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<p>DXC Technology ranks No. 99 on the 2025 Best Companies to Work For Southeast Asia.</p>

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One of the younger companies in the <em>Fortune</em> 500, the information technology and consulting company has only been in existence since 2017 when it was spun off of Hewlett Packard.

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Created by the merger of CSC and the Enterprise Services business of Hewlett Packard Enterprise, DXC Technology is an IT services company serving 6,000 private and public sector clients.

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DXC Technology is an IT services and consulting company whose clients include aerospace, automotive, and manufacturing businesses. Its 120,000 employees in 70 countries, particularly in India, help customers with software development, including for artificial intelligence. Among DXC’s competitors are consulting giants Accenture, Capgemini, and Infosys. DXC was founded in 2017 from the combination of Computer Sciences Corporation and Hewlett Packard Enterprise’s enterprise services division.

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DXC Technology (DXC): Company Profile, Stock Price, News, Rankings

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DXC Technology

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Ladies and gentlemen, thank you for standing by. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the DXC Technology Q3 Fiscal 2026 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question at that time, simply press star followed by the number one on your telephone keypad.

If you would like to withdraw your question, press star one a second time. Thank you, and I would now like to turn the conference over to Roger Sachs, Vice President, Investor Relations. You may begin.

Thank you, Operator. Good afternoon, everybody, and welcome to DXC Technology's Q3 Fiscal 2026 Earnings Conference Call. We hope you have had a chance 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 Bene, our Chief Financial Officer. Here's today's agenda. First, Raul will update you on our strategic initiatives. Rob will then cover our quarterly financial performance, as well as provide thoughts on our Q4 and fiscal full-year plans.

Raul and Rob will then take your questions. Please note certain comments on today's call are forward-looking and subject to risks and uncertainties that could cause actual results to differ materially from those expressed on the call. Details of these risks and uncertainties are in our annual report on Form 10-K and other SEC filings.

We do not commit to updating any forward-looking statements during today's call. In addition, when we refer to year-over-year or quarter-over-quarter revenue growth rates, we will be discussing organic revenue changes on a non-GAAP basis, which exclude the impact of foreign exchange and any inorganic activity. We will also be discussing certain other non-GAAP financial measures that we believe provide useful information to our investors. Reconciliations to the most comparable GAAP measures are included in the tables included in today's earnings release. With that, let me turn the call over to Raul.

Thank you, Roger. Last quarter, we committed to a dual-track strategy to stabilize our heritage businesses while building new AI-native revenue streams. For the first time, DXC has a clear, unified strategy and the infrastructure to deliver it. This quarter, we moved from design to deployment, launching our refreshed brand, standing up our first centralized sales enablement function, and advancing our Fast-Track initiatives. On the core track, we launched a refreshed brand in Q3, a clear story and new visual identity that articulates why customers choose DXC and stay with us.

This wasn't cosmetic. We retooled our solutions positioning, rebuilt our sales materials, and created a consistent message across every customer touchpoint. The early signals are encouraging. Where our teams are using these new tools and leading with our differentiated message, we're seeing it resonate. Customers and influencers respond positively when we lead with clarity and confidence about what makes DXC distinct. To scale that message across the organization, we've established a high-impact sales enablement team, the first centralized function of its kind at DXC.

They've rebuilt our onboarding process, created integrated sales plays for priority offerings, and established baseline metrics we're now tracking across regions. That said, we are a company of considerable scale, and driving consistent execution across a global sales organization takes time and discipline. Where we've deployed the new approach, it works. At a recent ISG provider summit, third-party advisors told us DXC showed up differently than expected: clear story, strong presence, memorable, and distinct from competitors.

Our focus now is making that consistent across the organization. What's not changing is what our customers consistently tell us DXC delivers. Our delivery excellence remains a competitive advantage and the foundation we're building upon. The opportunity in front of us is helping our sellers translate that operational credibility into more transformative conversations, moving from trusted partner to strategic advisor in our customers' AI innovation agendas.

