Unisys Earnings Call Balances AI Gains and Headwinds

Unisys ((UIS)) has held its Q1 earnings call. Read on for the main highlights of the call.

Unisys’ latest earnings call painted a mixed picture for investors. Management highlighted clear progress in margins, AI-driven efficiency and strong deal momentum, yet these gains are offset by constant-currency revenue declines, a GAAP net loss and negative free cash flow, leaving the near-term outlook balanced between improvement and ongoing pressure.

Revenue Ticks Up, But Currency Masks Underlying Decline

Unisys reported total revenue of $438 million, up 1.3% year over year on a reported basis. However, revenue excluding license and support was $372 million, up 3.1% in reported terms but down in constant currency, signaling that underlying demand remains soft despite headline growth.

Deal Momentum Builds With Strong TCV Growth

Total company TCV reached $274 million, rising 33% year over year and signaling healthier demand for Unisys’ offerings. New business TCV climbed to $158 million, up 16% sequentially and 45% year over year, marking the company’s strongest new signings quarter since late 2024.

Book-to-Bill and Backlog Underscore Future Workload

Unisys reported a trailing 12‑month book‑to‑bill of 1.2x for both the total business and Ex‑L&S, indicating more work signed than delivered. Backlog ended the quarter at $2.96 billion, up 2.4% from year‑end, giving the company a solid base of contracted revenue despite current top‑line pressure.

AI-Driven Margins Offset Top-Line Weakness

Total company gross margin improved to 25.7%, up 80 basis points year over year, reflecting better execution. Ex‑L&S gross margin expanded to 19.5%, up 170 basis points, with management crediting intelligent automation and workforce optimization for much of the improvement.

Non-GAAP Profitability Trends Move in the Right Direction

Non‑GAAP operating margin reached 4.5%, an improvement of 170 basis points year over year, showing progress toward profitability targets. Adjusted EBITDA of $46 million translated to a 10.6% margin, while SG&A fell by $5 million and the company reiterated its 2026 cost‑saving plans.

AI Wins Highlight New Client Traction

The company called out several notable AI‑enabled wins, including multiyear agentic service desk deals covering thousands of U.S. restaurants and an Australian deployment for roughly 11,000 employees. Additional wins included a DSS engagement with a large U.S. financial client, expansions with ENAIRE and a major U.S. community college system, and a new AI data center support deal with a global OEM.

Recognition and New Tools Bolster Competitive Positioning

Unisys gained industry recognition from Avasant, Everest, HFS and an elevated position by Gartner in digital workplace services, reinforcing its credibility in next‑gen infrastructure and AI. Product updates such as AB Suite enhancements and an AI developer toolkit for ClearPath Forward aim to make core applications more AI‑ready and easier to test.

Balance Sheet Leverage and Liquidity Show Gradual Improvement

The company ended the quarter with $380 million of cash, down from $414 million at year‑end, but noted improving leverage metrics. Net leverage inclusive of pensions declined to 2.9x from 3.2x a year earlier, and Unisys highlighted an undrawn ABL facility and no major debt maturities until 2031 as liquidity supports.

Talent Stability and Delivery Capacity Support Strategy

Management emphasized workforce stability, with trailing 12‑month voluntary attrition at 11.1%, which is relatively low for the sector. The company is expanding forward‑deployed engineering and investing in upskilling and AI delivery accelerators to support higher‑value projects and field services expansion.

Constant-Currency Revenue Declines and Segment Softness Persist

On a constant currency basis, total revenue fell 4.5% year over year, revealing pressure beneath the reported growth. By segment, Digital Workplace Solutions declined 6.5%, Cloud, Applications & Infrastructure slipped 2.4% and Ex‑L&S ECS fell 2.5%, while L&S revenue dropped 12.4% due to renewal timing.

Free Cash Flow Turns Negative Amid Higher Outflows

Free cash flow swung to negative $26 million versus a $13 million positive figure a year ago, largely due to interest timing, including an 18‑day stub period. On a pre‑pension basis, free cash flow was modestly positive at $2.9 million, but the company expects substantial remaining pension contributions this year that will weigh on reported cash flow.

GAAP Loss and Upcoming Noncash Charges Weigh on Optics

Unisys posted a GAAP net loss of $36 million, or a diluted loss of $0.50 per share, in the quarter. Management cautioned that elevated noncash expenses tied to pension annuity actions and legal or entity streamlining later this year will further pressure GAAP net income, even as non‑GAAP metrics improve.

Digital Workplace Margins Pressured by Mix

DWS gross margin slipped to 13.5% from 14.2% a year ago, as exited clients and the growth of lower‑margin Device Subscription Service impacted profitability. Management noted that DSS carries heavier hardware components, which structurally compresses margins even as it drives revenue.

Guidance for 2026: Improving Margins Amid Revenue Decline

Unisys reaffirmed that 2026 revenue will decline 6.5% to 4.5% in constant currency, or about 3.5% to 1.5% on a reported basis, with Ex‑L&S revenue also falling and L&S guided to $415 million. For the year, the company is targeting non‑GAAP operating margins of 9%–11%, Ex‑L&S gross margin gains, SG&A savings and full‑year free cash flow around negative $25 million, with Q2 revenue of roughly $450 million and a non‑GAAP operating margin near 5%.

Unisys’ earnings call leaves investors weighing solid operational progress against real top‑line and cash constraints. AI‑driven margins, strong new business signings and a growing backlog suggest a healthier core, but declining constant‑currency revenue, GAAP losses and pension‑related cash and noncash headwinds keep the story firmly in “work‑in‑progress” territory for now.