DXC Technology Company Q3 FY2026 earnings call

Strategic Initiatives

• Implemented dual-track strategy to stabilize heritage businesses and build AI native revenue streams.
• Launched refreshed brand in Q3 with clear story and new visual identity, established centralized sales enablement team.

Delivery and Branding

• Delivery excellence remains competitive advantage; example: win with London Metropolitan Police for enterprise transformation.

Fast Track Initiatives

• Progressing well with development timelines ahead of plan; focus on AI-infused solutions like Core Ignite in banking and agentic security operations center in security; aim to achieve 10% of run rate revenue by end of Q2 fiscal 2029.

AI Architecture

• Leveraging legacy systems as assets, connecting to AI via orchestration layer for faster deployment of solutions.

Total revenue was $3.2 billion, declining 4.3% year-to-year. Segment performance: CES (40% of total revenue) declined 3.6% year-to-year, book-to-bill for the quarter was 1.2, trailing 12-month book-to-bill 1.13; GIS (50% of total revenue) declined 6.2% year-to-year, quarterly book-to-bill ratio improved to 1.09; Insurance (10% of total revenue) grew 3.2% year-to-year, impacted by delay of large BPS opportunities from 3Q to 4Q.

Third Quarter 2026

• Total organic revenue expected to decline 4%-5%; CES revenue decline similar to prior quarters, GIS revenue decline mid-single digits, insurance revenue growth consistent; adjusted EBIT margin 6.5%-7.5%, non-GAAP diluted EPS $0.65-$0.75.

Full Year Fiscal 2026

• Total organic revenue decline ~4.3%, CES low single-digit decline, GIS mid-single-digit decline, insurance low single-digit growth; adjusted EBIT margin ~7.5%, non-GAAP diluted EPS ~$3.15; full year free cash flow ~$650 million.

Fourth Quarter 2026

• Expect to repurchase $60 million of shares, exiting 2026 with ~$1.7 billion in cash; plan to deploy $400 million to retire U.S. dollar bonds and repurchase $250 million of shares in first half of fiscal 2027.

• Execution Risks: Driving consistent execution across global sales organization takes time and discipline.
• Market Risks: Volatile macro environment including corporate spinouts, restructurings, and breakups may impact deal timing and approval.
• Client Hesitancy: Potential client hesitancy around not modernizing tech stacks, but focus on value-based pricing and optionality as benefits.

Q: Perspective on fast-track attributes and services provided A: Raul Fernandez discussed examples like Hogan and Core Ignite, emphasizing replicability, scalability, IP, and need for right teams. June Investor Day will provide more detail.

Q: Client conversations on 2026 spending intentions and pipeline conversion A: Raul noted opportunities from corporate spinouts, restructurings, and breakups, and Rob mentioned robust pipeline but mix impact of longer-term vs short-term projects.

Q: Pricing environment and cap allocation A: Robert Del Bene explained varying pricing by segment, and cap allocation prioritizing investment, balance sheet, and shareholder return.

Q: AI solutions and revenue mix A: Raul mentioned AI use across segments like insurance with ServiceNow infrastructure and upcoming Investor Day for more detail.