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UNISYS CORP (UIS)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 revenue was $460.2M, down 7.4% YoY and below Wall Street consensus ($493.7M*) as license & support (L&S) renewals slipped into early Q4; non-GAAP diluted EPS was $(0.08), below consensus $0.01* .
  • Gross margin fell to 25.5% (–370 bps YoY) largely on L&S timing; adjusted EBITDA was $48.2M with a 10.5% margin (vs. 15.5% in Q3 2024) .
  • Guidance cut: FY25 constant-currency revenue growth lowered from (1)%–+1% to (4)%–(3)%; non-GAAP operating margin reiterated at 8%–9% (L&S assumption ~$430M) .
  • A non-cash pension annuity settlement produced a $227.7M GAAP settlement loss (net of tax); management emphasized continued liquidity strength and expects ~$110M pre-pension free cash flow for FY25 .

Values marked with * are from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • L&S remained a “cash generation engine” with strong retention and consumption; company raised out-year L&S outlook to ~$400M average annual for 2026–2028 (“strong client retention and consumption”) .
  • Ex-L&S gross margin improved 70 bps YoY to 18.6%, reflecting operational efficiency and workforce optimization gains .
  • TCV grew 15% YoY to $415M in Q3, driven by renewals; backlog held at $2.83B (vs. $2.80B in Q3 2024) .

Selected quote: “We are seeing momentum in our newer AI solutions… expect to support continued successful expansion of our Ex-L&S gross margin.” — CEO Michael Thomson .

What Went Wrong

  • Top-line missed consensus and declined YoY; ECS gross margin fell sharply (46.2%, –1,200 bps YoY) due to L&S renewal timing; total gross margin down 370 bps YoY .
  • CFO cited elongated public-sector decision cycles and PC cycle weakness; DWS and CA&I revenues declined YoY (–4.3% and –4.8% respectively) .
  • Pricing pressure intensified on renewals with competitors undercutting; management is prioritizing profitability over low-margin contracts .

Financial Results

Key metrics vs prior periods and estimates

MetricQ3 2024Q1 2025Q2 2025Q3 2025Consensus (Q3 2025)
Revenue ($M)497.0 432.1 483.3 460.2 493.7*
GAAP Diluted EPS ($)(0.89) (0.42) (0.28) (4.33) —
Non-GAAP Diluted EPS ($)(0.10) (0.05) 0.19 (0.08) 0.01*
Gross Margin (%)29.2% 24.9% 26.9% 25.5% —
Adjusted EBITDA ($M)77.0 40.2 61.4 48.2 66.1*
Adjusted EBITDA Margin (%)15.5% 9.3% 12.7% 10.5% —
Non-GAAP Operating Margin (%)9.9% 2.8% 7.6% 5.4% —

Values marked with * are from S&P Global.

Segment breakdown (Revenue and Gross Profit %)

SegmentQ3 2024 Revenue ($M)Q3 2024 GP %Q3 2025 Revenue ($M)Q3 2025 GP %
Digital Workplace Solutions (DWS)130.9 16.3% 125.3 16.2%
Cloud, Applications & Infrastructure (CA&I)189.4 19.5% 180.4 19.6%
Enterprise Computing Solutions (ECS)154.0 58.2% 133.2 46.2%
Other22.7 —21.3 —

KPIs and cash flow

KPIQ3 2024Q3 2025
Total Contract Value (TCV) – Total ($M)362 415
TCV – Ex-L&S New Business ($M)174 124
TCV – Ex-L&S Renewals ($M)96 230
TCV – L&S Renewals ($M)92 61
Backlog ($B)2.80 2.83
Cash from Operations ($M)32.0 38.0
Free Cash Flow ($M)14.2 19.9

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue growth (constant currency)FY 2025(1.0)% to +1.0% (4.0)% to (3.0)% Lowered
Non-GAAP Operating MarginFY 20258.0% to 9.0% 8.0% to 9.0% Maintained
L&S Revenue AssumptionFY 2025~$430M ~$430M Maintained
Pre-Pension Free Cash FlowFY 2025~$110M ~$110M Maintained
Q4 L&S Revenue (assumption)Q4 2025—$185M–$190M New detail

