DXC Technology (DXC) AI Stock Analysis

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DXC Technology

(NYSE:DXC)

46Neutral

DXC Technology's stock is rated at 46, reflecting its current challenges in profitability and revenue growth. While the earnings call showed some positive aspects like strong cash flow and improved bookings, the technical indicators and valuation metrics suggest caution. The company's efforts toward strategic growth are promising, but the near-term outlook remains hampered by declining revenues and profitability issues.

Positive Factors

Cost Management

Margin outperformance in the quarter is largely attributed to disciplined cost management, uplifted by a one-time +50bp benefit from equity compensation savings.

Free Cash Flow

FCF guide for FY25 was raised by 14% to $625M, with benefits from OM strength, deferred restructuring, and NWC efficiency.

Insurance Services and Software

Insurance Services and Software remains a bright spot, delivering +5.6% y/y organic growth.

Negative Factors

Bookings Growth

Tepid bookings in the first half of FY25 underpins growth deceleration in F4Q and likely into early FY26.

Investor Skepticism

This remains a show-me story; quarterly execution is key, and investor skepticism remains.

Revenue Guidance

4Q revenue guide underwhelms a bit with organic CC contraction forecasted at -5.5% to -4.5%, due to the impact of weaker 1H25 bookings.

DXC Technology (DXC) vs. S&P 500 (SPY)

Market Cap

$2.91B

Dividend YieldN/A

Average Volume (3M)2.55M

Price to Earnings (P/E)268.0

Beta (1Y)1.19

Revenue Growth-5.65%

EPS Growth78.20%

CountryUS

Employees130,000

SectorTechnology

Sector Strength68

IndustryInformation Technology Services

Share Statistics

EPS (TTM)-0.42

Shares Outstanding181,048,550

10 Day Avg. Volume1,210,712

30 Day Avg. Volume2,545,637

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)0.00

Price to Cash Flow (P/CF)0.00

P/FCF Ratio0.00

Enterprise Value/Market Cap2.31

Enterprise Value/RevenueN/A

Enterprise Value/Gross Profit2.18

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$22.00

Price Target Upside36.90% Upside

Rating ConsensusHold

Number of Analyst Covering6

DXC Technology Business Overview & Revenue Model

Company DescriptionDXC Technology Company, together with its subsidiaries, provides information technology services and solutions primarily in North America, Europe, Asia, and Australia. It operates in two segments, Global Business Services (GBS) and Global Infrastructure Services (GIS). The GBS segment offers a portfolio of analytics services and extensive partner ecosystem that help its customers to gain rapid insights, automate operations, and accelerate their digital transformation journeys; and software engineering, consulting, and data analytics solutions that enable businesses to run and manage their mission-critical functions, transform their operations, and develop new ways of doing business. It also uses various technologies and methods to accelerate the creation, modernization, delivery, and maintenance of secure applications allowing customers to innovate faster while reducing risk, time to market, and total cost of ownership. In addition, this segment offers business process services, which include integration and optimization of front and back office processes, and agile process automation. The GIS segment adapts legacy apps to cloud, migrate the right workloads, and securely manage their multi-cloud environments; and offers security solutions help predict attacks, proactively respond to threats, and ensure compliance, as well as to protect data, applications, and infrastructure. It also provides IT outsourcing services to help customers securely and cost-effectively run mission-critical systems and IT infrastructure. In addition, this segment offers workplace services to fit its customer's employee, business, and IT needs from intelligent collaboration; and modern device management, digital support services, and mobility services. DXC Technology Company is headquartered in Ashburn, Virginia.

How the Company Makes MoneyDXC Technology makes money primarily through its comprehensive portfolio of IT services and solutions. The company's revenue streams include IT outsourcing, where it manages clients' IT infrastructure and operations, and consulting services, which provide strategic guidance and implementation support for digital transformation. Additionally, DXC generates income from its cloud and platform services, offering clients cloud migration, management, and optimization solutions. The company also earns revenue from application services, which involve application development, modernization, and maintenance. Significant partnerships with technology providers and industry alliances enhance DXC's offerings and contribute to its earnings by expanding its reach and capabilities in delivering advanced solutions to its clients.

DXC Technology Financial Statement Overview

Summary

DXC Technology faces significant challenges in profitability and revenue growth, as reflected in its income statement. The balance sheet reflects a manageable debt level, but overall financial stability could be threatened by ongoing profit issues. Cash flow performance is mixed, with strong operating cash flow but inconsistent free cash flow growth.

Income Statement

Negative

DXC Technology exhibits declining revenue trends, with a negative net profit margin for the TTM, indicating challenges in profitability. The gross profit margin is negative, suggesting cost control issues. Positive EBITDA margin indicates some operational efficiency.

Balance Sheet

Neutral

The company has a moderate debt-to-equity ratio, which could indicate manageable leverage but poses potential risk if profitability issues persist. Return on equity is weak, reflecting poor net income performance. However, the equity ratio is reasonable, indicating a stable proportion of equity financing.

Cash Flow

Neutral

DXC shows a positive operating cash flow, which is a good sign of core business strength. However, free cash flow growth has been inconsistent, and the operating cash flow to net income ratio indicates discrepancies between cash generation and accounting profitability.

