Earnings

DXC's Insurance Revenue Jumped 23.1%, But A Contract Change Helped — And Consulting Goodwill Has 13% Cushion

DXC's growth unit got a lift from a favorable contract modification, while its Consulting unit's goodwill test cleared by 13%.

DXC Technology's insurance software unit grew revenue 23.1% on an organic basis last quarter, and the company's 10-Q says that figure includes a favorable contract modification signed during the quarter. The same filing shows the Consulting & Engineering Services unit passed its goodwill test with fair value only 13% above carrying value.

A contract change flatters Insurance

DXC, which provides IT services and software to large global companies and public sector organizations, reported Insurance revenue of $394 million for the second quarter of fiscal 2027. Segment profit rose 60.7% to $45 million, a margin of 11.4%.

The prior quarter looks very different. DXC's first-quarter filing showed Insurance growing 1.4% organic, so the 23.1% quarter is a sharp break from that trend. For the first six months, Insurance organic growth was 12.4%.

The same customer contract change left marks elsewhere: the company wrote off transition and transformation costs once, hitting cost of services, and sped up software amortization as a single event. Insurance book-to-bill, a measure of new awards against revenue, was 0.79x, up from 0.68x a year earlier.

Thin cushion under Consulting goodwill

In its annual test as of July 1, 2026, DXC found the Consulting unit's fair value exceeded carrying value by 13%. The unit carries $378 million of goodwill, and the company says a significant unfavorable change in revenue growth rates in its forecasts could force an impairment charge later.

That unit's revenue fell 3.3% on an organic basis in the quarter, to $1,213 million, and segment profit fell 13.8% to $125 million. Insurance goodwill of $149 million also passed the test. DXC found no signs requiring an interim test as of September 30.

The shrinking core

Total revenue was $3.0 billion, down 4.0% organically. Global Infrastructure Services, the largest segment, fell 10.0% to $1,427 million, with segment profit down 45.9%. Diluted earnings per share were $0.15, against $0.20 a year earlier.

Remaining performance obligations, the contracted revenue yet to be recognized, stood at about $15.8 billion at September 30. DXC repurchased about 5.7 million shares for $60 million in the quarter.

On its earnings release, the company guided third-quarter revenue down about 6.0% organically and acknowledged ongoing discussions regarding a possible sale of its insurance business. CEO Raul Fernandez said "our core revenue recovery will take time."

DXC's market value was $2.4 billion at the time of the original report, and the company's guidance calls for third-quarter revenue to fall about 6.0% without another contract tailwind.