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DXC Technology reported fourth-quarter revenue below expectations, citing weaker discretionary technology spending and execution issues. The company said profitability and free cash flow exceeded guidance, supported by improved spending management and non-recurring items.
On the company’s fourth-quarter and fiscal 2026 earnings call, President and CEO Raul Fernandez said DXC delivered “a strong quarter on profitability,” with adjusted EBIT margin and free cash flow ahead of guidance. Revenue came in at just over $3.1 billion, missing DXC’s organic revenue guide by about $75 million, or roughly two percentage points.
Fernandez said the shortfall reflected both demand and execution, adding that DXC is working on tighter in-quarter conversion and “smaller, faster start opportunities” that can be sold and delivered within the same period.
CFO Rob Del Bene said total fourth-quarter revenue was $3.1 billion, down 6.6% year over year on an organic basis. He attributed the decline to “increased weakening of discretionary spending on short-term services projects,” particularly in Global Infrastructure Services (GIS), where revenue was affected in both the U.S. and Europe.
Adjusted EBIT margin was 7.6%, slightly above DXC’s guidance range and up 30 basis points from the prior year. Del Bene said the margin performance reflected spending management and non-recurring items, partly offset by lower revenue. Non-GAAP earnings per share were $0.77, at the high end of guidance.
Bookings declined about 14% from a year earlier, and the quarterly book-to-bill ratio was 1.07. Del Bene said the decline reflected a difficult comparison with the prior-year quarter, which included large renewals, as well as lower short-term project-based services in both GIS and Consulting and Engineering Services (CES).
CES revenue declined 3.9% year over year and represented about 40% of total revenue. Enterprise applications grew in the quarter, while custom applications weakened due to short-term discretionary project delays.
GIS revenue fell 10.6% year over year and represented about 50% of total revenue. Del Bene said project-based services pressure worsened, and weakness extended to resale-based discretionary projects for the first time this fiscal year.
Insurance revenue grew 4% year over year, driven by high-teens growth in the software business. DXC cited customer migrations to its cloud-based Assure platform and adoption of AI-enabled Smart Apps.
For fiscal 2026, DXC reported total revenue of $12.6 billion, down 4.8% year over year. CES revenue declined 3.8%, GIS revenue declined 7.2%, and insurance revenue increased 3.6%.
Del Bene said the full-year performance reflected macro uncertainty and pressure on discretionary project-based spending. Full-year bookings declined about 6%, with a book-to-bill ratio slightly below 1. CES posted a full-year book-to-bill ratio of 1.1, while GIS was 0.94.
Adjusted EBIT margin for the year declined 20 basis points to 7.7%, which Del Bene said was largely due to investments in offering development, sales and marketing. Non-GAAP diluted EPS was $3.23, down 6% from the prior year.
Free cash flow totaled $713 million for fiscal 2026, up from $687 million the prior year and ahead of DXC’s expectations. The company repurchased $250 million of shares during the year, nearly 18 million shares, representing almost 10% of shares outstanding. Del Bene also said DXC reduced debt through $808 million of cash payments since the start of fiscal 2025, including bond prepayments and capital lease reductions.
DXC expects fiscal 2027 total organic revenue to decline 3% to 5% year over year, with the pace of decline improving by three to four percentage points in the second half of the year. Del Bene said the guidance assumes no change in the current macro environment.
By segment, DXC expects GIS revenue to decline in the mid-single digits for the year, with improvement in the second half as headwinds from prior contract losses ease. In CES, revenue is expected to decline in the mid-single-digit range throughout the year, reflecting continued project-based services pressure. In insurance, DXC expects growth in line with fiscal 2026, with improvement through the year driven by expected new customer contracts and AI-based software solutions.
The company expects fiscal 2027 adjusted EBIT margin of 6% to 7%, non-GAAP diluted EPS of $2.40 to $2.90, and free cash flow of about $600 million. For the first quarter, DXC expects total organic revenue to decline 6.5% to 7.5%, adjusted EBIT margin of about 5%, and non-GAAP diluted EPS of about $0.40.
On the guidance, Del Bene said the midpoint assumes the current macro environment continues, with results potentially trending toward the high end if conditions improve and toward the low end if they deteriorate. Fernandez added that DXC took a “very, very conservative approach” to the expected fiscal 2027 revenue contribution from new AI-related offerings.
Fernandez said DXC is working to transform into an “AI-led company” while expanding margins and free cash flow. He described the company’s “Customer Zero” approach, in which DXC uses itself as the proving ground for AI tools before offering them to clients.
Fernandez said every DXC employee now has access to enterprise-grade AI tools, an internal knowledge hub, AI playgrounds, and internal agents designed to support responsible AI use. He cited an internal four-week AI challenge in which more than 100 teams built nearly 1,300 working AI agents.
DXC also previewed two AI-related offerings: CoreIgnite, which Fernandez said helps banks modernize capabilities such as buy now, pay later, stablecoin and remittance without changing core banking systems; and OASIS, an agentic orchestration platform for managed services. Fernandez said OASIS launched with 10 customers on April 28 and contributed to a new logo win with a major European insurer.
Fernandez said AI is both an opportunity and a potential threat, but emphasized that about 80% of DXC’s revenue is already tied to outcome-based categories, including fixed-price and volumetric pricing. He said this creates an opportunity to use AI to improve efficiency, throughput and margin across existing contracts.
Fernandez said DXC advanced to the final stages of 13 large opportunities in the quarter, representing more than $2 billion of potential total contract value. On a dollar-weighted basis, DXC won 32%, lost 40%, and about 28% remained outstanding. He said he expected a higher win rate.
Fernandez said pricing was not the issue in recent large-deal losses. Instead, he said DXC sometimes failed to demonstrate the right capabilities at the technology, industry, or company-specific level, and that the company is applying lessons from wins and losses to improve solutioning and positioning.
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