A good example of how our go-to-market strategy is working is a significant new logo win with the London Metropolitan Police, a master vendor engagement to lead their enterprise transformation. We're replacing core ERP and resource management platforms, integrating modern SaaS and AI into mission-critical operations. We won this engagement because of deep public sector expertise, disciplined execution, and a repeatable blueprint we can scale across UK police forces.

We're closing the gap between our best performers and the broader organization through these targeted talent and enablement investments, and I'm confident we'll generate results from these initiatives. Conversely, our Fast-Track initiatives are progressing well, with development timelines and early client interest tracking ahead of our initial plans. Fast-Track is about acceleration. It's focused on AI-infused solutions, repeatable IP, and productized offerings that deliver higher growth, higher margins, and durable differentiation. Fast-Track is possible because of how we've architected AI inside DXC.

Our approach starts with a fundamental insight: legacy systems aren't liabilities. They're assets. They contain decades of battle-tested business logic and institutional knowledge. Rather than ripping them out, we connect them to AI through an intelligent orchestration layer that routes work across multiple providers, enforces security and governance, and maintains complete audit trails. We built this approach for ourselves first. We've deployed AI at scale across all 115,000 employees, integrating every major AI provider and routing work to the best model for each task, giving us full technical portability.

We're putting 60 years of institutional knowledge to work: pricing, contract intelligence, competitive insights, project data, all surfaced through role-aware platforms that deliver the right information to the right people at the right time. This approach lets us move from idea to production in weeks, not months. And we're applying the same architecture we're building for clients to accelerate our own product development. As Customer Zero, we prove it works inside DXC before we offer it to the market. Here's how that Customer Zero experience is translating into fast-track offerings.

In security, our Agentic Security Operations Center, powered by 7AI, protects DXC from 4.5 million threats daily, with over 90% resolved automatically. We're now offering this proven capability to banking, healthcare, and government clients who are overwhelmed by alert volume. They see our operational results as proof it works. In banking, we own and operate Hogan, one of the most trusted core banking platforms in the world. It processes over $2.5 trillion in transactions per day across 300 million accounts. Rather than forcing customers into risky multi-year core replacement projects, we built CoreIgnite.

CoreIgnite embodies our enterprise AI philosophy: connect, don't convert. CoreIgnite allows banks to connect to fintechs, launch new digital products, and modernize customer experiences while preserving the security and performance of the mainframe underneath. We know our banking customers want to innovate, but when the stakes are this high, they cannot risk their core ledgers. We're bringing the innovation to them through a curated ecosystem of partners.

We partnered with Ripple to integrate enterprise-grade blockchain digital asset custody and real-time global payments directly into Hogan. We partnered with Euronet to bring the Ren payments platform to our clients, enabling instant card issuing and payments. We partnered with Aptys to give our banking partners immediate access to FedNow and real-time payments. We partnered with Splitit to allow banks to offer buy now, pay later options.

We believe our Fast-Track initiatives can achieve 10% of our run rate revenue by the end of Q2 Fiscal 2029. We are deliberately structuring our Fast-Track products and contracts to preserve strategic flexibility. That gives us multiple paths to create shareholder value as these businesses mature, including scaling them inside DXC, partnering, or pursuing other value-enhancing outcomes. The focus is straightforward: build high-potential businesses and retain the flexibility to choose the option that delivers the strongest return for shareholders. For decades, this industry operated on a linear equation.

To grow revenue, you had to grow headcount. That era is ending. AI allows us to build and deploy solutions faster with lower incremental capital and less dependency on labor growth. Our strong free cash flow allows us to self-fund these initiatives while maintaining balance sheet discipline. We're excited to share more about these opportunities at our upcoming Investor Day in New York City, the second week of June. Specific details will be announced shortly. The strategy is clear.