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 and Q2)Current Period (Q3)Trend
AI/Technology-led deliverySEA and agentic AI POCs; DSS pipeline; ClearPath Forward 2050 strategy ~40% virtual-agent deflections; content auto-generation; Apple reseller; private AI frameworks Scaling; deepening partnerships
Public sector demandMuted state/local; delays; cautious CA&I (Q1/Q2) U.S. shutdown concerns; project work pause expected to persist for “a couple of quarters” Persistent headwind
L&S consumption and outlookRaised FY25 L&S to ~$430M; discuss $400M 2026 Reaffirm ~$430M FY25; out-years avg ~$400M (2026–2028); Q4 concentration Stable-to-positive
Pricing pressureCompetitive renewals; discipline on margins More undercutting; willing to let low-value contracts go Intensifying; disciplined stance
PC cycle and hardware timingWindows 11 upgrade tailwinds; accelerated PC hardware in Q2 Windows 10 support extension dampened refresh; some hardware shifted QoQ Mixed; timing effects
Pension strategy$250M discretionary contribution; derisked volatility Annuitized ~$320M liabilities; GAAP settlement loss; path to remove ~$600M by end 2026 Executing removal plan

Management Commentary

  • Strategy: “We’re building momentum in our AI-led solutions with technology-first delivery models… making us more competitive… supporting our margins.” — CEO Michael Thomson .
  • L&S strength: “We are on track to meet our increased L&S expectations of $430 million… supported by strong retention and consumption.” — CEO Michael Thomson .
  • Profit/FCF focus: “We remain on track to achieve our non-GAAP operating margin guidance of 8% to 9% and continue to expect more than $100 million of pre-pension… free cash flow.” — CFO Deb McCann .
  • Liquidity: “Undrawn asset-backed revolver and no major debt maturity until 2031” — CFO Deb McCann .
  • Public sector outlook: “The green shoots… in Q2 have really subsided… we expect that is going to continue for a couple of quarters.” — CEO Michael Thomson .

Q&A Highlights

  • AI impact on P&L: AI lowers delivery costs and improves margins; some top-line pressure from sharing savings with clients; L&S consumption uplift attributed to AI-driven data/compute usage .
  • Margin resilience despite revenue shortfall: Higher L&S mix and renewal scope expansion at better margin; SG&A cuts accelerated into 2025 .
  • Public sector timing: U.S. shutdown concerns prolong project pauses; non-discretionary areas still active; recovery unlikely to be immediate .
  • Pricing dynamics: Increased undercutting by competitors; management prioritizes profit dollars and margin over low-price renewals .
  • L&S timing shift detail: ~$12M L&S renewal slipped a few days into Q4; no impact to full-year .

Estimates Context

  • Q3 2025 revenue missed consensus by ~$33.5M ($460.2M vs $493.7M*) and non-GAAP EPS missed by ~$$0.09 ($(0.08) vs $0.01*) .
  • EBITDA consensus $66.1M* vs reported adjusted EBITDA $48.2M; gross margin and ECS mix were pressured by renewal timing .

Values retrieved from S&P Global.

Key Takeaways for Investors

  • Revenue guidance cut highlights persistent demand softness in Ex-L&S (notably U.S. public sector) and timing shifts; model FY25 revenue at (4)%–(3)% in CC and a stronger Q4 L&S contribution .
  • Profitability intact: Non-GAAP operating margin 8%–9% reiterated; Q4 margin expected mid-teens on L&S concentration—focus on cash conversion and margin mix over headline growth .
  • L&S durability is a central pillar: FY25 ~$430M and out-year ~$400M average (2026–2028) with 70% margins—anchor assumptions on consumption trends rather than renewal timing .
  • Pension derisking is progressing: Annuitized ~$320M liabilities with non-cash GAAP settlement loss; path to remove ~$600M by end-2026 reduces future contribution volatility .
  • Near-term trading lens: Watch Q4 execution on L&S signings/collections and any further public-sector project delays; management flagged potential continued headwinds for “a couple of quarters” .
  • Pricing discipline: Expect occasional revenue attrition on renewals where economics are unfavorable; margin and cash flow remain management’s priority .
  • Operational levers: AI-led delivery, workforce optimization, and SG&A reductions are supporting Ex-L&S margins despite macro; monitor Ex-L&S GM trajectory (+70 bps YoY in Q3) .

Additional Notes and Sources

  • Q3 2025 press release and 8-K financials and guidance .
  • Q3 2025 earnings call transcript for qualitative commentary and guidance color .
  • Prior quarters for trend analysis: Q2 2025 8-K/call ; Q1 2025 8-K/call .
  • Other relevant Q3 period press releases: European Commission cybersecurity award (framework coverage for 71 EU entities) .

Values marked with * are from S&P Global.