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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

dxc technology

I would now like to turn the conference over to Roger Sachs, Vice President of Investor Relations. You may begin.

Thank you, operator. Good afternoon, everybody, and welcome to DXC Technology's fourth quarter and fiscal year end twenty twenty five earnings call. We hope you had a chance to review our earnings release posted to the IR section of DXC's website. Speaking on today's call are Raul Fernandez, our President and CEO and Rob Delbeni, our Chief Financial Officer. Let me walk you through today's agenda.

First, Raul will share an overview of our results and provide an update on our strategic initiatives. Then Rob will take you through our financial performance, full year fiscal twenty twenty six guidance and offer some thoughts on our outlook for the first quarter. After that, both Raul and Rob will take your questions. Certain comments made during 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. You can find details of these risks and uncertainties in our annual report on Form 10 ks and other SEC filings.

We do not commit to updating any forward looking statements during today's call. Additionally, during this call, we will be discussing 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 that are in today's earnings release. And with that, let me turn the call over to Raul.

Thank you, Roger. Our fourth quarter results represent another important step towards our goal of achieving sustainable profitable revenue growth. We are gaining momentum with bookings up more than 20% resulting in a book to bill ratio of 1.2. This marks our second consecutive quarter above one point zero bringing us to a second half bookings growth rate of 24%, a clear indication of traction in the market and building the foundation to drive long term top line growth. Reversing eight consecutive years of revenue decline remains the highest priority for me, our leadership team and the entire DXC organization.

The rebuilding of our operational capabilities is deeper and more extensive than I originally appreciated, but the work the team is doing is addressing structural, operational and cultural issues that will better position us going forward. Great companies are built by teams of experienced people who share an intense passion to win. I am proud that we have recruited 22 great new members of our extended leadership team in the last fifteen months. Each brings exceptional skills with the intensity to win and in that time we also rotated out 14 executives. DXC has had significant turnover in top executive leadership since its inception and leadership stability is absolutely critical to ensuring we give our turnaround the time, attention and persistence it deserves.

In that spirit, I'm happy to announce that Rob and I have received equity grants designed to secure our continued leadership through fiscal year twenty twenty eight. These grants align our compensation with sustainable long term shareholder value creation. Another area of critical importance to us is to deepen our customer relationships and identify new opportunities to expand our pipeline. I recognize this gap in our organization and started rebuilding these capabilities from the ground up with an eye toward operational discipline and improved execution. My team and I have reviewed quota attainment data and segmented the existing population based on achievement.

We developed strict quantitative performance criteria for twenty twenty five year end reviews with a documented process. We held CEO calls with HR business partners and sales leaders to communicate changing expectations and initiated better reporting for tracking sales performance. In preparation for our new fiscal year, we completed a quota deployment audit to ensure proper coverage for fiscal year twenty twenty six, further aligned pay incentives for our sales organization and onboarded our first Chief Revenue Officer, TR Newcomb, someone I've worked with in the past and who brings an incredible amount of focus, energy and operational excellence to the role. Our work has led to continuous improvement in our systems, processes and pay structures, all of which will lay an even stronger foundation. DXC has been a significant global technology player for over forty years in four major technology cycles personal computing in the 80s, Internet computing in the 90s, mobile and cloud computing in the 2,000 era and now AI in 2020 and beyond.

This is a company with tremendous assets, loyal customers, deep and broad capabilities and a global footprint with local excellence. The impact of AI is just beginning to accelerate within our client base and AI spending is increasing year to year. This comes at a time when our customers are favoring further consolidation of their IT spending, putting DXC in a unique position to compete with the combined power of our full stack infrastructure and app management capabilities. We have built an early but strong track record of delivering real bottom line results for our customers in key areas including modernization, technical support, development time, testing, process improvement, deployment and maintenance by harnessing the power of AI. While it's very early in the Gen AI adoption cycle, it is clear to me that we are very well positioned to lead our clients into what I believe is the largest transformational technology opportunity of our lifetime.

One of my top commitments as President and CEO is to spend as much time with our current and prospective customers as possible. During my tenure, I've met with over 100 customers, which has equipped me to better understand how we can more effectively meet their changing needs and identify new opportunities for mutual growth. New logos of significant size have been scarce in DXC's recent history and this is something we have been laser focused on improving. We are thrilled to share that Carnival Cruise Line just tapped DXC to manage its critical infrastructure powering operations across the entire fleet. This was a highly competitive bid with ISG advising throughout the selection process and we won.

