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Item 2. Management’s Discussion and Analysis

2025-08-01 compared with 2025-02-05 · 150 added, 213 removed, 204 unchanged (64% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 third quarter and first nine months of fiscal 2025 and our financial condition as of December 31, 2024.

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.

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• Critical Accounting Estimates

The following discussion includes a comparison of our results of operations and liquidity and capital resources for the third quarters and first nine months of fiscal 2025 and fiscal 2024.

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.

DXC helps global companies run their mission critical systems and operations while modernizing IT, optimizing data architectures, and ensuring security and scalability across public, private and hybrid clouds.

Many of the world’s largest companies and public sector organizations trust DXC to deploy services to drive new levels of performance, competitiveness, and customer experience across their IT estates.

We generate revenue by offering a wide range of information technology services and solutions primarily in North America, Europe, Asia, and Australia.

We operate through two segments:

Global Business Services ("GBS") and Global Infrastructure Services ("GIS").

We market and sell our services directly to customers through our direct sales offices around the world.

Our customers include commercial businesses of many sizes and in many industries and public sector clients.

Key profitability metrics for the third quarter of fiscal 2025 compared to the third quarter of fiscal 2024 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.

DXC is a leading global provider of IT services.

We are a trusted partner to many of the world’s most innovative organizations, building solutions that move industries and companies forward.

Our engineering, consulting, and technology experts help clients simplify, optimize, and modernize their systems and processes, manage their most critical workloads, integrate AI-powered intelligence into their operations, and put security and trust at the forefront.

Through innovative solutions, we help clients achieve competitive advantages in the marketplace.

Effective April 1, 2025 (fiscal year 2026), we began reporting our financial results under a new segment structure designed to better reflect the Company’s operational structure and the delivery of end-to-end IT services.

The new structure includes three reportable segments:

Consulting & Engineering Services ("CES"), Global Infrastructure Services ("GIS"), and Insurance Services ("Insurance").

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

Financial Highlights

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.”

• Revenues of $3.2 billion, down 5.1% compared to prior year period, and down 4.2% on an organic basis;

• Diluted earnings per share of $0.31, compared to $0.81 in the third quarter of fiscal 2024;

adjusted diluted earnings per share of $0.92, compared to $0.86 in the third quarter of fiscal 2024, an increase of 7.0%;

• Fiscal 2025 operating cash flow of $1,083 million, less capital expenditures of $507 million, resulted in free cash flow of $576 million, compared to free cash flow of $601 million in the same period a year ago.

Results of Operations for the Third Quarter and First Nine Months of Fiscal 2025 and Fiscal 2024

Revenues across operating segments and geographies are provided below:

Three Months Ended Three Months Ended

(in millions) December 31, 2024 December 31, 2023 Percentage Change Constant Currency

December 31, 2024 (1)

Percentage Change in Constant Currency (1)

• Revenues of $3,159 million, down 2.4% year-over-year (down 4.3% on an organic basis);

• EBIT was $75 million, down 15.7% year-over-year with a corresponding margin of 2.4%.

Adjusted EBIT was $216 million , down 3.6% year-over-year with a corresponding margin of 6.8%;

• 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;

• 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;

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

Segment Highlights

Consulting & Engineering Services

• Revenue was $1,246 million, down 2.7% year-over-year (down 4.4% on an organic basis).

• Segment profit was $105 million, down 14.6% year-over-year, with a corresponding margin of 8.4%.

• Book-to-bill ratio of 1.19x, compared to 0.88x during the first quarter of fiscal 2025.

Global Infrastructure Services

• Revenue was $1,600 million, down 3.5% year-over-year (down 5.7% on an organic basis).

• Segment profit was $97 million, down 4.0% year-over-year, with a corresponding margin of 6.1%.

• Book-to-bill ratio of 0.74x, compared to 0.69x during the first quarter of fiscal 2025.

Insurance Services

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

• Segment profit was $33 million, down 25.0% year-over-year, with a corresponding margin of 10.5%.