The architecture is in place. The work ahead is delivery, and that's exactly what DXC does best. One final note: this script was written by me but delivered using my custom AI voice model built with ElevenLabs. We can now share translated versions in Spanish, French, German, Portuguese, and Arabic instantly. This is exponential in action: AI that amplifies human capability, and it's a preview of what we're bringing to clients. Let me turn it over to Rob to review the Q3 results.

Thank you, Raul, and good afternoon, everyone. Today, I'll go over our Q3 results and provide guidance for the Q4 and our updated full-year fiscal 2026 outlook. Now, starting with the Q3 results, total revenue was $3.2 billion, declining 4.3% year-to-year within our guidance range, with all three business segments performing consistently with the H1 of the year. From a geographic perspective, we experienced declining performance in the US, with the rest of the world improving from the H1 of the year.

As expected, our bookings improved from the levels we saw in the H1, with a book-to-bill ratio of 1.12, which brings our trailing 12-month book-to-bill to 1.02. This marks the fourth consecutive quarter with our trailing 12-month ratio above one. As a reminder, last year's Q3 bookings were our strongest in several years at $4.3 billion, which creates a more challenging year-to-year comparison. As we mentioned last quarter, we had a robust list of new large opportunities in the pipeline, three of which closed in the quarter, and we have good line of sight for others to close in the months ahead.

We attribute the building pipeline of opportunities to our foundation of delivery excellence and deep engineering skills, coupled with our investments in new offerings and AI-based solutions, deepening our relationships with third-party advisors and our new brand positioning. All of these factors are repositioning DXC as a strategic partner to the market. Adjusted EBIT margin was 8.2%, coming in slightly above the high end of our guidance range, driven by continued disciplined spending management and the timing of one-time benefits that were not included in our guide.

On a year-over-year basis, Adjusted EBIT margin declined 70 basis points, primarily reflecting planned higher investment levels and offering development and marketing initiatives to support future revenue growth. Non-GAAP EPS was $0.96, above the high end of our guidance range, consistent with our Adjusted EBIT performance and up from $0.92 in the Q3 of last year, largely driven by a lower share count, net interest expense, and taxes, and partially offset by lower Adjusted EBIT.

Now, turning to our segment results, the CES book-to-bill for the quarter was 1.2, which brought the trailing 12-month book-to-bill to 1.13. Bookings continued to be strong in long-term strategic projects, with continued pressure on short-term discretionary engagements. CES revenues, which represent 40% of total revenue, declined 3.6% year-over-year. This reflects the discretionary booking dynamic I just mentioned, which has been impacting revenue for the last several quarters.

Our expectation is that the strength of the longer-term bookings will lead to improved CES revenue performance in fiscal 2027. In addition, as we have mentioned, we are investing in building AI-based offerings such as CoreIgnite, AMBER, and our new AdvisoryX consultancy. As these new offerings scale, they will contribute to the performance of CES. Driven by large deal wins, the quarterly GIS book-to-bill ratio improved to 1.09, up from the H1 of the year.

The trailing 12-month book-to-bill is now just below one. GIS, which represents 50% of total revenue, declined 6.2% year-to-year, which is in line with our full-year expectation. Insurance, which represents 10% of total revenue, grew 3.2% year-to-year, largely due to growth in our software business. This growth has been driven by strategic customer migrations to our cloud-based Assure software platform and associated offerings.

We are also continuing to invest in our software capabilities. For example, we have introduced a suite of AI-enabled smart apps that help insurers drive revenue growth and productivity without changing their core systems. While these investments have near-term margin impacts, they will drive incremental revenue growth over the long term. In addition, in Q3, we anticipated closing a couple of large BPS opportunities that have now been delayed to Q4 and will impact our Q4 revenue forecast for insurance.

Now, turning to our cash flow and balance sheet, we generated $266 million of free cash flow during the quarter, bringing our year-to-date total to $603 million, up from $576 million during the same period last year. We're on pace to deliver our full-year guide of approximately $650 million. During the quarter, we took proactive steps to further strengthen our balance sheet. We refinanced our EUR 650 million euro bond that was scheduled to mature in January of 2026.

