DXC Technology, Inc. DXC reported better-than-expected bottom-line results for the third quarter of fiscal 2025. The company reported non-GAAP earnings of 92 cents per share, beating the Zacks Consensus Estimate by 19.5%. Moreover, the bottom line increased 7% year over year.
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DXC’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 23.8%.
Buoyed by stronger-than-expected bottom-line results, DXC raised guidance for fiscal 2025 earnings. Following the third quarter results, shares of the company marginally increased by 0.7% in the after-hours trade yesterday. Its strong bottom-line results and upbeat guidance are likely to boost DXC stock higher. Shares of DXC have soared 13.2% year to date, outperforming the Zacks Computers - IT Services industry’s gain of 3.9%.
DXC Technology Company. Price, Consensus and EPS Surprise
DXC Technology Company. price-consensus-eps-surprise-chart | DXC Technology Company. Quote
DXC’s Q3 Results in Detail
DXC reported revenues of $3.23 billion for the third quarter, which came above the Zacks Consensus Estimate by 0.7% but decreased 5.1% year over year. On an organic basis, revenues declined 4.2% year over year.
Segment-wise, revenues from Global Business Services declined 1.8% on a year-over-year basis to $1.67 billion. On an organic basis, the division’s revenues decreased 0.5% year over year. The organic growth in revenues was mainly driven by traction in insurance software and BPS business.
GIS revenues were $1.56 billion in the fiscal third quarter, down 8.5% year over year. On an organic basis, the division’s revenues decreased 7.8% year over year. The GIS division witnessed revenue declines across the Cloud Infrastructure, ITO & Security and Modern Workplace divisions.
The company’s non-GAAP gross profit increased 6% to $809 million from $763 million reported in the year-ago quarter. Non-GAAP gross margin improved 150 basis points to 25.1%. This expansion was primarily driven by savings from disciplined resource management practices and benefits from restructuring, which more than offset the negative impact of lower revenues and the data center hardware asset disposal.
DXC’s non-GAAP operating income increased to $286 million in the fiscal third quarter from $256 million in the year-ago quarter. Non-GAAP operating margin expanded 140 basis points to 8.9%, primarily driven by higher gross margin.
DXC’s Balance Sheet & Cash Flow Details
DXC exited the fiscal third quarter with $1.72 billion in cash and cash equivalents compared with $1.25 billion in the previous quarter. The long-term debt balance (net of current maturities) was $3.64 billion as of Dec. 31, 2024, down from $3.83 billion as of Sept. 30.
In the fiscal third quarter, DXC generated an operating cash flow of $650 million and a free cash flow of $483 million. In the first three quarters of fiscal 2025, it generated an operating cash flow of $1.08 billion and a free cash flow of $576 million.
DXC Updates Guidance for FY25
DXC updated the outlook for fiscal 2025, under which it raised guidance for every metric except for the revenues. For fiscal 2025, it now expects revenues between $12.8 billion and $12.83 billion compared with the previous guidance of $12.9-$13.1 billion. The Zacks Consensus Estimate for the top line is pegged at $12.95 billion.
DXC now projects the adjusted EBIT margin to be approximately 7.9%, up from the previous guidance of 7-7.5%. It now forecasts adjusted EPS of $3.35 compared with the previous guidance of $3-$3.25. The consensus mark for fiscal 2025 earnings per share is pegged at $3.17.
For the fiscal fourth quarter, the company anticipates revenues between $3.10 billion and $3.13 billion. The adjusted EBIT margin is expected to be approximately 7%. DXC projects adjusted earnings per share of 75 cents for the fiscal fourth quarter. The Zacks Consensus Estimate for revenues and earnings is pegged at $3.23 billion and 74 cents per share, respectively.
DXC’s Zacks Rank & Stocks to Consider
Currently, DXC carries a Zacks Rank #3 (Hold).
Gitlab GTLB, Planet Labs PBC PL and Fortinet FTNT are some top-ranked stocks that investors can consider in the broader Zacks Computer and Technology sector. GTLB, PL and FTNT carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Gitlab shares have dropped 4% for the past year. The Zacks Consensus Estimate for GTLB’s full-year 2025 earnings is pegged at 63 cents per share, indicating a 210% year-over-year increase.
Planet Labs PBC shares have surged 152% in the past year. The Zacks Consensus Estimate for PL’s fiscal 2025 bottom line is pinned at a loss of 15 cents per share. In the year-ago quarter, the company had reported a loss of 50 cents per share.
Fortinet shares have gained 52.2% for the past year. The Zacks Consensus Estimate for FTNT’s full-year 2025 earnings is pegged at $2.39 per share, suggesting an increase of 6.5% from the year-ago quarter’s reported figure.
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