• Book-to-bill ratio of 0.54x, compared to 0.70x during the first quarter of fiscal 2025.

Our revenues by geography and operating segment are provided below:

Three Months Ended Percentage Change

Percentage of Revenue for the Three Months Ended

(in millions) June 30, 2025 June 30, 2024 U.S.

Constant Currency (1)

June 30, 2025 June 30, 2024

Geographic Market

United States $ 828 $ 897 (7.7) % (7.7) % 26.2 % 27.7 %

United Kingdom

480 448 7.1 % 1.1 % 15.2 % 13.8 %

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Total Revenues $ 3,159 $ 3,236 (2.4) % (4.4) % 100.0 % 100.0 %

Operating Segments

GBS $ 1,666 $ 1,696 (1.8) % $ 1,680 (0.9) %

GIS 1,559 1,703 (8.5) % 1,570 (7.8) %

Total Revenues $ 3,225 $ 3,399 (5.1) % $ 3,250 (4.4) %

Nine Months Ended Nine Months Ended

(in millions) December 31, 2024 December 31, 2023 Percentage Change Constant Currency

December 31, 2024 (1)

Percentage Change in Constant Currency (1)

Geographic Market

United States $ 2,688 $ 2,971 (9.5) % $ 2,688 (9.5) %

Reportable Segments

$ 1,246 $ 1,281 (2.7) % (4.7) % 39.4 % 39.6 %

Other Europe 3,106 3,190 (2.6) % 3,114 (2.4) %

Australia 894 969 (7.7) % 890 (8.2) %

Other International 1,674 1,761 (4.9) % 1,771 0.6 %

Total Revenues $ 9,702 $ 10,281 (5.6) % $ 9,775 (4.9) %

Operating Segments

GBS $ 5,016 $ 5,108 (1.8) % $ 5,062 (0.9) %

GIS 4,686 5,173 (9.4) % 4,713 (8.9) %

1,600 1,658 (3.5) % (5.7) % 50.6 % 51.2 %

313 297 5.4 % 3.7 % 9.9 % 9.2 %

Total Revenues $ 3,159 $ 3,236 (2.4) % (4.4) % 100.0 % 100.0 %

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For more information, see "Non-GAAP Financial Measures."

For the third quarter of fiscal 2025, our total revenue was $3.2 billion, a decrease of $174 million or 5.1%, compared to the same period a year ago.

The 5.1% decrease against the comparative period includes a 0.7% unfavorable foreign currency exchange rate impact, a 0.2% decline in revenue from the disposition of certain businesses, and a 4.2% decline in organic revenue.

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".

For the first nine months of fiscal 2025, our total revenue was $9.7 billion, a decrease of $579 million or 5.6%, as compared to the same period a year ago.

The 5.6% decrease against the comparative period includes a 0.7% unfavorable foreign currency exchange rate impact, a 0.2% decline in revenue from the disposition of certain businesses, and a 4.7% decline in organic revenue.

For the discussion of risks associated with our foreign operations, see Part 1, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended March 31, 2025.

Global Business Services

For the third quarter of fiscal 2025, GBS revenue was $1.67 billion, a decrease of $30 million or 1.8%, as compared to the same period a year ago.

The 1.8% decrease against the comparative period includes a 0.5% decline in organic revenue, a 0.4% decline in revenue from the disposition of certain businesses, and a 0.9% unfavorable foreign currency exchange rate impact.

For the first nine months of fiscal 2025, GBS revenue was $5.0 billion, a decrease of $92 million or 1.8%, as compared to the same period a year ago.

The 1.8% decrease against the comparative period includes a 0.5% decline in organic revenue, 0.4% decline in revenue from the disposition of certain businesses, and a 0.9% unfavorable foreign currency exchange rate impact.

Global Infrastructure Services

For the third quarter of fiscal 2025, GIS revenue was $1.56 billion, a decrease of $144 million or 8.5%, as compared to the same period a year ago.

