DXC Technology Co

Previous wording

The purpose of the Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is to present information that management believes is relevant to an assessment and understanding of our results of operations and cash flows for the first quarter of fiscal 2026 and our financial condition as of June 30, 2025. The MD&A is provided as a supplement to, and should be read in conjunction with, our financial statements and accompanying notes.

Current wording

The purpose of the Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is to present information that management believes is relevant to an assessment and understanding of our results of operations and cash flows for the second quarter and first six months of fiscal 2026 and our financial condition as of September 30, 2025. The MD&A is provided as a supplement to, and should be read in conjunction with, our financial statements and accompanying notes.

Previous wording

The following discussion includes a comparison of our results of operations and liquidity and capital resources for the first quarters of fiscal 2026 and fiscal 2025. References are made throughout to the numbered Notes to the Condensed Consolidated Financial Statements (“Notes”) in this Quarterly Report on Form 10-Q.

Current wording

The following discussion includes a comparison of our results of operations and liquidity and capital resources for the second quarters and first six months of fiscal 2026 and fiscal 2025. References are made throughout to the numbered Notes to the Condensed Consolidated Financial Statements (“Notes”) in this Quarterly Report on Form 10-Q.

Previous wording

Results of Operations for the Three Months Ended June 30, 2025 and June 30, 2024

Current wording

Results of Operations for the Second Quarter and First Six Months of Fiscal 2026 and Fiscal 2025

Previous wording

Key metrics for the first quarter of fiscal 2026 compared to the first quarter of fiscal 2025 are included below. We have presented organic revenue, adjusted earnings before interest and taxes (“EBIT”), and diluted earnings per share on a non-GAAP basis. For more information, see “Non-GAAP Financial Measures.”

Current wording

Key metrics for the second quarter of fiscal 2026 compared to the second quarter of fiscal 2025 as well as year to date cash flow comparisons are included below. We have presented organic revenue and diluted earnings per share on a non-GAAP basis. For more information see “Non-GAAP Financial Measures.”

Previous wording

•Diluted earnings per share of $0.09, compared to $0.14 in the same period a year ago; adjusted diluted earnings per share of $0.68, compared to $0.75 in the same period a year ago;

Current wording

•Diluted earnings per share of $0.20, compared to $0.23 in the same period a year ago; adjusted diluted earnings per share of $0.84, compared to $0.93 in the same period a year ago;

Previous wording

•Cash generated from operations was $186 million, less capital expenditures of $89 million, resulted in free cash flow of $97 million, compared to free cash flow of $45 million in the prior-year period;

Current wording

•Year-to-date fiscal 2026 cash generated from operations was $595 million, less capital expenditures of $258 million, resulted in free cash flow of $337 million, compared to free cash flow of $93 million in the in the prior-year;

Previous wording

•Book-to-bill ratio (contract awards divided by quarterly revenue) of 0.90x, compared to 0.77x during fiscal 2025.

Current wording

•Book-to-bill ratio (contract awards divided by quarterly revenue) of 0.85x, compared to 0.81x in the prior-year period.

Previous wording

•Revenue was $313 million, up 5.4% year-over-year (up 3.6% on an organic basis).

Current wording

• Revenue was $320 million, up 4.6% year-over-year (up 3.6% on an organic basis).

Previous wording

For the first quarter of fiscal 2026, our total revenue was $3.2 billion, a decrease of $77 million or 2.4%, compared to the same period a year ago. The decrease against the comparative period includes a 4.3% decline in organic revenue partially offset by a 2.0% favorable foreign currency exchange rate impact. Organic revenue growth is a non-GAAP measure. For more information, see "Non-GAAP Financial Measures".

Current wording

For the second quarter of fiscal 2026, our total revenue was $3.2 billion, a decrease of $80 million or 2.5%, compared to the same period a year ago. The decrease against the comparative period includes a 4.2% decline in organic revenue partially offset by a 1.9% favorable foreign currency exchange rate impact. Organic revenue growth is a non-GAAP measure. For more information, see "Non-GAAP Financial Measures."

Previous wording

COS was $2.4 billion for the first quarter of fiscal 2026, a decrease of $138 million (-5.5%) compared to the prior-year period. The decline was primarily driven by the alignment of business development expenses to selling, general and administrative expenses in support of the offering model, a decrease in costs from lower revenue levels, and a reduction in professional services and contractor-related expenses from our cost optimization initiatives, partially offset by an unfavorable foreign currency exchange rate impact. In connection with the Company’s new segment structure in fiscal 2026, certain costs for personnel in non-client facing positions are now included in selling, general and administrative expenses.

