DXC Technology 2026 Q1 Earnings Net Income Declines 28%

DXC Technology (DXC) reported its fiscal 2026 Q1 earnings on July 31, 2025. The company's performance 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 reported a total revenue of $3.16 billion for Q1 2026, marking a 2.4% decrease from the previous year. The Consulting and Engineering Services segment generated $1.25 billion, while Global Infrastructure Services contributed $1.60 billion. Insurance Services saw a revenue of $313 million. This performance reflects ongoing challenges in maintaining growth across key 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. The company's net income also decreased by 28.0%, reaching $18 million, compared to $25 million in Q1 2025. The EPS decline signals challenges in maintaining profitability.

Post-Earnings Price Action Review
The strategy of investing in DXC Technology 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%. The strategy's lackluster performance highlights its high risk, as evidenced by a Sharpe ratio of -0.04, indicating substantial risk without corresponding returns. Despite low volatility at 45.66%, the strategy's 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
In recent developments, 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 also strengthened its leadership team by appointing new executives to drive strategic growth in emerging markets. Additionally, DXC has expanded its partnerships in the public sector, reinforcing its position as a leading provider of IT services to government entities. These moves are part of DXC's broader strategy to enhance its market presence and operational efficiency.