DXC Technology Reports Decline in Revenue Amidst Tough Market Conditions

DXC Technology, a prominent IT services provider, has announced its financial results for the quarter ending on June 30, revealing a 7 percent drop in revenue.
DXC Technology IT servicesThe company generated $3.45 billion in revenue during this period, attributing the decline to reduced IT spending by enterprise clients.

Segment-wise, DXC Technology saw a decrease of 3.1 percent in revenue from its Global Business Service (GBS) segment, generating $1,703 million. Additionally, the Global Infrastructure Services (GIS) segment experienced a more significant decline of 10.6 percent, with revenue amounting to $1,743 million during April to June quarter of 2023.

The GIS segment’s revenue performance was notably affected by declines in Cloud Infrastructure & ITO, along with moderating declines in Modern Workplace. The segment profit for GIS was $91 million, with a segment profit margin of 5.2 percent, representing a 130 bps margin compression compared to the first quarter of fiscal year 2023. GIS bookings stood at $1.7 billion during the quarter, resulting in a book-to-bill ratio of 0.94x. Over a trailing twelve months basis, the book-to-bill ratio improved to 1.04x.

On the other hand, the GBS segment’s performance was primarily driven by strong growth in the Analytics & Engineering offering. Despite this, the segment profit for GBS was $192 million, with a segment profit margin of 11.3 percent, showing a decline of 60 bps compared to the previous year. The decrease was attributed to investments made to drive future growth, as well as the impact of lower pension income. GBS bookings for the quarter amounted to $1.4 billion, resulting in a book-to-bill ratio of 0.84x. Over a trailing twelve months basis, the book-to-bill ratio improved to 1.01x.

Mike Salvino, Chairman, President, and Chief Executive Officer of DXC Technology, acknowledged the mixed financial performance of the first quarter of FY24. While revenue and margin fell short of expectations, the company’s free cash flow surpassed predictions. Salvino attributed the performance impact to lower than expected resale and project revenues and highlighted the challenging economic environment.

In light of the current market conditions and the tough competition faced from industry giants like Accenture, DXC Technology has adjusted its annual revenue forecast. The company now expects annual revenue to range between $13.88 billion and $14.03 billion, down from its prior prediction of $14.40 billion to $14.55 billion.

The company’s financial outlook reflects the broader concern among businesses about a turbulent economy, which has led to reduced IT spending and intensified competition within the industry. DXC Technology continues to strategize and adapt to these market conditions to sustain its growth and profitability in the future.

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