DXC

Strategic AI Focus & Leadership Restructuring

• Announced key leadership changes to align with the company's agentic AI transformation strategy: Paul Taylor joined as President, bringing deep AI and commercial entrepreneurial experience; Dan Gray took over leadership of GIS, with deep technical background in the company's agentic solutions; Holly Grant was promoted to President of AI Innovation, Strategy, and LabX.
• The company's core strategic goal is to leverage agentic AI to return DXC to sustainable growth, by streamlining operations, unifying commercial and delivery teams, and executing an aggressive AI-focused go-to-market playbook.

Product Proof Points & Customer Momentum

• The company follows a "Customer Zero" philosophy where AI solutions are first deployed and tested internally before being offered to customers. Internal testing of the agentic SOC (Security Operations Center) reduced mean time to intrusion detection from 21 minutes to 6 seconds, a transformative improvement for cybersecurity operations.
• DXC OASIS, the company's AI-powered IT operations platform, is already deployed across 57 customer environments, delivering measurable reductions in incident resolution time and ticket backlogs while maintaining high diagnostic accuracy. Management expects 85 customers on the OASIS platform by the end of 1H 2027, and 125 by the end of fiscal 2027.
• The company's "connect, don't convert" strategy lets customers retain existing legacy technology investments while adding new AI capabilities, reducing adoption risk, cost, and disruption, and avoids customer lock-in to a single AI provider or technology stack.

New Talent Model & Operational Acceleration

• Launched the Forward Deployed Engineer (FDE) model, a new class of hybrid AI builders that work directly in customer environments to deploy AI solutions and capture reusable patterns for faster scaling. 86 FDEs have already been certified in partnership with Anthropic, with a long-term goal of certifying tens of thousands of multilingual FDEs across multiple AI platforms including Anthropic, Amazon QuickSuite, and Microsoft Copilot.
• AI is shortening sales cycles dramatically: traditional enterprise sales cycles took 6-12 months, while the company now sees OASIS evaluations and contracting completed in 6 weeks or less. One recent agentic SOC deal with a global entertainment and technology company completed technical evaluation in just over 4 weeks and resulted in a multi-year, multi-million dollar engagement.
• AI fundamentally changes the company's growth economics: instead of historical revenue growth requiring proportional headcount expansion, AI allows faster scaling with lower capital and incremental labor requirements, enabling new recurring and consumption-based revenue streams while improving long-term profitability and free cash flow generation.

Balance Sheet & Capital Allocation

• Generated $314 million in free cash flow in 1Q 2027, including a $214 million benefit from the resolution of a long-running trade secrets litigation with TCS; adjusted free cash flow was $100 million, a modest year-over-year improvement.
• Ended the quarter with $1.9 billion in cash, and net debt declined by ~$270 million from Q4 2026 to ~$1.5 billion, strengthening the balance sheet. The company repurchased $70 million of shares in the quarter, and maintains plans to retire $400 million in bonds maturing in September 2026 and repurchase ~$250 million of shares in full fiscal 2027.

• Full Fiscal 2027: Management maintained the prior full-year guidance: total organic revenue is expected to decline 3% to 5% year-over-year, with a slower rate of decline in the second half of the year. Adjusted EBIT margin is projected to be between 6% and 7%, with sequential margin expansion through the year. Non-GAAP diluted EPS guidance is maintained at $2.40 to $2.90. Full-year free cash flow guidance is updated to ~$685 million, which includes the $214 million TCS litigation benefit and a required deposit for an ongoing IRS tax dispute.

  • CES: Expected to deliver low single-digit revenue decline for the full year, an improvement from prior guidance reflecting stronger-than-anticipated first quarter performance.
  • GIS: Continues to expect a mid single-digit revenue decline for the full year, with performance modestly below prior assumptions due to softer discretionary project activity, and a stronger second half performance as the impact of prior contract losses moderates.
  • Insurance: Continues to expect low single-digit full-year revenue growth, with stronger second half performance driven by new customer contract ramps, SaaS growth, and the completion of the legacy BPS contract wind-down in Q4.

• Second Quarter Fiscal 2027: Total organic revenue is expected to decline 5.5% to 6.5% year-over-year. CES is expected to deliver a low single-digit decline consistent with Q1; GIS is expected to deliver a high single-digit decline; Insurance is expected to grow at a similar rate to Q1. Adjusted EBIT margin is projected to be ~6%, and non-GAAP diluted EPS is expected to be ~55 cents.