Current wording

COS was $2.4 billion for the second quarter of fiscal 2026, a decrease of $44 million (-1.8%) compared to the prior-year period. COS was $4.8 billion for the first six months of fiscal 2026, a decrease of $182 million (-3.7%) compared to the prior-year period. The decline in both periods was primarily driven by the alignment of business development expenses to selling, general and administrative expenses in support of the offering model, a decrease in costs from lower revenue levels, and a reduction in professional services and contractor-related expenses from our cost optimization initiatives, partially offset by an unfavorable foreign currency exchange rate impact. In connection with the Company’s new segment structure in fiscal 2026, certain costs for personnel in non-client facing positions are now included in selling, general and administrative expenses.

Previous wording

Gross margin (Revenues less COS as a percentage of revenue) was 24.4% and 21.9% for the first quarters of fiscal 2026 and 2025, respectively.

Current wording

Gross margin (Revenues less COS as a percentage of revenue) was 24.6% and 24.5% for the second quarter and first six months of fiscal 2026, respectively, a decrease of 0.5% and an increase of 1.0% against the comparative periods.

Previous wording

SG&A was $394 million for the first quarter of fiscal 2026, an increase of $93 million (+30.9%) compared to the prior-year period. The increase in SG&A was primarily driven by higher expenses from the realignment of business development and other costs from COS as referenced above, and investments in marketing, advertising and the Company’s information systems, partially offset by lower levels of transaction, separation and integration-related (“TSI”) costs.

Current wording

SG&A was $366 million for the second quarter of fiscal 2026, an increase of $13 million (+3.7%) compared to the prior year period. SG&A was $760 million for the first six months of fiscal 2026, an increase of $106 million (+16.2%) compared to the prior-year period. The increase in both periods was primarily driven by higher expenses from the realignment of business development and other costs from COS as referenced above, certain investments in marketing and the Company’s information systems, a gain from a legal settlement in the second quarter of fiscal 2025, and an unfavorable foreign currency exchange rate impact, partially offset by lower levels of transaction, separation and integration-related (“TSI”) costs.

Previous wording

SG&A as a percentage of revenue was 12.5% and 9.3% for the first quarters of fiscal 2026 and fiscal 2025, respectively.

Current wording

SG&A as a percentage of revenue was 11.6% and 12.0% for the second quarter and first six months of fiscal 2026, respectively, an increase of 0.7% and 1.9% against the comparative periods.

Previous wording

Depreciation and amortization was $304 million for the first quarter of fiscal 2026, a decrease of $22 million (-6.7%) compared to the prior-year period. Depreciation expense decreased by $15 million due to lower average net property and equipment balances. Amortization expense decreased by $7 million due to lower transition and transformation contract cost balances.

Current wording

Depreciation and amortization was $295 million for the second quarter of fiscal 2026, a decrease of $34 million (-10.3%) compared to the prior-year period. Depreciation expense decreased by $20 million due to lower average net property and equipment balances. Amortization expense decreased by $14 million due to lower transition and transformation contract cost balances and lower software amortization.

Previous wording

During fiscal 2026, management approved global cost savings initiatives designed to better align our workforce, facility and data center requirements. Total restructuring costs recorded, net of reversals, was $37 million for the first quarter of fiscal 2026, a $2 million decrease (-5.1%) compared to the prior-year period.

Current wording

During fiscal 2026, management approved global cost savings initiatives designed to better align our facility and data center requirements. During the second quarter and first six months of fiscal 2026, total restructuring costs recorded, net of reversals, were $35 million and $72 million, respectively, a decrease of $7 million (-16.7%) and $9 million (-11.1%), respectively, as compared to the prior-year periods.

Previous wording

Net interest expense (interest expense less interest income) was $8 million for the first quarter of fiscal 2026, a $13 million improvement compared to the prior-year period primarily due to increased net interest income from higher global cash balances.

Current wording

Net interest expense (interest expense less interest income) was $7 million and $15 million for the second quarter and first six months of fiscal 2026, respectively, a decrease of $11 million (-61.1%) and $24 million (-61.5%), as compared to the prior-year periods. The improvement in both periods was primarily from higher net interest income from our cash deposits and multi-currency notional pools.

Previous wording

Other income, net comprises non-service cost components of net periodic pension income, pension and other post-retirement benefit (“OPEB”) actuarial and settlement (gains) losses, movement in foreign currency exchange rates on our foreign currency denominated assets and liabilities and the related economic hedges, losses (gains) on real estate and facility sales, and other miscellaneous (gains) and losses.

Current wording

Other income, net includes non-service cost components of net periodic pension income, pension and other post-retirement benefit (“OPEB”) actuarial and settlement (gains) losses, movement in foreign currency exchange rates on our foreign currency denominated assets and liabilities and the related economic hedges, losses (gains) on real estate and facility sales, and other miscellaneous (gains) and losses.

