DXC Technology Co (DXC)·Q4 2025 Earnings Summary

Executive Summary

• Q4 FY25 revenue $3.17B (-6.4% YoY; -4.2% organic) and non-GAAP EPS $0.84; revenue and EPS modestly exceeded S&P Global consensus, while adjusted EBIT margin contracted YoY to 7.3% as DXC invested in sales/marketing and people . Consensus: EPS $0.77 vs actual $0.84; revenue $3.13B vs $3.17B (S&P Global)*.
• Bookings momentum continued: book-to-bill 1.22x (vs 0.94x LY) with bookings up >20% YoY; second straight quarter >1.0x and second-half book-to-bill 1.28x, building future revenue visibility .
• FY26 outlook calls for another transition year: organic revenue -3% to -5%, adjusted EBIT margin 7%–8%, non-GAAP EPS $2.75–$3.25, FCF ~$600M, and Q1 FY26 revenue -4% to -5.5% organic with 6%–7% adj. EBIT margin .
• Strategic narrative: leadership deepening go-to-market rebuild (22 senior hires), re-segmenting reporting in FY26, restarting share repurchases ($150M plan), highlighting early GenAI wins (e.g., Carnival infrastructure win; AI Workbench with Ferrovial) as catalysts for medium-term inflection .

What Went Well and What Went Wrong

• What Went Well

  • Bookings strength and quality: second consecutive quarter >20% bookings growth; book-to-bill 1.22x, with GIS bookings +33% YoY and CES pipeline skewing to longer, strategic enterprise apps and data/AI engagements .
  • Disciplined cost execution: full-year adj. EBIT margin expanded 50 bps to 7.9% and FY25 FCF $687M (above ~$625M raised guide), deleveraging net debt by ~$785M YoY; Q4 non-GAAP gross margin 24.2% despite investments .
  • Strategic wins and AI positioning: Carnival chose DXC to manage critical infrastructure after a 12-vendor competition on capability (not price), and AI Workbench is scaling at Ferrovial with 30+ AI agents deployed .

• What Went Wrong

  • Topline pressure and margin mix: Q4 revenue -6.4% YoY; adj. EBIT margin 7.3% vs 8.4% LY, reflecting higher SG&A (11.3%) and investment in sales/people; non-GAAP EPS down 13.4% YoY to $0.84 .
  • Segment profitability down: GBS margin 10.9% (↓240 bps YoY) on insurance investments; GIS margin 7.0% (↓50 bps YoY) as workforce investments continued .
  • Macro/pipeline softness in discretionary projects: signs of weaker demand in consumer/retail and media/entertainment projects < $5M; FY26 guide implies organic decline (-3% to -5%) and Q1 seasonality .

Financial Results

Segment profitability (profit and margin)

Offerings revenue detail

KPIs

Estimates vs Actuals (S&P Global)

Values marked with * retrieved from S&P Global.

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• Strategy and bookings: “We are gaining momentum with bookings up more than 20% resulting in a book-to-bill ratio of 1.2... Reversing 8 consecutive years of revenue decline remains the highest priority” — Raul Fernandez, CEO .
• Sales engine rebuild: “We developed strict quantitative performance criteria... completed a quota deployment audit... and onboarded our first Chief Revenue Officer” .
• GenAI positioning: “It’s very early... but we are very well positioned... our insight into customers’ data, infrastructure, people and process readiness is incredibly valuable” .
• Carnival win: “We competed against 12 others... we won across the board on all the key metrics... it wasn’t down on price, it was on capability” .
• Investment and margins: “Adjusted EBIT margin was 7.3%... performance was driven by investments in our employee base, improving the capability of our sales force and investments in marketing... and IT” — Rob Del Bene, CFO .
• Capital return and FY26 priorities: “We will restart our share repurchase program... plan to return $150 million to shareholders in fiscal 2026” .

Q&A Highlights

• Demand/Pipeline mix: Softness in consumer/retail and media in project-based services < $5M; strategic ($5–$100M) pipelines “really solid” across banking, capital markets, manufacturing, public sector, insurance .
• Pricing: Pricing “very stable”; mega-deal renewals improving .
• CES bookings duration: Shift to longer-duration strategic enterprise apps/data & AI projects extends revenue conversion timing .
• Free cash flow bridge: FY26 FCF ~$600M bridges from FY25 with after-tax EBIT change and ~$30M higher restructuring; underlying FCF consistency emphasized .
• Guidance risk bands: Wider Q1 range (-4% to -5.5% organic) leaves room at low end for uncertainty; similar caution in FY26 range .
• Re-segmentation: FY26 to report Insurance Services & Software; Consulting & Engineering Services; and GIS (Cloud/ITO, Modern Workplace, Security, horizontal BPO) .

Estimates Context

• Against S&P Global consensus, Q4 FY25 revenue and EPS were modest beats: revenue $3.17B vs $3.13B*, EPS $0.84 vs $0.77*; beats driven by bookings strength and efficiency offsets, partially tempered by higher SG&A and growth investments .
• Given FY26 guide (organic -3% to -5%; adj. EBIT 7%–8%), Street likely revisits revenue trajectories (longer-duration bookings → delayed revenue) and EPS to reflect ongoing reinvestment and Q1 seasonality .
  Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

• Bookings momentum is real (two quarters >1.0x B2B) and broad-based, but conversion will be slower given the mix shift to longer, more complex CES projects; near-term revenue remains pressured .
• Investment cycle is weighing on quarterly margins (Q4 adj. EBIT 7.3% vs 8.4% LY) as DXC rebuilds sales/marketing and talent; management is prioritizing durable growth over near-term margin expansion .
• FY26 is a transition year with organic declines and steady margins; second-half seasonal FCF strength and a $150M buyback provide support while the pipeline matures .
• GenAI narrative is strengthening with credible client references (Ferrovial Workbench; Carnival infrastructure win) and a growing enterprise apps/data & AI bookings mix—key to medium-term differentiation .
• Watch demand in consumer/retail and media (project-based softness) and tariff/macro uncertainty into Q1; pricing remains stable, a positive for renewals and mega-deal economics .
• The new FY26 segment disclosure (Insurance; CES; GIS) should improve transparency on growth/profit pools; insurance remains structurally resilient with mid-single-digit trajectory asserted for FY26 .
• Full-year FY25 execution improved the balance sheet and FCF; with net debt down and cash up, DXC has flexibility to invest and return capital while targeting a medium-term revenue inflection .

Additional documents referenced during Q4 window:

• CEO/CFO employment extensions with performance-linked equity through FY28 (alignment with FCF, revenue, TSR) .
• AI Workbench launch with Ferrovial as anchor client (30+ AI agents at scale) .
• Collaboration with SAP and Microsoft to accelerate SAP modernization on Azure (DXC Complete) .