We won because we are uniquely qualified. We brought the full weight of our infrastructure capabilities, enterprise applications and technical muscle to the table and DXC was chosen to be their critical partner. Carnival is one of the largest cruise lines in the world that hosts over 6,000,000 guests a year. Their bar is very high. Everything must run safely and flawlessly from shore to ship with great customer experiences.

That's where we come in. We deliver complete operational confidence so Carnival can focus on their customers knowing every system is firing on all cylinders and running smoothly no matter where they are. This win isn't just about one client. It's a clear signal that we are a trusted partner and operator for some of the world's largest brands. Creating a winning culture, which sets the foundation for us to win consistently in the marketplace, is not an overnight mission.

It requires experienced leaders who are able to translate vision into action with sustainable results. Since becoming CEO, I have focused on increasing the clarity, consistency and transparency of internal communication, embedding a startup ethos that emphasizes flat, fast and learning focused collaboration and ensuring that we all think in terms of generating sound financial results while driving profitable growth, not just growth for growth sake. Over the past year, we've made targeted investments and brought in new leaders to jumpstart innovation across all our offerings, redesign and expand our AI capabilities and software platforms and streamline how we develop applications using GenAI. We expect fiscal twenty twenty six to be a year of continued disciplined execution to sharpen operations and drive efficiencies. Despite near term uncertainty over tariffs, we are clear on our strategy, confident in our team and committed to executing with the discipline required for DXC to generate sustainable and profitable growth.

Reflecting our confidence in the company's future, we will restart our share repurchase program. This underscores our commitment to delivering long term value to shareholders. With that, let me turn it over to Rob.

Thank you, Raul, and good afternoon, everyone. Today, I'll go over our fourth quarter results, touch upon our full year performance, and then provide guidance for the full fiscal year 2026 and the first quarter. Now starting with the fourth quarter. Total revenue of $3,200,000,000 was slightly above our expectations, declining 4.2% year to year on an organic basis. We delivered another strong quarter of bookings, up more than 20% year to year, resulting in a book to bill ratio of 1.2.

Growth was broad based across all of our offerings and markets. Adjusted EBIT margin was 7.3%, down 110 basis points year to year and like revenue slightly above our expectations. Performance was driven by investments in our employee base, improving the capability of our sales force and investments in marketing and communications and IT. Similar to the dynamics we saw during the first three quarters, the decline in revenue was offset by labor and non labor efficiencies. Non GAAP gross margin for the fourth quarter came in at 24.2%, down 40 basis points year to year and non GAAP SG and A as a percentage of revenue expanded 160 basis points year to year to 11.3%.

Our gross margin and SG and A performance were driven by the same factors just mentioned for adjusted EBIT. As a reminder, the year to year changes in our non GAAP gross margin and non GAAP SG and A are normalized for the reclassification of certain business development costs to SG and A. Non GAAP EPS was $0.84 down from $0.97 in the fourth quarter of last year, driven by lower adjusted EBIT, partially offset by a decline to non controlling interest and lower net interest expense. Now turning to our segments. GBS, which represents 51% of total revenue, was down 2.4% year to year organically with a profit margin decrease of two forty basis points to 10.9%.

The margin decline was driven by investments in our employees and to further build our industry leading insurance capabilities. Within GBS, consulting and engineering services had a second straight quarter of strong bookings, up nine percent year to year with a book to bill ratio of 1.22. The trailing twelve month book to bill for CES has now increased to 1.08. Last quarter, we noted an increase in larger projects in our CES pipeline and in the fourth quarter, we converted those opportunities to bookings. While these bookings have less revenue yield in the short term, they contribute to building our backlog and future revenues.

The growth profile of bookings in the quarter was more heavily weighted to enterprise applications and data and AI consistent with our growth strategy of CES. Organic revenue for CES declined 3.9% year to year reflecting ongoing market pressures on custom application projects. Insurance and BPS organic revenue grew 2.7% year to year. Our Insurance Services and Software business, which accounts for about 80% of the total, grew 1% year to year organically. Through the first three quarters of the year, the Insurance business grew at mid single digit rates.