Previous wording

The components of Other income, net for the first quarters of fiscal 2026 and 2025 were as follows:

Current wording

The components of Other income, net for the second quarters and first six months of fiscal 2026 and 2025 were as follows:

Previous wording

•foreign currency impact (+$6 million) - change in foreign currency, primarily due to movements of exchange rates on our foreign currency-denominated assets and liabilities, related hedges including forward contracts to manage our exposure to economic risk, and the cost of our hedging program;

Current wording

•foreign currency impact (+$2 million) - change in foreign currency, primarily due to movements of exchange rates on our foreign currency-denominated assets and liabilities, related hedges including forward contracts to manage our exposure to economic risk, and the cost of our hedging program;

Previous wording

•real estate and facility sales (+$2 million) - losses on real estate and facility sales in the comparative period; offset by

Current wording

•real estate and facility sales (+$34 million) - losses on real estate and facility sales in the comparative period; offset by gains on real estate and facility sales in the second quarter of fiscal 2026.

Previous wording

•other miscellaneous items (-$17 million) - primarily from the $14 million impairment of goodwill in the current quarter related to the change in operating segments.

Current wording

•other miscellaneous items (-$21 million) - primarily from the $14 million impairment of goodwill in the first quarter of fiscal 2026 related to the change in operating segments and from a gain on the sale of a strategic investment in the second quarter of fiscal 2025.

Previous wording

Our effective tax rate (“ETR”) was 73.1% and 63.2% for the first quarter of fiscal 2026 and the first quarter of fiscal 2025, respectively. For the first quarter of fiscal 2026, the primary drivers of the ETR were the global mix of income, U.S. tax on foreign income, the tax benefit of a worthless stock deduction under section 165(g) of the Internal Revenue Code related to DXC’s investment in a wholly owned subsidiary, and a reduction in a deferred tax asset for stock based compensation. For the first quarter of fiscal 2025, the primary drivers of the ETR were the global mix of income, U.S. tax on foreign income, a reduction in a deferred tax asset for stock based compensation, and a decrease in a deferred tax liability for estimated taxes associated with the repatriation of foreign earnings.

Current wording

Our effective tax rate (“ETR”) was 69.5% and 51.6% for the three months ended September 30, 2025, and September 30, 2024, respectively, and 70.7% and 56.5% for the six months ended September 30, 2025, and September 30, 2024, respectively. For the three months ended September 30, 2025, the primary drivers of the ETR were the global mix of income, U.S. tax on foreign income, and the tax benefit of a worthless stock deduction under section 165(g) of the Internal Revenue Code related to the Company's investment in a wholly owned subsidiary. For the six months ended September 30, 2025, the primary drivers of the ETR were the global mix of income, U.S. tax on foreign income, the tax benefit of a worthless stock deduction under section 165(g) of the Internal Revenue Code related to the Company’s investment in a wholly owned subsidiary, and a decrease in a deferred tax asset for stock based compensation. For the three months ended September 30, 2024, the primary drivers of the ETR were the global mix of income, U.S. tax on foreign income, the foreign tax credit, and an increase in interest receivables due from tax authorities. For the six months ended September 30, 2024, the primary drivers of the ETR were the global mix of income, U.S. tax on foreign income, the foreign tax credit, an increase in interest receivables due from tax authorities, and a decrease in a deferred tax asset for stock based compensation.

Previous wording

The One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. on July 4, 2025, after the close of our first quarter. The OBBBA includes a broad range of tax reform provisions affecting businesses. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. We are currently assessing its impact on our consolidated financial statements.

Current wording

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes a broad range of tax reform provisions affecting businesses. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. We anticipate remitting less federal and state income taxes during fiscal year 2026 as a result of OBBBA.

Previous wording

Diluted EPS for the first quarter of fiscal 2026 includes $0.15 per share of restructuring costs, $0.01 per share of transaction, separation and integration-related costs, $0.36 per share of amortization of acquired intangible assets, $0.01 per share of merger related indemnification, $0.05 per share of impairment losses, and $0.01 per share of tax adjustments.

Current wording

Diluted EPS for the second quarter of fiscal 2026 includes $0.16 per share of restructuring costs, $0.01 per share of transaction, separation and integration-related costs, $0.41 per share of amortization of acquired intangible assets, $0.01 per share of merger related indemnification costs, $(0.04) per share of gains on real estate, facility sales, and dispositions, and $0.09 per share of tax adjustments.

Previous wording

•Tax adjustments – discrete tax adjustments to impair or recognize certain deferred tax assets, adjustments for changes in tax legislation and the impact of merger and divestitures. Income tax expense of all other (non-discrete) non-GAAP adjustments is based on the difference in the GAAP annual effective tax rate (AETR) and overall non-GAAP provision (consistent with the GAAP methodology).