The 8.5% decrease against the comparative period includes a 7.8% decline in organic revenue from project completions and lower resale revenue and a 0.7% unfavorable foreign currency exchange rate impact.

For the first nine months of fiscal 2025, GIS revenue was $4.7 billion, a decrease of $487 million or 9.4%, as compared to the same period a year ago.

The 9.4% decrease against the comparative period includes a 8.9% decline in organic revenue from project completions and lower resale revenue and a 0.5% unfavorable foreign currency exchange rate impact.

Costs and Expenses

Our total costs and expenses are provided below:

Dollar Amount Dollar Amount

Three Months Ended December 31,

Change Nine Months Ended December 31,

(in millions) 2024 2023 Dollar Percent 2024 2023 Dollar Percent

Costs of services $ 2,416 $ 2,636 $ (220) (8.3) % $ 7,369 $ 7,988 $ (619) (7.7) %

Selling, general and administrative 335 294 41 13.9 % 989 949 40 4.2 %

Dollar Amount

Three Months Ended June 30, Change

(in millions)

2025 2024 Dollar Percent

Costs of services (excludes depreciation and amortization and restructuring costs) $ 2,388 $ 2,526 $ (138) (5.5) %

Selling, general and administrative (excludes depreciation and amortization and restructuring costs) 394 301 93 30.9 %

Depreciation and amortization 304 326 (22) (6.7) %

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Interest income (46) (51) 5 (9.8) %

Gain on disposition of businesses (7) (103) 96 (93.2) % (7) (96) 89 (92.7) %

Other income, net (39) (45) 6 (13.3) %

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Costs of Services

Costs of services, excluding depreciation and amortization and restructuring costs (“COS”), were $2.4 billion and $7.4 billion for the third quarter and first nine months of fiscal 2025, respectively, a decrease of $220 million and $619 million, respectively, as compared to the same periods of the prior fiscal year.

The decrease in expense against both comparative periods was primarily due to a decrease in costs from lower revenue levels and a reduction in professional services and contractor-related expenses from our cost optimization efforts.

Gross margin (Revenues less COS as a percentage of revenue) was 25.1% and 24.0% for the third quarter and first nine months of fiscal 2025, respectively, an increase of 2.7% and 1.7% against the comparative period.

Costs of services, excluding depreciation and amortization and restructuring costs (“COS”), consist of expenses directly associated with revenue-generating activities.

These expenses primarily include payroll and related employee benefit costs, subcontractor costs and other contract-related expenses, as well as technology, facilities, and other supporting infrastructure costs.

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.

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.

Selling, General and Administrative

Selling, general and administrative expense, excluding depreciation and amortization and restructuring costs (“SG&A”), was $335 million and $989 million for the third quarter and first nine months of fiscal 2025, respectively, an increase of $41 million and $40 million, respectively, as compared to the same periods of the prior fiscal year.

The $41 million increase in expense for the third quarter of fiscal 2025 was primarily due to an alignment of business development expenses from COS in support of the offering model and an increase in professional services and other vendor-related expenses, partially offset by reductions in payroll related expenses.

The $40 million increase in expense for the first nine months of fiscal 2025 was primarily due to an alignment of business development expenses from COS in support of the offering model and an increase in transaction, separation and integration-related (“TSI”) costs, partially offset by lower merger-related indemnification expenses and a gain from a legal settlement in fiscal 2025.

Selling, general and administrative expense, excluding depreciation and amortization and restructuring costs ("SG&A"), consist of the costs associated with personnel in non-client facing positions.

These expenses primarily include payroll and related employee benefit costs, business development efforts, marketing and advertising activities, and other expenses such as information systems and office space.

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.

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

Depreciation and Amortization

Depreciation expense was $87 million and $275 million for the third quarter and first nine months of fiscal 2025, respectively, a decrease of $18 million and $55 million, respectively, as compared to the same periods of the prior fiscal year.

The decrease in depreciation expense against both comparative periods was primarily due to lower average net property and equipment balances.

