Executive Summary
In Q1 2025, DXC Technology (DXC) reported a total revenue of $3.236 billion, representing a 4% decline year-over-year (YoY) on an organic basis. Despite this drop, the adjusted EBIT margin improved to 6.9%, up 40 basis points (bps) YoY, reflecting effective cost management amidst a cautious discretionary spending environment among clients. Non-GAAP diluted EPS rose 17% to $0.74, attributed to a reduction in outstanding shares. Management indicated that while new deal volumes remain under pressure, their selective approach is aimed at enhancing revenue quality rather than quantity. The company is reorienting its strategy towards stronger execution and operational excellence, which promises long-term value for shareholders. Improving cash flow from operations, positioned at $238 million, demonstrates liquidity resilience that allows DXC to manage its $4.1 billion debt effectively while investing in growth initiatives.
Key Performance Indicators
QoQ: -14.48% | YoY:-47.18%
QoQ: -42.31% | YoY:-34.78%
QoQ: 113.00% | YoY:-27.78%
QoQ: 112.73% | YoY:-17.65%
Key Insights
**Revenue:** $3.236 billion, down 4% YoY and 4.43% QoQ
**Adjusted EBIT Margin:** 6.9%, improved by 40 bps YoY
**Non-GAAP EPS:** $0.74, a 17% increase YoY
**Free Cash Flow:** $45 million, demonstrating operational effectiveness
**Gross Profit Margin:** 21.9%, expands by 80 bps
**Debt Levels:** $4.1 billion, with a decent coverage by cash of $1.3 billion.
Management emphasized a strategic shift to an integrated sales approach that aligns expertise with client verticals, to maximize business outcom...
Financial Highlights
Revenue: $3.236 billion, down 4% YoY and 4.43% QoQ
Adjusted EBIT Margin: 6.9%, improved by 40 bps YoY
Non-GAAP EPS: $0.74, a 17% increase YoY
Free Cash Flow: $45 million, demonstrating operational effectiveness
Gross Profit Margin: 21.9%, expands by 80 bps
Debt Levels: $4.1 billion, with a decent coverage by cash of $1.3 billion.
Management emphasized a strategic shift to an integrated sales approach that aligns expertise with client verticals, to maximize business outcomes and streamlining operations to meet specific client needs exhibits strong foundational health despite transactional fluctuations.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
3.24B |
-6.09% |
-4.43% |
| Gross Profit |
384.00M |
-47.18% |
-14.48% |
| Operating Income |
90.00M |
-34.78% |
-42.31% |
| Net Income |
26.00M |
-27.78% |
113.00% |
| EPS |
0.14 |
-17.65% |
112.73% |
Key Financial Ratios
operatingProfitMargin
2.78%
operatingCashFlowPerShare
$1.33
freeCashFlowPerShare
$0.25
Management Commentary
- Management Strategy:
- Raul Fernandez, CEO, stated, "Our teams are focused on designing and implementing solutions that embed engineering skills, AI and industry expertise to capture opportunities..."
- Emphasis on an improved operating model aligning with client verticals, showing early success in booking larger deals.
- Market Conditions:
- The management acknowledged ongoing market caution, with spending restraint observed across sectors, affecting overall bookings.
- Rob Del Bene, CFO, commented, "In light of ongoing market uncertainty, we continue to see cautious behavior from many of our customers."
"Our performance is an early testament to the improved execution by our teams along many fronts." - Raul Fernandez, CEO
— Raul Fernandez
"We are revamping our go-to-market approach within our sales organizations... this has resulted in an ongoing restrained discretionary spending environment on short-term project work." - Raul Fernandez, CEO},
— Raul Fernandez
Forward Guidance
Looking ahead, management expects organic revenue to decline in the range of 4% to 6% year-over-year for the full fiscal year 2025. They anticipate modest improvement in adjusted EBIT margins to between 6.5% and 7% driven by disciplined cost management and selective new deal pursue strategies. Management forecasts free cash flow for fiscal 2025 to increase to approximately $450 million, reflecting enhancements in working capital performance. Attention will be focused on continued pipeline growth, particularly within the consulting and engineering services segment.