In addition, we prepaid $300 million of our $700 million bond due to mature in September, consistent with our commitment to maintain a strong balance sheet with the appropriate debt levels. While continuing to strengthen our balance sheet and fund investments for long-term growth, we have been returning capital to shareholders following a disciplined and balanced approach. Year-to-date through the Q3 of fiscal 2026, we repurchased $190 million worth of our shares, including $65 million in Q3. We also remain focused on our commitment to lower our capital lease liability.

During the quarter, we paid down $47 million, which brings total reductions to more than $450 million since the start of fiscal 2025, which is when we amended our financial practice to significantly reduce new lease originations. In that timeframe, we held new originations to $33 million. With these efforts, and after accounting for currency movements on our euro-denominated bonds, our total debt declined by $465 million to approximately $3.6 billion.

Our ability to consistently generate strong free cash flow enabled us to increase our cash balance by more than $500 million since the start of fiscal 2025, bringing it to $1.7 billion. As a result, we have reduced our net debt by approximately $970 million. Looking ahead to Q4, we expect to repurchase $60 million worth of shares, bringing our full-year total to approximately $250 million, up from our initial guide for the year of $150 million. With strong free cash flow and expected proceeds from asset sales, we anticipate exiting 2026 with approximately $1.7 billion in cash.

Given this projected cash position, we are providing an early perspective on capital allocation for the H1 of fiscal 2027. Along with continuing to make growth investments in our business, we expect to deploy $400 million to retire the remaining US dollar bonds that come due in September. We also plan to repurchase $250 million worth of shares in the H1 of the upcoming fiscal year, which is equal to our total projected share repurchase in fiscal 2026. I'll provide further details on our full-year fiscal 2027 capital allocation expectations during our year-end call in May.

Now, let me provide you with our fiscal 2026 Q4 guidance. We expect total organic revenue to decline 4%-5%. From a segment perspective, we expect CES revenue to decline year-to-year at a similar rate to the past couple of quarters. Previously, I commented that we would see slight improvements in CES revenue performance in the Q4. While our bookings for the quarter were strong, short-term project bookings were below expectations and have delayed revenue improvements to fiscal 2027.

For GIS, we expect revenue to decline mid-single digits in line with prior quarters. And finally, insurance revenue growth is expected to be consistent with the prior quarter results, which is a reflection of continued software growth and flat insurance business process services performance impacted by the delay of bookings we experienced in Q3. We anticipate adjusted EBIT margin in the range of 6.5%-7.5%. Finally, our non-GAAP diluted EPS of $0.65-$0.75. This Q4 outlook implies updated full-year fiscal 2026 guidance as follows: total organic revenue decline of approximately 4.3%.

At a segment level, we expect CES to decline at a low single-digit rate. GIS is anticipated to decline at a mid-single-digit rate, and insurance is expected to grow at a low single-digit rate. We expect adjusted EBIT margin to be approximately 7.5%, and we expect non-GAAP diluted EPS to be approximately $3.15. Our full-year free cash flow expectation remains at approximately $650 million. With that, let me turn the call back over to Roger.

Thank you, Rob. We'd now like to open the call for your questions. Operator, would you please provide the instructions?

Thank you. We'll now begin the question-and-answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, press star one a second time. If you're called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.

To be able to take as many questions as possible, we ask that you please limit yourself to one question and one follow-up. Again, it is star one if you would like to join the queue. Our first question comes from the line of Jamie Friedman with Susquehanna. Your line is open.

Hi. Good evening. We have a lot of creativity and work going on here, and it is welcome by the investment community. I'd like to get your perspective, Raul, about the Fast-Track attributes that you're contemplating. If you look at one of the engagements you currently have or prospectively have, when you say things like repeatable scalable IP, could you go in a little bit to what sorts of services it is that you're providing or how the platform works? I know it's early, but I feel like at this point, some sort of more detail about what it is that you're doing would be helpful.