Amortization expense was $233 million and $700 million for the third quarter and first nine months of fiscal 2025, respectively, a decrease of $12 million and $25 million, respectively, as compared to the same periods of the prior fiscal year.

The decrease in amortization expense against both comparative periods was primarily due to lower software amortization.

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.

Restructuring Costs

During fiscal 2025, management approved global cost savings initiatives designed to better align our facility and data center requirements.

During the third quarter and first nine months of fiscal 2025, total restructuring costs recorded, net of reversals, were $43 million and $124 million, respectively, an increase of $7 million and $33 million, respectively, as compared to the same periods of the prior fiscal year.

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.

See Note 10 – “Restructuring Costs” for additional information about our restructuring actions.

Interest Expense and Interest Income

Net interest expense (interest expense less interest income) was $15 million and $54 million for the third quarter and first nine months of fiscal 2025, respectively, a decrease of $7 million and $10 million, respectively, as compared to the same periods of the prior fiscal year.

The decrease in net interest expense against both comparative periods was primarily due to decreased interest expense from lower levels of asset financing and commercial paper liabilities, partially offset by lower interest from cash deposits.

Gain on Disposition of Businesses

During the first nine months of fiscal 2025 and fiscal 2024, the Company sold insignificant businesses and made adjustments to estimated amounts from prior years’ dispositions that resulted in a gain of $7 million and $96 million, respectively.

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.

Other Income, Net

Other income, net comprises non-service cost components of net periodic pension income, 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.

The following table summarizes components of other income, net.

The components of other income, net were as follows:

Three Months Ended Nine Months Ended

(in millions) December 31, 2024 December 31, 2023 December 31, 2024 December 31, 2023

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.

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

Three Months Ended

(in millions) June 30, 2025 June 30, 2024 Dollar Change

Non-service cost components of net periodic pension income $ (43) $ (40) $ (3)

Foreign currency (gain) loss

Loss (gain) on real estate and facility sales

Other loss (gain)

10 (16) (6) (68)

Loss on real estate and facility sales

Other miscellaneous loss (gain)

Total $ (39) $ (45) $ 6

Other income, net, was $28 million for the third quarter of fiscal 2025, a decrease of $20 million against the comparative period.

Other income, net, was $94 million for the first nine months of fiscal 2025, a decrease of $94 million against the comparative period.

The change against the comparative period was primarily due to:

• net periodic pension income increased by $5 million and $12 million primarily due to changes in expected returns on assets and other actuarial assumptions.

• foreign currency gains increased by $6 million and decreased by $4 million, 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.

• net losses on real estate and facility sales increased by $5 million and $40 million;

• a decrease in other gains of $26 million and $62 million, primarily from an impairment loss in the third quarter of fiscal 2025 and the sale of a strategic investment in the first nine months of fiscal 2024.

Our effective tax rate (“ETR”) was 51.9% and 34.0% for the three months ended December 31, 2024, and December 31, 2023, respectively, and 54.5% and 32.8% for the nine months ended December 31, 2024, and December 31, 2023, respectively.

For the three months ended December 31, 2024, the primary drivers of the ETR were the global mix of income, U.S.

tax on foreign income, and the foreign tax credit.

For the nine months ended December 31, 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 three months ended December 31, 2023, the primary drivers of the ETR were the global mix of income, U.S.

tax on foreign income, and the foreign tax credit.

For the nine months ended December 31, 2023, the primary drivers of the ETR were the global mix of income, U.S.

tax on foreign income, a decrease in valuation allowances on deferred tax assets, and the foreign tax credit.

Other income, net, was $39 million and $45 million during the first quarters of fiscal 2026 and fiscal 2025, respectively, a decrease of $6 million (-13.3%) in other income compared to the same period a year ago that was primarily due to:

• higher pension income (+$3 million) - increase in net periodic pension income, primarily due to changes in expected returns on assets and other actuarial assumptions;

• 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;

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

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

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.

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.