Underlying performance in the fourth quarter was similar with the growth rate largely impacted by one time items. We have confidence that the growth rate for the insurance business will continue to perform at mid single digit growth rates for fiscal twenty twenty six. GIS, which represents 49% of total revenue declined 6% year to year organically, the second consecutive quarter of narrowing the year to year revenue decline. The improvement was driven by cloud offerings and workplace support services. Fourth quarter bookings for GIS grew 33% year to year with a book to bill of 1.28.

It was the second consecutive quarter of strong bookings exiting the year with a twelve month book to bill of 1.03. Profit margin declined 50 basis points year to year to 7% primarily reflecting our increased investments in our workforce. We continue to drive cost savings through optimization of software and data center costs. Now let me briefly touch upon our full year fiscal twenty twenty five results. Fueled by our strong performance in the second half of the year, full year bookings increased 7% year to year, significantly better than the fiscal twenty twenty four performance.

With bookings up 24% in the second half of the year, the book to bill ratio was 1.28 in the second half and 1.03 for the full year. Total revenue was $12,900,000,000 down 4.6% year to year on an organic basis with GBS declining 1% and GIS down 8.2. Adjusted EBIT margin expanded 50 basis points year to year to 7.9% driven by the execution of our cost reduction initiatives, which we accomplished with significantly less restructuring than originally estimated. Non GAAP diluted EPS was $3.43 up 11% year to year, primarily driven by a lower share count and a higher adjusted EBIT. Now turning to our cash flow and balance sheet.

For our full year fiscal twenty twenty five, we generated $687,000,000 of free cash flow above our most recent expectation of June largely driven by lower restructuring spend and better working capital management. In the year, we executed on our strategy of minimizing new financial lease originations and funding equipment purchases primarily through capital expenditures, which is a negative impact of free cash flow, but reduces our debt levels. As a result, capital expenditures increased year to year. Without this change in approach, cash flow would have increased year to year and CapEx would have declined. Total debt at fiscal year end twenty twenty five was equal to $3,900,000,000 down $213,000,000 year to year, including $298,000,000 of capital lease and asset financing pay downs.

Total cash on our balance sheet increased by approximately $570,000,000 year to year to $1,800,000,000 This was driven by our free cash flow generation and asset sale proceeds of approximately $190,000,000 As a result, we lowered net debt by $785,000,000 to approximately 2,100,000,000.0 As a reminder, we do not include asset sales in our reported free cash flow. At the beginning of fiscal twenty twenty five, our financial priorities centered around strengthening our balance sheet, creating financial flexibility and reducing excess capacity with the help of restructuring spending. We accomplished these objectives while spending less than originally planned on restructuring. With our improved financial position, in fiscal twenty twenty six, we will focus on the following financial priorities. We will continue to invest in our business to accomplish our top priority, driving sustained profitable revenue growth.

We will continue to reduce outstanding debt by minimizing financial lease originations and paying down a portion of our senior notes maturing in January of twenty twenty six. And finally, we plan to return $150,000,000 to shareholders in fiscal twenty twenty six in the form of share repurchases. Now let me provide you with our full year fiscal twenty twenty six guidance. We expect total organic revenue to decline 3% to 5%. GBS is projected to be down low single digits with consistent performance during the year, reflecting the larger, longer duration deals booked in the second half of fiscal twenty twenty five and increased economic uncertainty, particularly with shorter term project based services.

In GIS, we are projecting organic revenue to decline mid single digits, which reflects an improvement to last year's rate of decline. We expect adjusted EBIT margin to be between 7% to 8%, which reflects our intent to continue to build our revenue growth capabilities and invest in the business. With this revenue and adjusted EBIT margin guidance, we expect non GAAP diluted EPS to be between $2.75 and $3.25 We expect free cash flow for the fiscal year twenty twenty six of about $600,000,000 reflecting our EBIT guidance and about $30,000,000 of increased restructuring spending as we complete the execution actions planned in fiscal twenty twenty five. Consistent with prior years, free cash flow generation will be strongest in the second half of the fiscal year. And now for the first quarter of fiscal twenty twenty six, we expect total organic revenue to decline between 45.5%.