Great question. Let me just start that the key to doing this is obviously being in a position to understand where we have some value, existing value in the work that we do with our customers. Hogan's a great example. It's been around for a long time from the 1980s. Really wasn't invested in, cared for, nourished. Our customers, some of them stayed on, some of them left, but there's still a tremendous amount of a user base there. As I've brought in new product teams, these are more entrepreneurial-focused teams that have an ability to quickly look at an opportunity.

Now with AI, scale from sandbox to MVP in a fraction of the time than it was before, we've been targeting the areas that we want to invest in because, again, I think the biggest limiter I have is product teams that can execute. We've chosen where we have some legacy leverage, where there is something in what we do and what we did that provides some sort of defensible moat on the defense side and then gives us some offensive capability that somebody just can't enter and leapfrog us. Hogan is a great legacy platform.

This CoreIgnite is a great light layer, call it a gateway that connects new products that banks want in a very technology-easy, friendly way to connect. From a standpoint of value, we are creating value, and we are sharing that value in a non-traditional way. This is not rates times hours. This is not services. This is, in this case, it'll be sharing transaction fees. In this scenario, transaction fees are at a high rate, click rate, right, per day, per customer, per item that we are bringing to the table, meaning financial product that we're bringing to the table.

The attributes are replicability, scalability, IP, some defensive and offensive IP and architecture, and then, frankly, having the right team with the right background to quickly build and prototype and launch.I think this is a great example where we have started building. We've started talking to our customers. We've started engaging with partnerships. We've started announcing those partnerships before the product is ready to go. We're talking quarters, not years. We're talking months, again, not years, so the attributes across the board, and that's one in CES.

There's another offering within GIS called OASIS that we're going to launch. Our June Investor Day will be a day that we go into heavy detail. We will have demos there. We will have product teams there. We'll have customers there. Rob and I, in June, will have a much more detailed look at the next 24 months or 28 months, whatever's left in the 36-month timeline, and be able to give you a better sense as to the revenue ramp.

Personally, as I look back and I look at the development schedules that I originally approved and funded, and I look at where they are today, A, they're running ahead of schedule from a development standpoint, again, use of AI tools to get things done. And B, their time to revenue is faster than I originally thought. The time between now and June will let us fine-tune the model, let us look at what the ramp-up's going to be.

I think everything that you see in terms of the AI high flyers of incredible fast penetration and growth, we have an ability, if we select, if we invest, and if we build the right AI products to benefit from that much stronger rise in revenue and adoption. Again, I think we've targeted really well. We've got 6 right now. There's another probably 3-4 that are in the queue.

Again, the biggest issue I have is the right teams to execute on this and picking the right projects, right? They all have a shot at being super successful. As long as 4 out of 6 are successful, it's a win for us. Even if some aren't, we're going to learn along the way.

I'll drop back in the queue. I'm going to come back if there's room at the end. Thank you.

I'm happy to go into this. This is a higher gross margin or net margin profile, how we're pricing it. Happy to follow up on questions there as well.

Our next question comes from the line of Bryan Bergin with TD Cowen. Your line is open.

Good afternoon. Thank you. Maybe start on the guide. Just curious on the underlying drivers and assumptions you made on the growth rate within the underlying segments and businesses as far as CES, GIS, and insurance. Just how much of the CES improvement is in hand already? Just talk about as far as the insurance side of the equation, just what may have changed there in some of those ramps?

Brian, it's Rob. Thanks for the question. Our guide for all three segments, pretty consistent from a quarter-to-quarter perspective. Now, I mentioned last quarter that we were expecting a little bit of an improvement in CES in the Q4. The booking dynamics, as I said in the recorded remarks, the booking dynamics in CES were strong and strategic longer-term projects, different duration profile than the short-term projects. Based on the beginning pipeline for Q3, we expected to do a little better there, and the pattern of the H1 of the year continued into the Q3.