Current wording

•Tax adjustments – discrete tax adjustments to impair or recognize certain deferred tax assets, adjustments for changes in tax legislation and the impact of mergers and divestitures. Income tax expense of all other (non-discrete) non-GAAP adjustments is based on the difference in the GAAP annual effective tax rate (AETR) and overall non-GAAP provision (consistent with the GAAP methodology).

Previous wording

As of June 30, 2025, our cash and cash equivalents (“cash”) were $1.8 billion, of which $0.8 billion was held outside of the U.S. We maintain various multi-currency, multi-entity, cross-border, physical and notional cash pool arrangements with various counterparties to manage liquidity efficiently that enable participating subsidiaries to draw on the Company’s pooled resources to meet liquidity needs.

Current wording

As of September 30, 2025, our cash and cash equivalents (“cash”) were $1.9 billion, of which $1.1 billion was held outside of the U.S. We maintain various multi-currency, multi-entity, cross-border, physical and notional cash and pool arrangements with various counterparties to manage liquidity efficiently that enable participating subsidiaries to draw on the Company’s pooled resources to meet liquidity needs.

Previous wording

We have $0.1 billion in cash held by foreign subsidiaries used for local operations that is subject to country-specific limitations, which may restrict or result in increased costs in the repatriation of these funds. In addition, other practical considerations may limit our use of consolidated cash. This includes cash of $0.2 billion held by majority-owned consolidated subsidiaries where third-parties or public shareholders hold minority interests.

Current wording

We have $0.2 billion in cash held by foreign subsidiaries used for local operations that is subject to country-specific limitations which may restrict or result in increased costs in the repatriation of these funds. In addition, other practical considerations may limit our use of consolidated cash. This includes cash of $0.2 billion held by majority-owned consolidated subsidiaries where third-parties or public shareholders hold minority interests.

Previous wording

Net cash provided by operating activities was $186 million and $238 million, respectively, during the first quarters of fiscal 2026 and fiscal 2025, reflecting a year-over-year decrease of $52 million. The decrease was primarily due to:

Current wording

Net cash provided by operating activities was $595 million and $433 million, respectively, during the first six months of fiscal 2026 and fiscal 2025, reflecting a year-over year increase of $162 million. The increase in operating cash flows compared with the prior-year period was primarily from:

Previous wording

•a decrease in net income, net of adjustments of $49 million and an unfavorable change in working capital.

Current wording

•a $35 million decrease in net income, net of adjustments.

Previous wording

Net cash used in investing activities was $77 million and $188 million, respectively, during the first quarters of fiscal 2026 and fiscal 2025, reflecting a year-over-year change of $111 million. The change was primarily due to:

Current wording

Net cash used in investing activities was $222 million and $258 million, respectively, during the first six months of fiscal 2026 and fiscal 2025, reflecting a year-over-year decline of $36 million. The decline in investing cash flows compared with the prior-year period was primarily from:

Previous wording

•a $42 million decrease in payments on capital leases and borrowings for asset financing, as the Company continues reducing the volume of these financing arrangements.

Current wording

•a $58 million reduction in payments on capital leases and asset financing arrangements, as the Company continues reducing the volume of these financing activities.

Previous wording

The $153 million increase in total debt during the first quarter of fiscal 2026 was primarily attributable to the unfavorable foreign currency exchange rate of U.S. dollar against the Euro, partially offset by decreases in finance leases and borrowings for asset financing attributable to payments exceeding additions.

Current wording

The $106 million increase in total debt during the first six months of fiscal 2026 was primarily attributable to an unfavorable foreign currency exchange rate of U.S. dollar against the Euro, partially offset by decreases in finance leases and borrowings for asset financing attributable to payments exceeding minimal additions.

Previous wording

We were in compliance with all financial covenants associated with our borrowings as of June 30, 2025 and June 30, 2024.

Current wording

We were in compliance with all financial covenants associated with our borrowings as of September 30, 2025.

Previous wording

Our total liquidity of $5.0 billion as of June 30, 2025, includes $1.8 billion of cash and cash equivalents and $3.2 billion of available borrowings under our revolving credit facility.

Current wording

Our total liquidity of $5.1 billion as of September 30, 2025, includes $1.9 billion of cash and cash equivalents and $3.2 billion of available borrowings under our revolving credit facility. On October 23, 2025, the Company amended its revolving credit facility, extending the maturity date to November 1, 2030 and reducing the total available borrowings to $3.0 billion as a result of rationalizing its bank group. The Company believes this revised facility continues to provide ample financial flexibility to support our operating and strategic objectives.