Why DXC Technology Shares Are Diving Today

DXC Technology Co DXC shares are trading lower by around 20% after it reported worse-than-expected Q1 FY24 results and issued a below-consensus outlook.

The company reported a revenue decline of 7.0% Y/Y (-3.6% organically) to $3.45 billion, missing the consensus of $3.56 billion.

Revenue was impacted by a slowdown in short-term discretionary client expenditures. 

Segment-wise, revenues from Global Business Services fell 3.1% Y/Y to $1.70 billion, and Global Infrastructure Services declined 10.6% Y/Y to $1.74 billion. 

Book-to-bill stood at 0.89x in the quarter.

Adjusted EBIT declined to $224 million from $259 million a year ago, with a margin of 6.5% vs 7.0% in the prior year. 

Adjusted EPS of $0.63, down from $0.75, missed the consensus of $0.82.

The company reported an operating cash flow of $127 million in Q1.

As of June 30, 2023, cash and cash equivalents stood at $1.58 billion.

Repurchase: The company completed a share repurchase worth $280 million in Q1 FY24. DXC said it remains on track to complete a share repurchase worth $1 billion in FY24.

Outlook: DXC expects Q2 FY24 revenues of $3.430 billion - $3.460 billion (-5.5% to -4.5% organically vs. consensus: $3.57 billion), adjusted EPS of $0.65 - $0.70 (vs. consensus: $0.92) and adjusted EBIT margin of 6.5% to 7.0%.

For FY24, DXC lowered the outlook for revenues to $13.88 billion-$14.03 billion (from $14.40 billion - $14.55 billion; -4.0% to -3.0% organically, vs. consensus: $14.4 billion), adjusted EPS of $3.15 - $3.40 (consensus: $3.86) and adjusted EBIT margin of 7.0%-7.5%. 

"Our first quarter FY24 financial performance was mixed. While revenue and margin fell short of our expectations, free cash flow was better than expected. Our performance was impacted by lower than anticipated resale and project revenues. As a result of these factors, today we are reducing our guidance to reflect the challenging economic environment," said Mike Salvino, Chairman, President and Chief Executive Officer. 

Price Action: DXC shares are trading down by 19.5% at $21.80 premarket on the last check Thursday.