DXC Cuts Revenue Outlook To A 5% To 5.5% Decline, And Its CEO Calls Some Lost Deals 'Self-Made'
The IT services company cut its full-year outlook after second-quarter bookings fell 10%, and its CFO said Americas competition has stiffened.
DXC Technology, which provides IT services and insurance software to large global companies and public sector organizations, now expects full-year organic revenue to fall 5% to 5.5%, CFO Rob Del Bene said on the company's earnings call Thursday. CEO Raul Fernandez told analysts on the same call that some deals DXC failed to convert were "self-made."
Bookings missed, guidance followed
Second-quarter revenue was $3 billion, down 4% and above the top of guidance, Del Bene said. Adjusted EBIT margin was 6.2%, down 180 basis points (1.8 percentage points), and non-GAAP earnings per share were $0.67, against $0.84 a year earlier.
The book-to-bill ratio, new orders relative to revenue, was 0.8, with bookings down 10% from a year earlier. Del Bene said the pipeline had looked robust coming into the quarter, and the decline was sharpest in the Americas and the UK and Ireland.
About two-thirds of the guidance cut reflects second-quarter bookings that never arrived, Del Bene said. The remaining third comes from assuming the lower conversion rates carry into the third and fourth quarters. He split the reduction roughly evenly between Global Infrastructure Services and Consulting & Engineering Services.
DXC now expects adjusted EBIT margin of 5.75% to 6.25%, non-GAAP EPS of $2.25 to $2.50 and free cash flow of about $600 million. For the third quarter it expects organic revenue to fall about 6%.
Competition, caution and two-year deals
Del Bene said competition in the Americas "has stiffened," visible in win rates. Smaller project deals, mostly in financial services and retail, have slipped or dropped out of the pipeline, while the large deals deferred in the UK public sector are still being negotiated. Pricing data is relatively stable, slightly down, he said.
Fernandez said customers are asking whether to use an agentic approach (software that acts on its own) rather than a traditional vendor, which lengthens sales cycles. Some are choosing a two-year deal over a five-year one, he said.
Asked by a Guggenheim analyst whether DXC is losing share, Fernandez said some unconverted deals are "self-made" and "absolutely go-to-market imperfections" the company is clarifying. He said new president Paul Taylor, in the role two months, is focused on removing friction and improving sales execution, and will join the next call.
A $150 million gap and next year's costs
Fernandez cast the shortfall against a $12 billion backdrop, calling it a run-rate gap of about $150 million. "We just have to execute better," he said.
Del Bene said DXC raised its cost-reduction target this year and is evaluating deeper steps for fiscal 2028, though it is premature to give specifics. Backlog erosion is in line with historical levels, he told a TD Cowen analyst.
Fernandez also confirmed ongoing discussions about a possible sale of the insurance business, declining to take further questions on it. Insurance revenue grew 23%, helped by a one-time contract modification, and the company raised its insurance growth outlook to mid-single digits.
Taylor is due to lay out his initiatives on DXC's next earnings call.
Sources
- DXC Technology Company. (DXC) Q2 Earnings and Revenues Beat Estimates — Yahoo Finance
- DXC Technology Company Non-GAAP EPS of $0.67 beats by $0.12, revenue of $3.03B beats by $30M (DXC:NYSE) — seekingalpha.com
- DXC Technology Company (DXC) Stock Price, News, Quote & History - Yahoo Finance — Yahoo Finance
- Sime Darby sells global services centre to DXC Technology — The Edge Malaysia
- DXC Technology Reports Second Quarter Fiscal Year 2027 Results — prnewswire.com