That delays the improvement. In the insurance business, where software is growing nicely, consistently all year, the business process services segment of insurance is about a flattish range in terms of revenue for Q4. That's the prediction. Now, again, coming into the quarter, we had a robust pipeline. A couple of deals we expected to close that would have driven incremental revenue in Q4 got pushed to booking in Q4 instead of booking in Q3. That is also a bit of a delay, which dampens the growth rate we had previously expected in insurance for Q4.

Understood. My follow-up just on the margin side. Maybe talk about the performance in Q3, then the guide for the Q4. Is there any kind of expense timing shifts there? As you think about drivers for margin improvement and cost takeout and maybe even beyond the Q4, just as you ramp deals that you do win, how should we be thinking about that as you get into the early part of next fiscal too?

In the quarter, we did a little better than we had expected. We had good resource management and savings from that. We had some one-time bennies that we didn't exactly know the timing. We didn't have it in our guide, and they hit in Q3. That is the part of the decline from quarter to quarter going into Q4. The absolute revenue comes down a little bit quarter to quarter. That's the remainder of the quarter to quarter underpinning of the guide. Now, we have extending out into fiscal 2027.

The Q4 guide is a good launching point heading into 2027. We are going to be pulling together all of our cost takeout, as we normally would do, all of our cost takeout plans heading into the new year during the next 60 days or so. We'll have a much better picture of the cost takeout detailed plans in 60 days. I would say that we have plenty of room for cost improvement and spending management.

We are utilizing our AI capabilities internally, which will help us drive cost reductions next year and into the future. We feel confident in our margin profile heading into next year. The particulars we'll know more in 90 days.

Our next question comes from the line of Jonathan Lee with Guggenheim Partners. Your line is open.

Great. Thanks for taking our questions. What have you seen across your client conversations in January as it relates to calendar 2026 spending intentions? How does that compare to last year? In those conversations, what gives you confidence around any potential improvement in pipeline conversion going forward, given some of the deal delays you've highlighted?

Let me hit it first, and then I'll let Rob comment. One thing that has been a factor that we've noticed in the last quarter is that we are getting a lot of opportunities that are driven by corporate spinouts, restructurings, and breakups. We have existing customers and new customers that are going through the business rationale and then the actual execution of those spinouts. Those spinouts require a tremendous amount of support from a system standpoint. We are getting a good amount of opportunities, both existing clients and new clients.

Again, that is a step up that I think is reflected by the macro environment, where it's easier now to potentially do deals and get things approved in various governments around the world. If you remember April last year, the tariff, we started the year with a lot of hope and promise. Then we had the tariff issue. I think those have been internalized as kind of a normal operating mode where people understand that their tariff situation is what it is, and it will change over time. It is almost like a volatile factor that is now factored in as part of normal planning.

That definitely provided some pause last year in the spring and summer. We're beyond that. I think that the realization that AI has a huge unlock of economic value and potential far beyond anything that we've been through before is absolutely resonating across C-suites.They're also being thoughtful about how to take the right approach with the right parts of the business, with the right partners.

While I think in some instances it may delay some decision-making, the delay isn't about stopping any sort of investment and innovation. Not that whatsoever. It's really about thinking how big their AI agendas will be rolled out and at what pace and sequence.

Just to add to what Raul just described. Just looking at the data, our pipeline for Q4 is robust. The win rates we experienced in the Q3 were very stable with the rest of the year. Pricing is, I'll describe that as stable as well. Indicators are pretty consistent for the three quarters of this year. There was definitely this mixed impact of longer-term projects versus shorter-term projects, which the longer-term projects are, I think the close rates have been pretty stable. The shorter-term projects, they haven't.

The close, there's been more delays, and there's been more carrying over from one quarter to the next in the pipeline. Tthat pattern, which has existed for all three quarters, we see it. I see it continuing into the Q4, and that's what's baked into the guide.

That's really helpful context. Just as a follow-up, I want to dig into the connect-don't-convert strategy. On that and sort of connecting the AI and few solutions, how do we think about any risks or potential client hesitancy there? How do you convince clients around the benefits of essentially not modernizing their tech stacks?