We anticipate adjusted EBIT margin to be in the range of 6% to 7%, a function of lower revenue and first quarter seasonality with margins improving throughout the second half of the year. And finally, we expect non GAAP diluted EPS of $0.55 to $0.65 Before wrapping up, I want to highlight that beginning in the first quarter, we will report our financial results under a new segment structure that better aligns with how we now run the business. We will report three segments: Insurance Services and Software, Consulting and Engineering Services and GIS, which will include Cloud and ITO, Modern Workplace, Security and Horizontal BPO. We plan to provide restated historical results under our new reporting segments prior to the release of our fiscal first quarter results. And with that, let me turn the call back over to Roger.

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

Yes. Thank you. Your first question comes from Brian Bergen with TD Cowen. Your line is open.

Hey guys, good afternoon. Thanks. Wanted to just kick off on demand and the broader question about kind of what you saw as you move through the quarter and then post quarter April into May. And if you can comment on kind of what you've been seeing by industry as it relates to the ones that are more product based that would have direct implications for tariff dynamics versus those that are not? So any commentary as you've seen demand evolve, particularly if you've seen anything in the most recent week change just given I guess better directionality in geopolitics?

Sure. It's Raul here. Let me start. Look, we've had really good progress and good wins at the mega level $100,000,000 plus and at the strategic level the 5,000,000 to $100,000,000 The $5,000,000 and under is the category that's highly discretionary and easier for corporations to turn on and turn off. There are some segments where there has been some softness since early April.

Yes. As we hi, Brian. As we look at the pipeline, consumer industries and retail, the pipeline has dropped particularly in project based services. The so it's been concentrated the drops have been concentrated there and a little bit in also in the media and entertainment industry, which is not obvious why, but it has in those two industries. The pipeline has gone down a bit.

The rest of the industries are all strong, but banking, capital markets, manufacturing, public sector, insurance are all really robust for us. The other thing Rahul mentioned, I'll just second, is that project based services pipelines are solid, meaning the below $5,000,000 but really robust in the we call them the strategic segments between 5,000,000 and $100,000,000 which are more complex, a little longer in duration, the pipelines there are really solid.

Okay. Okay. Appreciate that. And then for my follow-up on free cash flow. So the $600,000,000 target, can you help can you bridge from fiscal twenty twenty five levels to this 2026 target?

And also speak to kind of free cash flow post finance lease expectations as you go through the year?

Yes. The bridge going year to year into '26 is simply the 2025 result adjusted for the after tax EBIT guidance that we gave and the increase in restructuring by about $30,000,000 So that implies the rest of the dynamics of free cash flow are essentially flat in our guide. And the chart we showed in the earnings presentation is meant to demonstrate the strength of our underlying free cash flow and the consistency of performance. And while the number the headline number for free cash flow was down year to year 24% to 25%, when you take into consideration the lease originations, capital lease financing that we have done in the past and factor that into the equation, if we had in the past instead of financing those capital purchases, run them through capital and free cash flow, which shows that we're improving free cash flow consistently over the last two years. So strong underlying, very good underpinning of free cash flow performance for the company.

Okay. I know the capital finance lease piece was like just under around $300,000,000 for this past fiscal year. Do you expect that to be comparable? Or do you still see that being

see those same because the originations were far lower in fiscal twenty twenty five, that amount is going to drop year to year. So yes, that's going to decline nicely in 2026.

The next question comes from Jonathan Lee with Guggenheim Partners. Your line is open.

Great. Thanks for taking my questions. First, can you help decompose what's contemplated in your outlook at both the high end and the low end of the range from a macroeconomic perspective?

Yes. Hi, Jonathan. So we've and let's take the first quarter revenue outlook of minus 4% to minus 5.5. In that range, we've left room at the low end for uncertainty. So we traditionally have given a one point range one quarter out.

We widened it to 1% to give us that room at the low end. So we see that exposure sitting here today, but we left room for it. And we gave a traditional two point range on the full year '26, But we did account for similar to first quarter, we did account for within that range some exposure at the low end if conditions deteriorate. So we've taken the uncertainty we think we've taken the uncertainty into account in both the first quarter and full year guidance.

Appreciate that color. And just as a follow-up, how would you characterize the pricing environment in terms of what you've seen through the quarter and how that may compare to what you saw last year?