Earnings Per Share

Diluted EPS for the third quarter and first nine months of fiscal 2025 was $0.31 and $0.68, respectively, a decrease of $0.50 and $0.75, respectively, as compared to the same periods of the prior fiscal year.

The decrease in diluted EPS against both comparative periods was primarily due to decreases in net income attributable to DXC common stockholders, partially offset by lower weighted average share counts from the Company’s share repurchases.

Diluted EPS for the third quarter of fiscal 2025 includes $0.18 per share of restructuring costs, $0.01 per share of transaction, separation and integration-related costs, $0.37 per share of amortization of acquired intangible assets, $0.05 per share of impairment losses, $(0.01) per share of gains on dispositions, $0.01 per share of net losses on real estate and facility sales, and $(0.01) per share of tax adjustments.

Diluted EPS for the first nine months of fiscal 2025 includes $0.54 per share of restructuring costs, $0.11 per share of transaction, separation and integration-related costs, $1.14 per share of amortization of acquired intangible assets, $(0.03) per share of merger related indemnification costs, $0.05 per share of impairment losses, $(0.04) per share of gains on dispositions, $0.13 per share of net losses on real estate and facility sales, and $0.02 per share of tax adjustments.

Diluted EPS for the first quarter of fiscal 2026 was $0.09, compared to $0.14 in the first quarter of fiscal 2025.

The decrease in earnings per share was primarily due to lower net income and higher weighted average common shares outstanding.

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.

Non-GAAP Financial Measures

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Free cash flow represents cash flow from operations, less capital expenditures.

Free cash flow is utilized by our management, investors, and analysts to evaluate cash available for normal business operations, to pay debt, repurchase shares, and provide further investment in the business.

Free cash flow is utilized by our management, investors, and analysts to evaluate cash available to pay debt, repurchase shares, and provide further investment in the business.

There are limitations to the use of the non-GAAP financial measures presented in this report.

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Certain non-GAAP financial measures and the respective most directly comparable financial measures calculated and presented in accordance with GAAP include:

Dollar Amount Dollar Amount

Three Months Ended December 31,

Change Nine Months Ended December 31,

(in millions) 2024 2023 Dollar Percent 2024 2023 Dollar Percent

Dollar Amount

Three Months Ended June 30, Change

(in millions) 2025 2024 Dollar Percent

Income before income taxes $ 67 $ 68 $ (1) (1.5) %

$ 131 $ 212 $ (81) (38.2) % $ 292 $ 418 $ (126) (30.1) %

Non-GAAP income before income taxes $ 208 $ 203 $ 5 2.5 %

$ 63 $ 140 $ (77) (55.0) % $ 133 $ 281 $ (148) (52.7) %

Net income $ 18 $ 25 $ (7) (28.0) %

Adjusted EBIT $ 216 $ 224 $ (8) (3.6) %

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• Amortization of acquired intangible assets – includes amortization of intangible assets acquired through business combinations.

• Merger related indemnification – in fiscal 2025 and fiscal 2024, represents the Company’s estimate of potential net liability to HPE for tax related indemnifications.

• Gains and losses on dispositions – gains and losses related to dispositions of businesses, strategic assets and interests in less than wholly-owned entities.

• Merger-related indemnification – represents the Company’s estimate of potential net liability to HPE for tax related indemnifications.

• Gains and losses on real estate and facility sales – gains and losses related to dispositions of real property.

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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).

(1) Starting in the fiscal quarter ended September 30, 2024, the Company’s reported non-GAAP financial results reflect an adjustment for gains and losses on real estate and facilities dispositions, which the Company’s current management believes are not reflective of the core operating performance of our business.

For comparability purposes, historical non-GAAP financial measures set forth herein have been recast to reflect this change, which included gains on dispositions of real property of approximately $2 million and $8 million during the three and nine months ended December 31, 2023, respectively.

For the fiscal years ended March 31, 2024 and March 31, 2023, the Company had gains on dispositions of real property of approximately $7 million and $21 million, respectively.