1. Global Infrastructure Services (GIS): Revenue declined 11% year-over-year, slightly below management expectations. Bookings grew 35% year-over-year driven by large deal wins in intelligent infrastructure and workplace segments, resulting in a book-to-bill ratio of 1.11 (trailing 12-month book-to-bill above 1). 1Q 2027 revenue was negatively impacted by softer discretionary project work. Adjusted EBIT margin fell to 2.6% in the quarter due to the revenue shortfall.

2. Global Business Services - CES (Customer Engineering & Solutions): Revenue declined 3% year-over-year, modestly ahead of management expectations, driven by better-than-anticipated project revenue in GrowthX and DXC Engineering. Total bookings declined 19% year-over-year due to a tough comparison to large deal wins in 1Q 2026, though DXC Engineering and GrowthX bookings grew year-over-year, and enterprise application services grew for the third consecutive quarter. Book-to-bill was 0.98, with a trailing 12-month book-to-bill of 1.04.

3. Insurance: Revenue grew 1.4% year-over-year, in line with management expectations. Total insurance software revenue grew 13%, with SaaS-based revenues (for the Assure platform and Horizon solutions) more than doubling year-over-year. Services revenue declined 1% due to the wind-down of a legacy BPS contract, which will continue impacting results through 3Q 2027.

• Persistent macroeconomic customer caution continues to suppress short-term discretionary IT and infrastructure project spending, which has negatively impacted near-term GIS revenue and may continue to pressure top-line results if macro conditions do not improve.
• The transformation to an AI-powered agentic operating model requires new leadership and technical skills across the organization, and there is execution risk associated with upskilling existing teams and recruiting new talent to meet the requirements of the new operating model.
• Ongoing litigation, including a tax dispute with the IRS regarding 2009 currency losses, requires cash outlays and creates uncertainty around future cash flows. The 2027 guidance includes a required cash deposit to stop additional interest accrual while management evaluates an appeal.
• Conversion of the strong recent GIS bookings growth to revenue is expected to occur gradually through the second half of the year, and there is risk that conversion could be slower than currently anticipated if customer decision-making remains delayed.
• The near-term revenue drag from the legacy BPS contract wind-down in the Insurance segment will continue through the first three quarters of fiscal 2027.

Q: What is driving the expected second half revenue improvement compared to the first half, and what visibility do you have for this improvement across segments? / A: Management expects the year-over-year revenue decline to improve from ~-6.5% in the first half to ~-2% in the second half. 90% of this improvement comes from GIS, with 75% of that GIS improvement already contracted via opening backlog, giving high visibility. The remaining improvement relies on a modest increase in in-year sales, which management views as reasonable given new AI product momentum. CES is expected to perform consistently with first half results, and Insurance has clear line of sight to improvement driven by the contract wind-down completion in Q4.

Q: GIS bookings grew 35% YoY with a 1.11 book-to-bill, but revenue fell more than expected and margins halved. When will bookings convert to revenue, and what changes will Dan Gray bring to improve GIS margins? / A: Strong bookings reflect better large deal closing execution, while lower revenue was driven by softer-than-expected discretionary infrastructure project work. Margins will recover as revenue improves through the year, and management expects full-year GIS margins to be flat to slightly up year-over-year. New leader Dan Gray, who previously architected GIS's agentic AI transformation, will accelerate existing cost takeout plans, unifying technical and P&L leadership to speed up execution.

Q: Early after Investor Day, what signals are you seeing that increase or decrease confidence in your long-term AI strategy? / A: Raul Fernandez reported very strong positive signals from customer meetings: documented dramatic reductions in time and cost for core IT and security operations from agentic solutions like OASIS and agentic SOC have shortened decision-making dramatically, with deal closing times cut from months to weeks. New AI offerings are technically outperforming competitors, creating new customer conversations that DXC has not traditionally had, increasing confidence the strategy is on track. Net new bookings also improved in the first quarter to their strongest level in some time.

Q: Why did you make recent leadership changes, and do you now have the leadership you need for the AI transformation? / A: Running an AI-enabled agentic company requires very different skills than traditional enterprise technology: it requires far faster decision-making, non-linear working styles, and departure from outdated legacy project methodologies. The leadership changes were made to put leaders with these required agile, technically-focused attributes in key positions aligned with the highest growth AI opportunities. Management believes the new leadership team has the right characteristics to succeed in the AI era.