Yes. The for us, the pricing environment has been very stable. And when I say that, for us in particular, for mega deals, we've made improvements as we have renewals coming due. So that environment has been favorable for us. In project based services, everything below the mega deal, both strategic projects in the 5,000,000 to $100,000,000 category and the below $5,000,000 categories have both been very stable for us.

Next question from James Faucette with Morgan Stanley. Your line is open.

structurally, your Gen AI spend Gen AI spend generally has been increasing. How is that being reflected in your P and L now? And where are seeing that show up? And I guess maybe more importantly, how fast are these projects growing? And what's their relative size compared to your typical engagements?

Yes. Look, the spend for major corporations in the last two years have been in the smaller side. So it's the $5,000,000 and under. And they've been pilots to prove out proof points meaning faster, better development time, faster, better documentation, etcetera. And we see across every industry a considerable amount of pilot work and that's an area that I'm super excited about because we've got a great set of building blocks that we're putting in place with regards to replicability, with regards to scale of our solutions.

And that's key for us in terms of taking the opportunity, the AI opportunity for our clients in different industries and being able to bring them real results, real case studies that have ROI behind them and having them quickly adopt. So I'm super excited about the demand on that front. We are still very, very early in the cycle, but we are very, very, very well positioned for several reasons. And let me just add two more. One of the clear considerations for companies as they're looking to engage any part of their business functions into any sort of Gen AI work is to look at their data readiness, their infrastructure readiness and their people and process readiness.

And we are uniquely positioned to have incredible insight there. So I feel very, very strong about our early returns on that front with our customers and the foundation we're building because that foundation will be part of our growth in the future.

Got it. Appreciate that. And it seems like you're seeing increasing bookings. Obviously, the time to convert that to revenue is takes a little while, and that makes sense. But I'm wondering if you can talk about how the duration of the new contracts you're signing compares to what you've done in the past and how that may be improving, if at all, revenue visibility?

I think number one, and I'll turn it over to Rob in a second, is we're building a bigger, more qualified pipeline through the fundamental restructuring and rebuilding of our sales operation. I went into a lot of detail in the remarks to begin with around that because it gives you some insight as to the level of foundational work that was needed in that particular area. And now with a great new leader that I've worked with in the past here in Newcomb, taking that and operationalizing it and scaling it is key for us. And we've got the building blocks in place now. And frankly, if you think about the type of work that we've done in sales, we're doing similar work across every business function.

And now with our leadership team in place, we've got not just the foundation set in the right direction, but leaders that can continue to grow.

James, it's Rob. Let me just throw in one more comment. So in our CES business, where the pipeline has been very good and the bookings were very strong in the strategic project category, that means between 5,000,000 and $100,000,000 Those projects are typically more complex. They're longer in duration. So we are experiencing within the CES business that longer duration entering into backlog and revenue projections going forward.

So that's reflected in our guide. So that became more pronounced in the third quarter and into the fourth quarters where it was really evident to us. So if we continue to see, and hopefully we will, the bookings in that category increase because they're strategic enterprise apps related as opposed to custom apps. It will be really good for the business, but the yield turn the conversion into revenue is extended a bit versus traditional custom apps smaller projects.

The next question comes from Keith Bachman of BMO. Your line is open.

Yes. Thank you very much. My question follows that is more broadly, what are the conditions in order to generate revenue growth? And so I think investors are a little bit disappointed with the fiscal year twenty twenty six guidance, call it negative four at the midpoint. You talked about maybe duration is impacting that conversion of what appears to be solid bookings into revenues.

But how what longer term message do you want to leave with investors about what would cause the business to turn to a positive number? And don't know if you want to venture this far, when would that be?

Sure. So the foundation elements there are both quantitative and qualitative. On the quantitative side, we spoke a little bit about the progress we've made in bookings, the trailing book to bill and also the increase in size and quality of our pipeline. That's key. The size and quality of our pipeline and also the effectiveness of our ability to win those are all part of execution and having better sales and marketing capabilities and that's both in terms of human capital and actual materials that we're bringing to market are a key to that.

So for me, falls into two areas. Is the foundation in place, meaning the stories in place, the solutioning in place, the bid and proposals in place, the people to lead those? Do we get the opportunities? Absolutely get the opportunities. Can we execute?

