DXC Technology’s third quarter results were met with a sharply negative market reaction, as the company reported a year-over-year revenue decline and a significant drop in operating margin. Management cited ongoing challenges in converting pipeline opportunities, particularly in the Americas and the UK and Ireland, as a primary factor limiting sales growth. CEO Raul Fernandez acknowledged that the competitive environment has intensified, with traditional project-based deals delayed and customers taking longer to make decisions. He noted, “We are not satisfied with our current performance,” openly addressing the company’s sales execution and the need for better alignment between supply and demand.
Is now the time to buy DXC? Find out in our full research report (it’s free for active Edge members).
DXC (DXC) Q3 CY2026 highlights:
- Revenue $3.03 billion vs S&P analysts’ estimates of $3.00 billion (4% year-on-year decline, 1.3% beat)
- Adjusted EPS $0.67 vs S&P analysts’ estimates of $0.55 (22% beat)
- Revenue guidance The company dropped its revenue guidance for the full year to $11.95 billion at the midpoint from $12.23 billion, a 2.3% decrease
- Adjusted EPS guidance Management lowered its full-year adjusted EPS guidance to $2.38 at the midpoint, a 10.4% decrease
- Operating margin 1.8%, down from 5.1% in the same quarter last year
- Organic revenue fell 4% year on year (beat)
- Market capitalization $2.39 billion
While we enjoy listening to the management’s commentary, our favorite part of earnings calls is the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our top 5 analyst questions from DXC’s Q3 earnings call
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Tien-Tsin Huang (JPMorgan) asked about the reasons behind lower pipeline conversion and whether deals were being lost or just delayed. CFO Rob Del Bene explained that the delays were most pronounced in the Americas and UK public sector, primarily due to customer indecision and increased competition, with most large deals still in the pipeline but timing uncertain.
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Keith Bachman (BMO Capital Markets) pressed on the drivers of deal delays and whether increased price competition was affecting bookings. Del Bene responded that pricing remained relatively stable but win rates had dropped, while Fernandez noted that customers are reassessing project priorities and shortening contract lengths due to greater uncertainty.
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Bryan Bergin (TD Cowen) inquired about the risk of backlog erosion and the sustainability of signed work. Del Bene assured that backlog erosion statistics were in line with historical levels, and Fernandez emphasized that AI-driven cybersecurity solutions are seeing strong demand and fast adoption.
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Jonathan Lee (Guggenheim) questioned whether recent share loss was DXC-specific and what changes were being implemented to recover. Fernandez acknowledged internal go-to-market issues and highlighted organizational changes, including the appointment of Paul Taylor, to improve sales execution and customer engagement.
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Jamie Friedman (Susquehanna) requested updates on GrowthX and the competitive landscape in insurance software. Fernandez described strong initial wins and follow-on opportunities in agentic modernization, and noted that DXC’s insurance platform shares the attractive characteristics that drive high valuations in the sector.
Catalysts in upcoming quarters
In the coming quarters, the StockStory team will watch (1) whether DXC’s core sales execution improves, resulting in stronger pipeline conversion rates and large deal wins, (2) the pace of adoption and revenue contribution from agentic and AI-based solutions, and (3) the continued growth and stickiness of the insurance SaaS platform. Additionally, we will monitor the impact of cost reduction initiatives on margins and any strategic actions affecting the company’s portfolio.
DXC currently trades at $14.82, down from $15.19 just before the earnings. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free).
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