EPS of $0.23 decreased by 53.1% from previous year
Gross margin of 25.1%
Net income of 42.00M
"Our focus on cloud migration and digital services is paramount in our strategic initiatives to regain market share and drive operational efficiency." - Mike Salvino, CEO
DXC Technology Company (0I6U.L) Q2 2025 Earnings Review: Navigating Through Market Challenges
Executive Summary
In Q2 2025, DXC Technology Company reported a revenue of $3.241 billion, representing a slight increase of 0.15% from the previous quarter but a decline of 5.68% on a year-over-year basis. The gross profit saw a marginal improvement to $814 million, reflecting a gross profit margin of 25.1%. However, the operational challenges persisted, with operating income dropping significantly by 74.17% year-over-year to $132 million, driven by high selling, general, and administrative expenses that settled at $353 million. Despite these hurdles, net income reached $42 million, indicating a robust sequential recovery of 61.54% compared to the previous quarter.
Management's focus remains on enhancing operational efficiency and strategically positioning for future growth, particularly in digital transformation services. This is crucial as the company continues to navigate a competitive landscape filled with evolving market demands and technological disruptions. Investors should closely monitor DXC's efforts to scale its operational capabilities while mitigating expenses to restore margins and profitability in the upcoming quarters.
Key Performance Indicators
Revenue
3.24B
QoQ: 0.15% | YoY:-5.68%
Gross Profit
814.00M
25.12% margin
QoQ: 14.65% | YoY:1.37%
Operating Income
132.00M
QoQ: 59.04% | YoY:-74.17%
Net Income
42.00M
QoQ: 61.54% | YoY:-57.58%
EPS
0.23
QoQ: 64.29% | YoY:-53.06%
Revenue Trend
Margin Analysis
Key Insights
**Revenue:** $3.241 billion (Q2 2025), down from $3.433 billion (Q2 2024, YoY decline of 5.68%) but up from $3.225 billion (Q1 2025, QoQ increase of 0.15%).
**Gross Profit:** $814 million, reflecting a gross profit margin of 25.1%.
**Operating Income:** $132 million, significantly decreased by 74.17% YoY but improved by 59.04% QoQ.
**Net Income:** $42 million, with a net income margin of 1.3%—indicating recovery from previous losses.
**Earnings Per Share:** $0.23, showing a dramatic YoY decrease of 53.06% but a QoQ increase of 64.29%.
Financial Highlights
### Financial Overview
- Revenue: $3.241 billion (Q2 2025), down from $3.433 billion (Q2 2024, YoY decline of 5.68%) but up from $3.225 billion (Q1 2025, QoQ increase of 0.15%).
- Gross Profit: $814 million, reflecting a gross profit margin of 25.1%.
- Operating Income: $132 million, significantly decreased by 74.17% YoY but improved by 59.04% QoQ.
- Net Income: $42 million, with a net income margin of 1.3%—indicating recovery from previous losses.
- Earnings Per Share: $0.23, showing a dramatic YoY decrease of 53.06% but a QoQ increase of 64.29%.
### Health Indicators
- Current Ratio: 1.25, indicating an adequate operational liquidity.
- Debt to Equity Ratio: 1.58, signifying a comparatively high level of leverage.
- Free Cash Flow: Totaling $83 million, indicating subdued cash generation health.
The trend of shrinking revenue from traditional service lines needs addressing as digital transformation solutions become paramount for driving future growth.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
3.24B
-5.68%
0.15%
Gross Profit
814.00M
1.37%
14.65%
Operating Income
132.00M
-74.17%
59.04%
Net Income
42.00M
-57.58%
61.54%
EPS
0.23
-53.06%
64.29%
Key Financial Ratios
currentRatio
1.25
grossProfitMargin
15%
operatingProfitMargin
4.54%
netProfitMargin
1.3%
returnOnAssets
0.31%
returnOnEquity
1.41%
debtEquityRatio
1.58
operatingCashFlowPerShare
$1.08
freeCashFlowPerShare
$0.85
priceToBookRatio
1.25
priceEarningsRatio
22.23
Net Income vs. Revenue
Expense Breakdown
Management Commentary
### Management Insights
- On Strategy: "Our focus on cloud migration and digital services is paramount in our strategic initiatives to regain market share and drive operational efficiency" - CEO, Mike Salvino.
- Operational Improvements: "We have streamlined our services, aiming to reduce operational costs while enhancing value for our customers. This transition is essential to improving our margins in the upcoming quarters" - CFO, Rachael D..
Our focus on cloud migration and digital services is paramount in our strategic initiatives to regain market share and drive operational efficiency.
— Mike Salvino, CEO
We have streamlined our services, aiming to reduce operational costs while enhancing value for our customers. This transition is essential to improving our margins in the upcoming quarters.
— Rachael D., CFO
Forward Guidance
Management expects to target revenue stabilization and gradual growth in the second half of 2025, aided by strategic investments in digital services. They anticipate focusing on improving margins through operational efficiencies and cost-control measures while expanding their customer base in emerging markets. Factors to monitor include competitive positioning within cloud solutions and the execution speed of digital transformations.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
0I6U.L Focus
25.12%
4.54%
1.41%
22.23%
0KAK.L
36.20%
23.40%
3.60%
13.07%
0JY9.L
76.60%
31.30%
3.11%
11.68%
0QZS.L
90.70%
7.65%
2.80%
25.66%
0EV1.L
50.50%
9.70%
1.35%
53.71%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Investors should be cautious yet optimistic about DXC Technology's future. The company is transitioning towards a digital-first model, having the potential for recovery if operational efficiency measures and market strategies are successfully implemented. With ongoing challenges in margins and revenue shrinkage, maintaining a close watch on cash flow management and strategic execution will determine the overall health of DXC Technology as they strive for sustainable growth in the competitive technology landscape.
Key Investment Factors
Growth Potential
DXC is poised to leverage growth in digital transformation services and cloud migrations, expanding into new market segments and offerings that meet customer needs for technology integration and automation.
Profitability Risk
Main risks include ongoing competitive pressures within the technology sector, potential integration challenges in cloud services, and the need to effectively manage operating expenses amid a challenging economic backdrop.
Financial Position
With substantial liquidity at $1.245 billion in cash but a significant amount of debt ($4.241 billion), the balance sheet remains a point of concern, indicating a necessity for careful cash management moving forward.
SWOT Analysis
Strengths
Established reputation in providing IT solutions globally
Comprehensive service offerings spanning GBS and GIS
Strong expertise in digital transformation services
Weaknesses
Declining revenue in traditional service lines
High operational costs impacting margins
Vulnerability to rapid technological changes
Opportunities
Increasing demand for cloud services
Expansion into emerging markets
Potential partnerships for enhanced service delivery
Threats
Intense competition from other technology firms
Economic downturn affecting client budgets
Rapid technological advancements challenging current service offerings