Yes. Can we execute at scale? That's the key in terms of timing. How quickly can we get to scale? And again, the rebuild was pretty substantial.

We've got that in place and we've got key leaders in place. As we go throughout the year. Feel that we'll have better insight as to when we'll see the turn.

Okay. Maybe my follow on then is, do you think the underlying markets you serve are growing and you're seeding share? Or do you think the markets that you serve, not the broader IT services, are contracting and you're doing better, so to speak? And I'd like to hear within that context, maybe you could flush out a little bit on the Carnival Cruise Line deal about why do you think that you won that deal and how important was price in the ultimate conclusion?

Yes. Great question. We have more than enough opportunities in every vertical that we serve and every geography that we're in. AI is not an AI adoption isn't segmented by geographies or verticals. It's happening across every industry and every company.

So the opportunity is there. That's a full stop. Our ability to win is executing on the big and small things. And one of the things that I'm reflecting on which has been great with regards to Carnival is that I was in one of the very early pitches with the team, new teammates that had just joined us were part of the bid and proposal and solutioning team. And we competed against 12 others and it was a very, very good competition at the end.

We won across the board on all the key metrics. But it wasn't down on price. It was on capability. It was on being a proven partner. It was on having the foundation technical foundation leadership partnership to take them to another level.

And we were able to clearly convey that in terms of what we bring to the table and that was a great proof point and a great win. The key here is to scale that over and over again. Demand is there. We have presence. We have customers.

We just have to scale the winning emotions that led to a great, great new partnership with Carnival.

Okay. Thank you very much. I'll cede the floor.

The next question comes from Darrin Peller with Wolfe Research. Your line is open.

Hi, thanks. This is Paul Abrakt on for Darrin. So now that we're a few quarters into the revamped go to market approach, can you just touch on what the company's cross sell motion looks like today? And as you're improving engagement with clients and helping build their understanding of all DXC's offerings, are you seeing incremental demand from GIS clients for the GBS offerings?

Yes. We've recently begun to hold client engagement insight forums where we bring multiple clients across different industries together to really talk about the current challenges, the opportunities there are with AI, the proof points that we've got with real case studies and real return on investments. And they've been great to participate in. I've been in a couple of them. And what's clear is that when customers appreciate the full breadth of capabilities that we have from the infrastructure side all the way to the application and AI and the custom development side, we are one of only a handful of players that both have the end to end capabilities and also can deliver it globally with local excellence.

So we are very, very well positioned to continue to build on that. We have to just get the motions in place to scale solutioning, to scale pre marketing, to target opportunities better within our existing customer base and turn that into revenue quicker.

Great. That's helpful. And then Rob, if we look at the margin guide for seven to 8% for the year, can you just walk us through the bridge from the fiscal twenty twenty five margin to this range? And then you're guiding to 6% to 7% for the first quarter. So just curious on the drivers for expanding margins throughout the year?

Yes. So the from the mid to the midpoint, the drop is about 40 basis points to midpoint of the guide on a year to year basis. And it is a combination of the revenue declines offset by cost disciplined cost management, which we demonstrated we are capable of achieving in fiscal twenty twenty five. So we're going to repeat that to offset any revenue declines. And then we have other cost reductions in excess of that to cover investments for the most part, but we have left room in our guide for an increase in investments year to year.

And bottom line, that really accounts at the midpoint for the decline in margin is leaving room for investments to help us continue to progress on this growth journey. So that is the number one factor in the margins at the midpoint. Again, we'll like we did and as we did in 2025, we'll monitor that throughout the year and invest appropriately and make sure we're getting the yield we need to from the investments.

Your next question comes from Jason Kupferberg with Bank of America. Your line is open.

Hi, good afternoon Raul and Rob. This is Tyler DuPont on for Jason. Thanks for taking the questions this evening. Raul, I wanted to start by asking about the current leadership structure. You mentioned you've onboarded 22 give or take new members, if I heard you correctly, to the extended leadership team since you've been at the helm of DXC.

In the new three year employment agreement was interesting to see this evening. So at this point, what gives you the confidence that you have all the building blocks in place to improve the second derivative and growth rate and ultimately end up in positive territory?

things that gives me confidence is that these great leaders that I've worked with in other companies have voted with their feet and they've joined us. They see what I see. They see an opportunity to take an incredible company that has incredible customers and solutions that have been deployed and use that as a launch pad to really, take advantage of the AI opportunity that's in front of us. And so I I'm very encouraged that, you know, we've been able to get the caliber of new talent in. And, again, some like TR are just in for a month or two.

