What DXC Technology (DXC) Said on Its Q2 Earnings Call

Key Points

• DXC exceeded quarterly guidance with $3 billion in revenue, but revenue fell 4% year over year, adjusted EBIT margin declined to 6.2%, and bookings dropped 10% as deal timing and weaker pipeline conversion hurt performance.
• The company cut its fiscal 2027 outlook, now expecting organic revenue to decline 5% to 5.5%, adjusted EBIT margin of 5.75% to 6.25%, and non-GAAP EPS of $2.25 to $2.50.
• DXC remains in discussions about a potential insurance-business sale, while its insurance SaaS operations and AI initiatives showed momentum, including strong Assure adoption and increased use of its OASIS agentic platform.

DXC Technology NYSE: DXC reported second-quarter fiscal 2027 results above its guidance range, but lowered its full-year outlook after weaker-than-expected bookings and pipeline conversion in its core business. The company also confirmed it is in ongoing discussions related to a possible sale of its insurance business, though management declined to provide further details.

Chief Executive Officer Raul Fernandez said the company and its board remain focused on multiple avenues for shareholder value creation, including improving its core operations, expanding agentic and artificial intelligence-based offerings, and evaluating strategic portfolio actions.

“We have more work to do, particularly in improving sales execution and stabilizing revenue in our core business,” Fernandez said. “That remains a priority, and we are not satisfied with our current performance.”

Quarterly Results Exceed Guidance

DXC reported total revenue of $3 billion in the fiscal second quarter, down 4% year over year but above the high end of its guidance range. Adjusted EBIT margin was 6.2%, down 180 basis points from a year earlier, while non-GAAP diluted earnings per share fell to $0.67 from $0.84 in the prior-year quarter.

Chief Financial Officer Rob Del Bene said the quarter included a one-time contract modification in the insurance business that had not been included in guidance. Excluding that item, revenue was within the company’s guided range and adjusted EBIT margin and earnings per share were in line with expectations.

The company’s quarterly book-to-bill ratio was 0.8, while its trailing 12-month book-to-bill ratio remained 1.0. Bookings declined 10% year over year, however, as large-deal timing and lower conversion of project-based services opportunities weighed on performance.

Del Bene said the weaker bookings were especially pronounced in the Americas and the United Kingdom and Ireland. In UKI, some larger public-sector deals were deferred but remain in the pipeline and under negotiation, he said. In the Americas, smaller project-based opportunities in financial services and retail were delayed, slipped or, in some cases, dropped out of the pipeline.

DXC said its pricing data remained relatively stable, though win rates declined during the quarter. Fernandez said clients are reassessing traditional technology projects as they consider whether agentic AI approaches could offer an alternative, adding time to decision cycles. Some customers are also opting for shorter contract terms amid uncertainty about how technology may evolve.

Segment Performance and Insurance Momentum

Customer Experience Services, or CES, revenue declined 3.3% year over year, consistent with the company’s guidance and recent trends. Enterprise Application Services and GrowthX continued to grow, while DXC’s custom applications business remained under pressure. Engineering services showed momentum, supported by an expanding pipeline and year-over-year bookings growth.

CES recorded a 0.79 book-to-bill ratio, as bookings declined 17% year over year, primarily due to Enterprise Application Services. Global Infrastructure Services, or GIS, posted a 0.8 book-to-bill ratio and a 13% reduction in bookings. GIS revenue declined 10%, slightly below DXC’s expectations, amid delayed large deals and weakness in project-based services.

The insurance business reported revenue growth of 23% year over year, driven by the one-time contract modification. Excluding that modification, underlying insurance revenue was consistent sequentially, as growth in recurring software revenue offset the wind-down of a business-process-services contract expected to conclude in the fourth quarter.

DXC said its SaaS insurance business, which includes the Assure platform, Horizon solutions and AI-based Smart Apps, grew at a strong double-digit rate. Customer adoption of the Assure platform surpassed 275 enterprise insurance accounts. The company sold its first Smart App during the quarter, and its Smart Apps pipeline increased more than 20% from the prior quarter.

AI Offerings and Commercialization Efforts

Fernandez emphasized DXC’s effort to convert its AI engineering capabilities into commercial growth. Since June, more than 5,700 employees have earned AI certifications, according to the company. DXC is developing expertise across platforms including Amazon, Microsoft Copilot, 7AI, Anthropic and ElevenLabs.

The company announced its first large GrowthX win with a global banking institution, which will use DXC’s Modernization as a Service offering to modernize a mission-critical core banking system and move toward the cloud. The offering combines DXC’s AI-powered modernization platform and delivery factory with Anthropic’s Claude model to identify and document business rules embedded in legacy systems.

DXC also said utilization of its OASIS agentic platform rose sixfold from the prior quarter as it expanded agent capabilities and increased the number of production workflows. The company introduced DXC Workplace Services, an AI-native workplace offering enabled by OASIS, and said patch management has emerged as a key use case. DXC is currently running two pilots with new customers.

In cybersecurity, DXC has been approved to productize Claude Mythos through a managed service called DXC Frontier Code Assurance. The service is intended to identify, validate, prioritize and help remediate vulnerabilities in critical software. Fernandez described cybersecurity as an area where customer demand may move more quickly because of the need to defend against AI-enabled threats.

Guidance Reduced on Bookings and Pipeline Conversion

DXC reduced its fiscal 2027 outlook to reflect the weaker second-quarter bookings performance and an assumption that lower pipeline conversion rates will continue through the remainder of the year.

• Full-year organic revenue is now expected to decline 5% to 5.5% year over year.
• CES revenue is projected to decline in the mid-single digits.
• GIS revenue is expected to decline at a high-single-digit rate, though DXC still anticipates sequential improvement in the third quarter and a more pronounced improvement in the fourth quarter.
• Insurance revenue is expected to grow at a mid-single-digit rate, increased from previous expectations for low-single-digit growth.
• Adjusted EBIT margin is expected to range from 5.75% to 6.25%.
• Non-GAAP diluted EPS is projected at $2.25 to $2.50.
• Free cash flow is expected to be approximately $600 million.

For the fiscal third quarter, DXC expects organic revenue to decline about 6% year over year, adjusted EBIT margin of approximately 6%, and non-GAAP diluted EPS of approximately $0.55.

DXC generated $91 million in free cash flow during the second quarter, including a $122 million cash deposit with the Internal Revenue Service related to tax litigation involving currency losses from 2009. Excluding that payment, quarterly free cash flow was $213 million. The company also retired $400 million of U.S. dollar bonds that matured in September 2026 and repurchased $60 million of shares during the quarter.

Del Bene said DXC had entered the year with a cost-reduction plan and has increased its cost-takeout objective following the revenue outlook reduction. The company is evaluating additional actions for fiscal 2028, though the CFO said it was too early to discuss specifics.

About DXC Technology (NYSE:DXC)

DXC Technology NYSE: DXC is a global information technology services and solutions company that helps organizations modernize and manage their technology environments. Its services include consulting, application development and management, cloud migration and operations, cybersecurity, data and analytics, enterprise technology management, and workplace and end-user services.

The company serves businesses and government organizations across a range of industries, including financial services, healthcare, insurance, manufacturing, aerospace and defense, automotive, retail, and the public sector.

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