2026” – Rob Del Bene .
  • Pipeline/confidence: “We continue to have a strong pipeline and anticipate a third-quarter book-to-bill ratio greater than one” – Rob Del Bene .
  • Investment rationale: “Adjusted EBIT margin… above the high end of our guidance… reflecting disciplined cost management… impact of increased investment levels is visible in Insurance Services and CES segment margins” – Rob Del Bene .
  • Internal AI adoption: “As client zero, we are using existing and emerging AI across all corporate functions… this script was written by Raul Fernandez but delivered by my custom AI-generated voice model” – Raul Fernandez .

Q&A Highlights

  • CES trajectory and bookings: Management expects CES momentum to pick up into Q4 FY26, with robust pipeline and longer-duration strategic projects; execution focus remains on Core and Fast Track motions .
  • GIS pipeline and operational metrics: Large-deal pipeline building with longer cycles; improved customer scores and lower churn; upcoming Oasis pilots to reposition DXC as an AI-infused managed services partner .
  • Free cash flow sustainability: Working capital improvements and lower cash taxes are expected to sustain better FCF; CapEx pace similar to H1, opportunistic investment as warranted .
  • Pricing and win rates: Pricing remains stable across quarters; win rates stable QoQ; ongoing sales capability rebuilding .
  • Workforce and AI agents: Transitioning labor model to “diamond” structure with AI agents at the base; upskilling workforce to move up the value chain .

Estimates Context

  • EPS beat should drive near-term positive revision bias on earnings; revenue roughly in line/slight miss and EBITDA miss may temper enthusiasm on margin trajectory. Consensus EPS $0.70* vs actual $0.84; revenue $3.167B* vs $3.161B; EBITDA $445M* vs $422M*. Values retrieved from S&P Global.
  • Estimate dispersion modest (EPS: 9 estimates; revenue: 8), consistent with limited near-term visibility on project-based demand and longer deal cycles [GetEstimates].

Key Takeaways for Investors

  • Near-term execution: EPS beat and stronger-than-expected free cash flow ($240M in Q2; FY26 FCF raised to ~$650M) support capital returns and deleveraging; buybacks at $75M in Q2 with $467M authorization remaining .
  • Top line: Revenue stable sequentially (~$3.16B) with YoY decline consistent with the last several quarters; pipeline strength and TTM book-to-bill >1.0 underpin medium-term improvement prospects .
  • Margin outlook: Adjusted EBIT margin at 8.0% above guide, but segment margins compressed YoY due to higher investment; focus remains on cost discipline while funding AI/product initiatives .
  • Guidance mix: FY26 revenue range refined and FCF raised; tax rate guidance increased to ~37% and net interest expense lowered to $55M, modestly supportive to EPS within the maintained $2.85–$3.35 range .
  • Strategic catalysts: Xponential blueprint, CES Core Ignite, and GIS Oasis pilots are medium-term product catalysts; watch Q3 book-to-bill and early client wins for validation .
  • Trading lens: Positive EPS surprise and higher FCF guide are bullish near-term; offset by bookings softness and EBITDA miss; monitor Q3 >1.0x book-to-bill and segment-level margin traction as stock reaction drivers [GetEstimates].
  • Risk checks: Discretionary project pressure (CES), longer GIS deal cycles, and higher non-GAAP tax rates may cap upside until conversion improves; pricing remains stable, reducing immediate margin compression risk .

Notes: Values retrieved from S&P Global where indicated with an asterisk.