Exchange: NYSE | Sector: Technology | Industry: Information Technology Services
Q1 2026
Published: Aug 1, 2025
Earnings Highlights
Revenue of $3.16B down 2.4% year-over-year
EPS of $0.09 decreased by 35.7% from previous year
Net income of 16.00M
""With a healthy pipeline and steady deal inflows, we remain confident in our ability to consistently drive a trailing 12-month book-to-bill ratio above 1.0." - Raul J. Fernandez, President and CEO" - Raul J. Fernandez
DXC Technology Company (DXC) Q1 2026 Financial Results: Navigating Through Challenges With Strategic Growth Focus
Executive Summary
DXC Technology's first quarter fiscal 2026 results showcased a challenging revenue environment, with a year-over-year decline of 4.3% on an organic basis, bringing total revenue for the quarter to $3.159 billion. Despite this, adjusted EBIT margin stabilized at 6.8%, reflecting proactive measures undertaken to enhance profitability amidst the market pressures. Notably, the company reported a strong recovery in bookings, increasing by 14% compared to the previous year, marking the third consecutive quarter of double-digit growth. The management expressed optimism about future growth driven by recent leadership appointments and strategic initiatives focused on artificial intelligence (AI) integration, enhancing their service offerings, and streamlining operations.
Key Performance Indicators
Revenue
3.16B
QoQ: -0.32% | YoY:-2.38%
Net Income
16.00M
QoQ: -93.94% | YoY:-38.46%
EPS
0.09
QoQ: -93.84% | YoY:-35.71%
Revenue Trend
Margin Analysis
Key Insights
Solid free cash flow generation of $97 million (up from $45 million YoY)
Book-to-bill ratio improved to 1.06, indicating a growing demand across various verticals, especially in public sector and retail.
Financial Highlights
Revenue for Q1 2026 stood at $3.159 billion, a decline of 4.3% year-over-year but an improvement towards the higher end of guidance. Adjusted EBIT margin at 6.8% reflects productive cost management despite revenue pressures. The company achieved a non-GAAP diluted EPS of $0.68, which decreased from $0.75 in Q1 2025. Key highlights include:
- Solid free cash flow generation of $97 million (up from $45 million YoY)
- Book-to-bill ratio improved to 1.06, indicating a growing demand across various verticals, especially in public sector and retail.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
3.16B
-2.38%
-0.32%
Net Income
16.00M
-38.46%
-93.94%
EPS
0.09
-35.71%
-93.84%
Key Financial Ratios
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Management emphasized several themes during the earnings call:
1. Growth and Execution: CEO Raul Fernandez stated, "We delivered first quarter results at the high end of our guided ranges for both organic revenue growth and adjusted EBIT margin with non-GAAP EPS above the high end of guidance."
2. AI and Innovation: Fernandez noted the importance of AI, stating, "AI is redefining every business process and redefining every customer interaction. Our approach to AI solutions is centered around integrating AI seamlessly into the fabric of our clients' operations..."
3. Segment Focus: CFO Rob Del Bene stated, "Our adjusted EBIT margin was 6.8% down modestly by 10 basis points year-to-year. We’re investing to support future top line growth while continuing to drive productivity to offset revenue declines."
"With a healthy pipeline and steady deal inflows, we remain confident in our ability to consistently drive a trailing 12-month book-to-bill ratio above 1.0." - Raul J. Fernandez, President and CEO
— Raul J. Fernandez
"We’re not just applying AI to improve our operations. We’re pressure testing and documenting our journey as Client Zero..." - Raul J. Fernandez, President and CEO
— Raul J. Fernandez
Forward Guidance
Management provided a cautious outlook for the remainder of the fiscal year, maintaining that total organic revenue is expected to decline between 3% to 5%. However, they anticipate potential improvements in the second half of 2026 driven by the maturation of larger deals and strong bookings growth. Non-GAAP diluted EPS guidance was revised upwards to a range of $2.85 to $3.35. Factors to monitor include:
- Progress in converting a healthy bookings pipeline into revenue.
- Ongoing operational improvements and margin management.
- Economic conditions affecting enterprise IT spending.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
CACI
8.74%
8.74%
3.29%
23.41%
CDW
21.60%
6.95%
9.68%
23.60%
JKHY
42.90%
25.20%
6.19%
27.00%
BR
24.50%
9.45%
3.62%
78.75%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
DXC Technology's Q1 2026 results reflect a company navigating through a transformative phase amidst challenging market conditions. While there are short-term headwinds to revenue growth, the strategic focus on integrating AI and improving operational efficiencies positions DXC favorably for future growth. The solid cash position and reduced debt further enhance the efficiency of capital allocations. Investors should closely monitor the company's ability to convert its bookings into revenue and the effectiveness of the new leadership in driving sustainable growth.
Key Investment Factors
Growth Potential
DXC's strategic focus on AI integration and partnerships with leading technology firms (e.g., Boomi) suggests strong growth pathways and the potential for enhanced service offerings that meet evolving customer demands.
Profitability Risk
Ongoing pressure on organic revenue growth due to economic uncertainty and potential market shifts, particularly in core service areas; competitiveness against agile startups in the AI sector.
Financial Position
With a solid cash position of $1.8 billion and a declining debt profile (approximately $4 billion total debt), DXC is focusing on strengthening its balance sheet and enhancing financial flexibility.
SWOT Analysis
Strengths
Strong market reputation and established relationships in highly regulated industries
Diverse service offerings across consulting, engineering, and IT services
Substantial cash reserves enabling strategic investments and shareholder returns
Weaknesses
Recent revenue decline indicating challenges in market positioning and competitive pressures