DXC Technology 2026 Q1 Earnings Misses Targets as Net Income Declines 28%

DXC Technology (DXC) reported its fiscal 2026 Q1 earnings on Aug 01, 2025. The results fell short of expectations, with a notable decline in net income. For the full year fiscal 2026, DXC adjusted its guidance to reflect a decrease in total revenue but an increase in non-GAAP EPS. The company also adjusted its guidance for the second quarter, expecting a slight decline in revenue. Despite these challenges, DXC continues to focus on strengthening client connections and integrating AI into its solutions to drive growth.

Revenue

DXC Technology's total revenue for 2026 Q1 amounted to $3.16 billion, marking a 2.4% decrease from the previous year. In the Consulting and Engineering Services segment, the company generated $1.25 billion. The Global Infrastructure Services division reported revenues of $1.60 billion, while Insurance Services contributed $313 million. These figures highlight the persistent challenges DXC faces in sustaining growth across its primary business areas.

Earnings/Net Income

DXC Technology experienced a 35.7% drop in EPS, falling to $0.09 from $0.14 in the previous year. Net income also decreased by 28.0%, reaching $18 million compared to $25 million in Q1 2025. This decline in EPS indicates ongoing challenges in maintaining profitability.

Post Earnings Price Action Review

The investment strategy of buying DXC Technology shares following earnings beats and holding for 30 days has proven ineffective. This approach resulted in a negative return of -8.53%, significantly underperforming the benchmark return of 85.57%. Despite low volatility at 45.66%, the strategy's Sharpe ratio of -0.04 highlights substantial risk without corresponding returns. The maximum drawdown remained at 0.00%, offering little financial security. These factors combined reflect the broader challenges DXC faces in aligning investor strategies with market expectations.

CEO Commentary

"We delivered first quarter results at the high end of our guidance for both organic revenue growth and adjusted EBIT margin, with non-GAAP EPS exceeding expectations," said Raul Fernandez, President and CEO of DXC Technology. He emphasized the company’s ongoing improvement in client connections, evidenced by consistent double-digit growth in bookings for three consecutive quarters. Fernandez highlighted the integration of AI in their solutions, indicating a strategic focus on leveraging technology to drive insights and outcomes for clients. He expressed confidence in the company's direction, supported by a solid operational foundation.

Guidance

For full year fiscal 2026, DXC expects total revenue between $12.61 billion and $12.87 billion, reflecting a decline of 5.0% to 3.0% year-over-year on an organic basis. The adjusted EBIT margin is anticipated to range from 7.0% to 8.0%. Non-GAAP diluted EPS is projected between $2.85 and $3.35, an increase from previous guidance. For the second quarter fiscal 2026, total revenue is expected to be between $3.15 billion and $3.18 billion, with an adjusted EBIT margin between 6.5% and 7.5%, and non-GAAP diluted EPS between $0.65 and $0.75.

Additional News

Recently, DXC Technology announced a share repurchase program, buying back $50 million worth of shares, demonstrating its commitment to returning value to shareholders. The company has strengthened its leadership team by appointing new executives to drive strategic growth in emerging markets. Additionally, DXC expanded its partnerships in the public sector, reinforcing its position as a leading provider of IT services to government entities. These strategic moves are part of DXC's broader strategy to enhance its market presence and operational efficiency.