Mar 2024	Mar 2023	Mar 2022	Mar 2021	Mar 2020
Breakdown
Income Statement		Total Revenue
13.67B	14.43B	16.27B	17.73B	19.58B
	Gross Profit
3.09B	3.18B	3.58B	3.64B	4.68B
	EBIT
466.00M	-659.00M	1.60B	-397.00M	1.57B
	EBITDA
1.81B	942.00M	3.17B	3.07B	-2.81B
	Net Income Common Stockholders
91.00M	-566.00M	718.00M	-146.00M	-5.36B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
1.22B	1.86B	2.67B	2.97B	3.68B
	Total Assets
13.87B	15.85B	20.14B	22.04B	26.01B
	Total Debt
4.87B	5.37B	6.17B	6.97B	11.49B
	Net Debt
3.64B	3.51B	3.50B	4.00B	7.81B
	Total Liabilities
10.80B	12.03B	14.76B	16.73B	20.88B
	Stockholders Equity
2.81B	3.82B	5.38B	5.31B	5.13B
Cash Flow		Free Cash Flow
954.00M	960.00M	952.00M	-391.00M	1.76B
	Operating Cash Flow
1.36B	1.42B	1.50B	124.00M	2.35B
	Investing Cash Flow
-491.00M	-635.00M	-60.00M	4.67B	-2.14B
	Financing Cash Flow
-1.49B	-1.51B	-1.82B	-5.48B	657.00M

DXC Technology Technical Analysis

Technical Analysis Sentiment

Negative

Last Price16.07

Price Trends

50DMA

16.60

Negative

100DMA

18.75

Negative

200DMA

19.66

Negative

Market Momentum

MACD

-0.26

Negative

RSI

53.42

Neutral

STOCH

86.90

Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For DXC, the sentiment is Negative. The current price of 16.07 is above the 20-day moving average (MA) of 14.97, below the 50-day MA of 16.60, and below the 200-day MA of 19.66, indicating a neutral trend. The MACD of -0.26 indicates Negative momentum. The RSI at 53.42 is Neutral, neither overbought nor oversold. The STOCH value of 86.90 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for DXC.

DXC Technology Risk Analysis

DXC Technology disclosed 40 risk factors in its most recent earnings report. DXC Technology reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

DXC Technology Peers Comparison

Overall Rating

UnderperformOutperform

Sector (60)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
G	78 Outperform	$8.69B	17.46	22.15%	1.26%	6.46%	-16.94%
CNXC	74 Outperform	$3.26B	12.79	6.34%	2.54%	21.67%	-17.91%
WNS	72 Outperform	$2.76B	15.37	21.21%	―	-0.64%	30.96%
ASGN	66 Neutral	$2.65B	15.67	8.65%	―	-8.05%	-18.60%
Sector *	60 Neutral	$10.94B	10.58	-7.08%	2.98%	7.52%	-12.04%
KD	52 Neutral	$7.71B	59.33	12.09%	―	-8.20%	―
DXC	46 Neutral	$2.91B	267.98	-2.46%	―	-5.65%	78.20%

* Technology Sector Average

Performance Comparison

DXC

DXC Technology

16.07

-3.64

-18.47%

Genpact

49.71

17.91

56.32%

ASGN

51.95

-46.22

-47.08%

WNS

59.69

10.95

22.47%

CNXC

Concentrix

51.10

-8.59

-14.39%

Kyndryl Holdings Incorporation

33.15

12.26

58.69%

DXC Technology Earnings Call Summary

Earnings Call Date:Feb 04, 2025

(Q3-2025)

% Change Since: -28.93%|

Next Earnings Date:May 14, 2025

Earnings Call Sentiment Neutral

The earnings call highlighted strong cash flow, margin expansion, and improved bookings, contrasted by revenue declines and challenges in specific segments. The strategic initiatives and leadership changes indicate a focus on long-term growth.

Q3-2025 Updates

Positive Updates

Strong Free Cash Flow

DXC Technology generated free cash flow of $483 million for the third quarter, with a year-to-date total of $576 million, exceeding full-year fiscal 2025 guidance.

Impressive Book-to-Bill Ratio

DXC achieved a book-to-bill ratio of 1.33x, the highest in eight quarters, indicating strong bookings growth across offerings.

Adjusted EBIT Margin Expansion

The adjusted EBIT margin expanded 140 basis points year-over-year to 8.9%, ahead of expectations.

Growth in Insurance and BPS

Insurance and horizontal BPS organic revenue grew 5.6% year-over-year, driven by expanding software license revenue.

Leadership Expansion

The addition of Brad Novak as CIO and other new leaders is expected to drive increased AI usage and data strategy improvements.

Negative Updates

Revenue Decline

Total revenue declined 4.2% year-over-year on an organic basis, with GIS segment revenue down 7.8% year-over-year.

Fourth Quarter Revenue Guidance

DXC expects total organic revenue to decline 5.5% to 4.5% in the fourth quarter, reflecting the impact of low bookings in the first half of the year.

Challenges in Modern Workplace Segment

Modern Workplace segment experienced an 11.3% year-over-year decline, with a significant 30% drop in resale revenue.

Incremental FX Headwinds

Incremental foreign exchange headwinds impacted financial performance, although specifics were not detailed.

Company Guidance

During the third quarter of fiscal year 2025, DXC Technology reported performance exceeding its guidance, with revenue declining 4.2% year-over-year on an organic basis. The company achieved an adjusted EBIT margin of 8.9%, reflecting a 140 basis point expansion from the previous year, and a non-GAAP diluted EPS of $0.92, marking a 7% increase year-over-year. Free cash flow was robust at $483 million, bringing the year-to-date total to $576 million, surpassing the full-year guidance. Bookings surged with a book-to-bill ratio of 1.3x, the highest in eight quarters, indicating strong market traction. The company remains focused on disciplined execution, client-centric strategies, and leveraging a revamped go-to-market approach to drive future growth across its IT services portfolio.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.