DXC Technology’s third quarter saw sales decline year-over-year, though the market responded positively to the results. Management attributed the period’s mixed performance to continued pressure in discretionary custom application projects and slower bookings, especially in its GIS and CES segments. CEO Raul Fernandez described the company’s transformation as ongoing, highlighting that "we are laser-focused on building a predictable and growing company with better execution and pipeline conversion in the quarters ahead." While DXC’s adjusted profitability outperformed expectations due to cost discipline, operating margins declined as the company invested in new offerings.
Is now the time to buy DXC? Find out in our full research report (it’s free for active Edge members).
DXC (DXC) Q3 CY2025 Highlights:
- Revenue: $3.16 billion vs analyst estimates of $3.17 billion (2.5% year-on-year decline, in line)
- Adjusted EPS: $0.84 vs analyst estimates of $0.70 (20.5% beat)
- Adjusted EBITDA: $461 million vs analyst estimates of $444.7 million (14.6% margin, 3.7% beat)
- The company reconfirmed its revenue guidance for the full year of $12.74 billion at the midpoint
- Management reiterated its full-year Adjusted EPS guidance of $3.10 at the midpoint
- Operating Margin: 5.1%, in line with the same quarter last year
- Organic Revenue fell 4.2% year on year vs analyst estimates of 4% declines (17.9 basis point miss)
- Market Capitalization: $2.40 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From DXC’s Q3 Earnings Call
- Bryan Bergin (TD Cowen) pressed for details on CES momentum and pipeline conversion. CEO Raul Fernandez pointed to targeted go-to-market improvements and a growing base of large, longer-term projects, while CFO Rob Del Bene said bookings provide a solid base but more deals are needed.
- Antonio (Morgan Stanley, for James Faucette) asked about GIS segment trends and the role of Hogan software. Fernandez highlighted improved customer retention and new product pipeline growth, while Del Bene noted project-based demand remains challenged but pipeline momentum is building.
- Yu Lee (Guggenheim Partners) questioned the macro assumptions embedded in the outlook. Del Bene responded that forecasts are based on backlog and internal metrics, not on any significant changes in the broader economic environment.
- Tien-Tsin Huang (JPMorgan) inquired about the CoreIgnite product and its impact on existing Hogan customers. Fernandez clarified that CoreIgnite adds new revenue streams without cannibalizing current contracts and positions DXC uniquely due to its legacy expertise.
- Bradley Clark (Bank of Montreal) probed the sustainability of cost reductions and margin management. Del Bene emphasized ongoing cost discipline, while Fernandez noted the impact of internal AI tools on future productivity.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be monitoring (1) the pace at which DXC converts its large deal pipeline into bookings and revenue, (2) the early adoption and customer feedback on new AI-powered solutions like CoreIgnite and OASIS, and (3) the company’s ability to stabilize and grow its core SAP and insurance businesses. Execution on internal productivity initiatives and further margin improvements will also remain key markers of progress.
DXC currently trades at $13.81, up from $12.94 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).
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