I think it's about optionality. Many clients have tried to do big lifts and shifts and have failed. I think a lot of factors are now coming together. One, much better AI-based toolsets for code conversion, which does two things. One, allows you to revisit the old legacy systems. Of course, we could be players in that scenario. More importantly, being able to build lightweight offerings that are AI-based that can be delivered very quickly. They can also be priced from our standpoint in a more disruptive and value-based way. I think it's a win-win.

I think that the era of rates times hours is ending. Now we're moving into a new era of value-based pricing. It will take longer than we all think because we have huge organizations, purchasing organizations, procurement organizations that have grown up doing that. I think it's less of a tech challenge than it is a biz process challenge and a procurement and thinking challenge in terms of who do you want your partner to be and how do you want their business model to work side by side with your business model. We're taking a very creative, innovative, and disruptive approach to all of this.

As you know, we've had a history, and we own it, of having, since these companies came together, a decline in revenue. We are committed to solving that issue, to getting it to zero, and then to growing again. We think AI is an incredible tailwind for us to do that if we position ourselves correctly. The investment that we're doing in Fast-Track is exactly that, to position us as great partners in their AI journey.

Our next question comes from the line of Brendan Biles with JPMorgan. Your line is open.

Thanks so much for the question. Thanks for sharing the results with us today. I love the refreshed look and the branding of the slides. Looks awesome. Question for me is on free cash flow. Seems like you outperformed versus at least what we had penciled in for free cash flow in the quarter.

Just want to confirm, is that consistent with your expectations, or did you outperform your expectations as well? What's the thinking on the full-year number staying at $650 million? I take it to the extent you outperform, is that just going allocating that cash flow into these kind of these Fast-Track initiatives to the extent there was outperformance? Thank you.

Thanks, Brendan. I'll take that one. We did a little bit better than we anticipated in the quarter. Just to step back up, for the full year, our pattern of quarterly free cash flow this year is different than the last several years in that we normally would have flat free cash flow in the H1 and produce 90% of our free cash flow in the H2 of the year. We pulled, and that was because of working capital dynamics. This year, we pulled forward the benefits of working capital into the H1 of the year. So it changed our normal SKU.

In the Q3, we also did a little bit better than we anticipated in a couple of areas, not materially. I do think that is more of a pull forward from Q4 into Q3 rather than adding to our full-year guide. Now, we always try to do better, right? We will keep working all elements of free cash flow and try to outperform, but right now, what I can see is we'll be on our original guide.

The deployment and to answer your question on deployment, we're really clear in our script where we're deploying our cash in the H1 for the fiscal year. We gave color on both repurchase and debt repayments.

Our next question comes from the line of Antonio Jaramillo with Morgan Stanley. Your line is open.

Thank you for the question. I want to go back to your comments on the pricing environment. How does pricing vary for each of the business segments? Where do you see the most change?

Our pricing dynamics are different in each segment depending on the profile of the engagement. Let me just take it step by step here. In GIS, where there are longer-term commitments, including at some engagements have capital, some engagements don't. The pricing would vary depending on the level of upfront commitment being made by DXC. Some engagements require more transition and transformation. The pricing structure of those contracts would look very different than a consulting contract, right?

Where it's people-related and skills-related and the value you're bringing to that engagement. Really, the same in the insurance business is different. Even within insurance, you have a software component to insurance, which is priced as typical software providers price their products. There's the BPS component to insurance that's priced more typically like an outsourcing contract. Each of the three segments have different dynamics. The level of upfront investment will determine part of those pricing dynamics. I will say that for all three, this year, our pricing has been stable for all three segments.

Got it. That's helpful. I wanted to follow up on the capital allocation priorities. It looks like the share buybacks will be ramping up in the H1 of fiscal year 2027, which is matching what you guys are going to do for this fiscal year. How do you balance that with investment as well?