Some have been here for a year. But in total, I've been here fifteen months. And I think that the team that we've got in place has both the experience and the capacity from an execution standpoint to take what we have been fixing and building and scale it.

Okay. Great. And so I guess as a follow-up, I mean, have been several bookings related questions asked tonight, I thought I might be able to pile on and ask one more myself. But from a slightly different lens, it was encouraging to see book to bill on an LTM basis above one for both GBS and GIS. I think that's the first time since June of twenty twenty three that we've seen that.

But just given we've seen a decent amount of these contracts moving from pipeline into bookings and then ultimately into revenue. Just from a sustainability standpoint, what's the level of visibility that DXC has into being able to backfill that pipeline to make sure that once the bookings convert to revenue, we're still on a strong footing?

So we have the visibility begins with the opportunity pipeline. And we have a pipeline that supports sustainability. And we have confidence that pipeline will progress, turn into actual bookings and then convert to revenue. So it all starts with opportunity identification pipeline and progression. And we've improved performance in all areas throughout 2025, and we expect to continue to both improve that performance and progress the current pipeline which is good and continue to add more opportunities as we progress throughout the year.

And we've talked a lot about the pipeline, the opportunities both quantitatively increasing, but also just from a qualitative standpoint and from a renewal standpoint, we're also more successful in renewing existing contracts on terms that both the customer and we are happy with. So that's another factor in terms of being able to build a solid foundation to growth. But it really does begin and end with a better, bigger qualified pipeline and then getting that timed correctly so that we can convert that to revenue and building it quarter over quarter to a point where mathematically you can see a trajectory that's positive.

Great. Well, thank you both. That's very helpful.

The next question comes from Jamie Friedman with Susquehanna. Your line is open.

Hi, good evening. Thanks for taking my question. I wanted to ask about insurance. So are you did I hear you say that you're going to break that out as a segment in more detail? Was wondering if that's the case and I heard you wrong, I'm sorry.

And then if so, what the rationale for that? That's the first one on insurance. And also on insurance, could you just revisit where you are in the revenue recognition? I remember there was some journey between the like term and license and subscription. Is that still part of the plan?

Is that underway? Where are we in that process? Thank you.

So Jamie, it's Rob. We are going to break out you did hear that correctly, we're going to break out insurance as a separate segment beginning in 2026. And the rationale for that is simply it's a reflection of how we manage the business. And we the three segments that we are going to be disclosing in 2026 are the management system we use internally, right? And that's so that's the rationale.

Your last question, I think it's related to in the past, we've discussed progressing and developing our SaaS business within insurance. And that is a longer term strategy that we have. We've started down that road. And as we progress down that journey, we'll think about the appropriate time to break that out separately as we report insurance as a separate segment.

Okay. Thanks for that Rob. And then for my follow-up, by the way, like a lot of these new slides, the Slide six on the technology innovation cycles is helpful. I guess bigger picture role, do you feel like if you look at this continuum, you know, where you put Internet, mobile, cloud, AI, I'm just looking at slide six, is this like, some of these technologies that think are can be deflationary for the service provider, some create more advantage. How do you feel about your hand and your view of the technology estate relative to what's going on in tech innovation right now?

Yes. No, I feel great. I think that and I spoke about it earlier. Our insight in terms of our customers with regards to their infrastructure, their people, their processes, their data readiness, that insight is incredibly valuable and it makes us best positioned to help them take on journeys in the AI front that are both targeted and meaningful and that have a real ROI. So for us, it's marrying the existing knowledge and relationships that we have with the proven capabilities that we've deployed across multiple industries that have real return on investment and cross selling that more effectively and frankly just being better at communicating the real results that we're seeing.

But we are very, very well positioned if you look at that at that set of technology supercycles that you were referring to, I started my career after the PC supercycle and the Internet supercycle. And I believe that this actually has more disruption and more capability to really change how companies operate globally, and we're in a great position to be their partner.

DXC Technology (DXC) Q4 2025 Earnings Call Transcript

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