DXC Technology (DXC) experienced a sharp decline in its stock price on Friday, dropping approximately 23% to $9.20 per share, as the IT services company projected another year of organic revenue contraction. The disappointing outlook has intensified concerns about the pace of the company's artificial intelligence (AI)-driven turnaround, especially as clients continue to tighten their budgets.
The company reported its fiscal fourth-quarter results after the market closed on May 7, revealing a GAAP loss of $0.84 per share. Revenue for the quarter came in at $3.13 billion, a 1.2% decrease year-over-year, while organic revenue—which excludes currency fluctuations, acquisitions, and divestitures—fell by 6.6%. Adjusted earnings per share on a non-GAAP basis were $0.77, exceeding the company's guidance range of $0.65 to $0.75, but this was not enough to offset the revenue miss.
DXC's management attributed the weak performance to softer demand for short-term project work, particularly within its largest segment, Global Infrastructure Services. This unit generated $1.55 billion in revenue, representing a 10.6% organic decline. The Consulting and Engineering Services segment also struggled, with revenue of $1.26 billion, down 3.9% organically. The only bright spot was the Insurance Software & Services division, which posted $325 million in revenue, a 4.0% organic increase.
Bookings for the quarter fell 14% compared to the same period last year, and the book-to-bill ratio was 1.07, indicating that new contracts only slightly outpaced revenue. Chief Financial Officer Robert Del Bene pointed to reduced discretionary spending as a key headwind, particularly in the U.S. and European infrastructure markets.
Looking ahead, DXC provided a cautious outlook for fiscal 2027, forecasting revenue between $12.11 billion and $12.35 billion, which would represent an organic decline of 3% to 5%. The company expects adjusted EBIT margin to be in the range of 6% to 7%, with non-GAAP diluted earnings per share projected between $2.40 and $2.90. Free cash flow is anticipated to be approximately $600 million.
CEO Raul Fernandez acknowledged the company's challenges, stating that while free cash flow and margins were solid, top-line performance fell short. He attributed the miss to both pipeline and demand issues, as well as execution problems. Despite these setbacks, DXC is pushing forward with its AI strategy, launching the OASIS agentic orchestration platform on April 28. Fernandez noted that the platform has already attracted ten customers and played a crucial role in securing a major European insurer. However, he also warned of increasing competitive pressure, with rivals showing "additional aggressiveness" in some long-term contracts.
The broader IT services industry is also facing headwinds, as evidenced by Kyndryl's recent earnings report, which showed a 5% revenue decline in constant currency. However, DXC's miss stands out because management specifically cited sales execution as a contributing factor.
DXC remains committed to its share repurchase program, planning to buy back $250 million in shares during fiscal 2027, and intends to repay the remaining $400 million in senior notes maturing in September 2026. While these moves provide some flexibility for capital allocation, they do not directly address the persistent revenue challenges that have weighed on investor sentiment.