Our first priority is investing to grow the business. That is our number one priority. We've also the other two priorities are equally important to us: maintaining the right debt profile, strong balance sheet, and return to shareholders. Once we set our investment levels that we require and determine how much incremental cash we have to deploy to the other two priorities, we will balance the right debt profile with what we feel like is the appropriate return to shareholders. So it's judgment.

You could see from all the actions we've taken for the last two years that we've been applying judgment along the way. With our cash balances we currently have and project to have to the end of the fiscal year, we feel confident in the cash generation and the cash projections. We thought it was appropriate this year to give guidance for the H1 of next year, which is a little unusual for us, but that should be a signal of confidence in our cash projections.

Let me just give a little bit of color. As investors and builders of AI products and services that we're bringing to market, we are benefiting from the incredible amount of compute that is available to us. I think what's happened in the last two years is that you've got a democratization, small d, of compute and an ability to have access to that for anybody to have access to that as a user, as a consumer, and as an enterprise. We clearly see the benefit and value and the fact that you can build incredible solutions in a fraction of the time at a fraction of the cost.

We are super confident in our ability to continue to invest. As I said before, the issue isn't the ability to invest in these. The issue is about having the right number of teams ready to go out and build them, sell them, and deliver them. I think it's just the backdrop of the environment today. As a big company building solutions or as an entrepreneur and a startup building solutions in an AI world, it's an incredibly faster, cheaper way of bringing value to market.

That's helpful, guys. Thanks. I'll jump back in the queue.

Our next question comes from the line of Keith Bachman with BMO Capital Markets. Your line is open.

Thank you very much. I wanted to go back to some of the initiatives to try to stimulate growth. A couple of questions. One is, how do you think about promoting CoreIgnite and others while also balancing margin expectations? As you mentioned, you have to build it, you have to promote it. That usually means an investment profile. I think it is the right thing to do to try to stimulate the top line. How do you balance those initiatives? I think, Rob, you started to address some of these new initiatives. How are you pricing them? Are you moving into consumption-based models? I have a follow-up if I could.

I think first and foremost, the ability to build these, again, in a very quick and capital-light and investment-light way, kind of underpins our financial flexibility in terms of how we price and how we capture value. I think we're moving towards value-based pricing. We're moving towards an ability, and we are absolutely going to be doing that. The other thing to not forget is that these startups inside of DXC have the benefit of a $12 billion company with 115,000 colleagues around the world with fully spun-up marketing and sales organizations.

We are investing in product. We are investing in solutions that are new and AI-centric, but then they get to benefit from the new branding, the new positioning, all the human capital that we've built around it. Those shared services that are here to support the corporation as a whole also support these new initiatives. We're benefiting from being large and from being legacy, but we're also benefiting from being fast and then the ability to go and use these tools to quickly build solutions and bring them to the marketplace.

Frankly, it gives us an ability to be more disruptive versus our competitors in pricing and to think about this as long-term value capture for ourselves and for our customers.

Thank you for that. As you think about, you guys have done an admirable job, certainly, on lowering your net debt, and some trade-offs have existed. At this juncture, I think part of it was also you wanted to clean up the business. At this juncture, I appreciate the capital allocation description you've given in the slide deck. How do you think about M&A to try to also use as a source to spur growth within that context of capital allocation?

We've said that we'd be open if we have the infrastructure that's ready to be able to have an accretive acquisition of a company that would help accelerate the business goals of one of our three offerings. We would absolutely look at it. We are looking at it. The ability to create products and services inside of our organization and bring those to market, A, we control more of it. There's less risk. There's less friction. We just have more control on all sides of the equation.

To the extent we can find a company with a solution or value proposition that clearly adds value to one of our offerings and clearly adds value to where we want to double down and invest in, we will absolutely look at that anywhere in the world. We have active teammates that are working on that every day, but A, I want to make sure that the foundation that we bring anything into is solid and good and accretive, and it will grow faster than it did independently.

DXC Technology (DXC) Q3 2026 Earnings Call Transcript

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