DXC Technology to Report Q1 Earnings: What's in Store?

DXC Technology DXC is slated to report first-quarter fiscal 2025 results on Aug 8.

For the first quarter of fiscal 2025, the company anticipates revenues between $3.1 billion and $3.15 billion. The Zacks Consensus Estimate for fiscal first-quarter revenues stands at $3.14 billion, which indicates a year-over-year decline of 8.8%.

DXC anticipates non-GAAP earnings per share between 55 cents and 60 cents. The consensus mark for earnings is pegged at 57 cents per share, which suggests a 9.5% year-over-year decrease.

The company's earnings outpaced estimates thrice in the trailing four quarters while missing the same on one occasion, with an average surprise of 2.4%.

Let's see how things are shaping up for this announcement.

Factors to Consider

DXC's fiscal first-quarter performance is likely to have benefited from its strong customer retention rate and robust recurring revenues gained from its large global insurance carrier customers. DXC is likely to have gained from the network modernization initiatives of its customers, aiding the company's expansion in the cloud computing space.

DXC's fiscal first-quarter performance is expected to have benefited from its broadening artificial intelligence capabilities as AI is at the center of the digital transformation trend. DXC Technology's partnerships with industry leaders, including Microsoft and Dell Technologies, to advance in the AI space are likely to contribute to the company's first-quarter fiscal 2025 results.

During the to-be-reported quarter, DXC signed an agreement with Ferrovial and Microsoft to develop a generative AI platform named Quercus. DXC also partnered with Dell to advance Enterprise Intelligence Services. The collaboration will utilize the AI, data analytics, machine learning and intelligent automation expertise of both companies.

Nevertheless, the benefits from the aforementioned factors are likely to have been offset by the negative impact of the softening IT spending as organizations are pushing back their investments in big and expensive technology products amid the ongoing macroeconomic and geopolitical issues.

The company expects fiscal first-quarter organic revenues to decline in the 7-8% range. The year-over-year expected organic revenue decrease is mainly due to an anticipated weak performance in DXC's Global Infrastructure Services.

For first-quarter fiscal 2025, DXC Technology expects GIS revenues to decline in the double-digit percentage range. Furthermore, the revenue shortfall is likely to have weighed on the quarterly margins. DXC projects the adjusted EBIT margin in the range of 5.5-6% in the fiscal first quarter.

However, DXC's cost-saving initiatives and lower interest expenses are likely to have partially offset the negative impact of the revenue shortfall on bottom-line results.

What Our Model Says

Our proven model does not conclusively predict an earnings beat for DXC this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. However, that's not the case here.

DXC currently has an Earnings ESP of 0.00% and carries a Zacks Rank #3.

Stock With the Favorable Combination

Here is a stock worth considering, as our model shows that it has the right combination of elements to beat on earnings this season.

Brinker International EAT has an Earnings ESP of +8.02% and sports a Zacks Rank #1 at present.

Brinker International is set to report fourth-quarter fiscal 2024 results on Aug 14. The Zacks Consensus Estimate for EAT's earnings is pegged at $1.65 per share, indicating growth of 18.7% from the year-ago quarter's reported figure. Shares of EAT have returned 37.4% in the year-to-date period.

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