Q1 2027 DXC Technology Co Earnings Call Transcript
Key Points
- DXC Technology Co (DXC) reported total bookings increased 5% year-over-year, with a book-to-bill of 0.99, the highest first-quarter level in three years, and a trailing 12-month book-to-bill above 1.
- The company's agentic AI solutions, such as Oasis and agentic SOC, are gaining traction, with Oasis deployed across 57 customer environments and a leading entertainment company signing a multiyear, multimillion-dollar engagement after a technical evaluation of just over four weeks.
- DXC Technology Co (DXC) is executing on its AI strategy with the launch of a forward-deployed engineer model, certifying 86 engineers with Anthropic and aiming to certify tens of thousands, which is expected to drive new revenue streams.
- The company generated $314 million in free cash flow in Q1, including a $214 million benefit from the TCS litigation, and reduced net debt by nearly $270 million, strengthening its balance sheet.
- Insurance segment showed resilience with 1.4% revenue growth, and SaaS-based revenues more than doubled year-over-year, driven by momentum in Azure platform and Horizon Solutions.
- DXC Technology Co (DXC) is seeing faster sales cycles for AI products, with evaluations and contracting completed in six weeks or less, compared to traditional 6-12 month cycles, indicating growing customer demand.
- Total revenue declined 6.7% year-over-year in Q1, with GIS revenue down 11%, reflecting continued customer caution and softer discretionary project work.
- Adjusted EBIT margin fell to 5%, down 180 basis points year-over-year, impacted by revenue profile and seasonal factors, with GIS margins dropping to 2.6%.
- The company faces a challenging macro environment with no expected improvement, and guidance assumes no change, limiting upside potential.
- CES bookings declined 19% year-over-year due to tough comparisons and weakness in custom applications, despite growth in other areas.
- Insurance segment is impacted by the wind-down of a BPS contract, which will drag on growth in Q2 and Q3, and the book-to-bill was below 1 due to lumpy deal timing.
- DXC Technology Co (DXC) expects a significant second-half improvement in revenue, but this relies on GIS performance and in-year sales, with 15-20% of the improvement already delivered in Q1 bookings, indicating execution risk.
Ladies and gentlemen, thank you for standing by. My name is Christa, and I will be your conference operator today. At this time, I would like to welcome everyone to the DXC Technology Services first-quarter fiscal 2027 earnings conference call. (Operator Instructions)
I would now like to turn the conference over to Roger Sachs, Vice President of Investor Relations. Roger, please go ahead.
Thank you, operator. Good afternoon, everyone, and welcome to DXC Technology's first-quarter fiscal 2027 earnings conference call. We hope you had an opportunity to review our earnings release, which is available in the IR section of DXC's website.
Speaking on today's call are Raul Fernandez, our President and CEO; and Rob Del Beni, our Chief Financial Officer. Here's today's agenda.
First, Raul will update you on our strategic initiatives. Rob will then review our quarterly financial performance as well as provide thoughts on our second quarter and fiscal full year 2027 guidance.
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