A reconciliation of reported results to non-GAAP results is as follows:

Three Months Ended December 31, 2024

(in millions, except per-share amounts) As

Reported Restructuring

Costs Transaction,

Separation and

Integration-Related Costs Amortization

Assets Impairment Losses (Gains) and Losses on Dispositions (Gains) and Losses on Real Estate and Facility Sales Tax Adjustment Non-GAAP

Income before income taxes $ 131 $ 43 $ 3 $ 87 $ 12 $ (8) $ 3 $ — $ 271

Income tax expense 68 9 1 18 2 (6) 1 2 95

Net income 63 34 2 69 10 (2) 2 (2) 176

net income attributable to non-controlling interest, net of tax 6 — — — — — — — 6

Net income attributable to DXC common stockholders $ 57 $ 34 $ 2 $ 69 $ 10 $ (2) $ 2 $ (2) $ 170

Effective Tax Rate 51.9 % 35.1 %

Basic EPS $ 0.31 $ 0.19 $ 0.01 $ 0.38 $ 0.06 $ (0.01) $ 0.01 $ (0.01) $ 0.94

Diluted EPS $ 0.31 $ 0.18 $ 0.01 $ 0.37 $ 0.05 $ (0.01) $ 0.01 $ (0.01) $ 0.92

Weighted average common shares outstanding for:

Basic EPS 181.02 181.02 181.02 181.02 181.02 181.02 181.02 181.02 181.02

Diluted EPS 184.77 184.77 184.77 184.77 184.77 184.77 184.77 184.77 184.77

Nine Months Ended December 31, 2024

Three Months Ended June 30, 2025

(in millions, except per-share amounts) As

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Assets Merger Related

Indemnification Impairment Losses (Gains) and Losses on Dispositions (Gains) and Losses on Real Estate and Facility Sales Tax Adjustment Non-GAAP

Indemnification Impairment Losses Tax

Adjustments Non-GAAP

Income before income taxes $ 67 $ 37 $ 1 $ 87 $ 2 $ 14 $ — $ 208

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net income attributable to non-controlling interest, net of tax

Net income attributable to DXC common stockholders $ 125 $ 99 $ 20 $ 210 $ (5) $ 10 $ (8) $ 24 $ 3 $ 478

Effective Tax Rate 54.5 % 33.9 %

Basic EPS $ 0.69 $ 0.55 $ 0.11 $ 1.16 $ (0.03) $ 0.06 $ (0.04) $ 0.13 $ 0.02 $ 2.65

Diluted EPS $ 0.68 $ 0.54 $ 0.11 $ 1.14 $ (0.03) $ 0.05 $ (0.04) $ 0.13 $ 0.02 $ 2.59

Weighted average common shares outstanding for:

Basic EPS 180.54 180.54 180.54 180.54 180.54 180.54 180.54 180.54 180.54 180.54

Diluted EPS 184.65 184.65 184.65 184.65 184.65 184.65 184.65 184.65 184.65 184.65

Three Months Ended December 31, 2023

(in millions, except per-share amounts) As

Reported Restructuring costs Transaction,

Separation and

Integration-Related Costs Amortization

Assets Merger Related Indemnification (Gains) and Losses on Dispositions (Gains) and Losses on Real Estate and Facility Sales Tax Adjustment Non-GAAP

Income before income taxes $ 212 $ 36 $ 2 $ 88 $ 2 (104) $ (2) $ — $ 234

Income tax expense 72 5 — 13 — (10) (1) 5 84

Net income 140 31 2 75 2 (94) (1) (5) 150

net loss attributable to non-controlling interest, net of tax

2 — — — — — — 2

6 unchanged sentences

Diluted EPS 184.96 184.96 184.96 184.96 184.96 184.96 184.96 184.96

Nine Months Ended December 31, 2023

Three Months Ended June 30, 2024

(in millions, except per-share amounts) As

3 unchanged sentences

Integration-Related Costs Amortization

Assets Merger Related indemnification (Gains) and Losses on Dispositions (Gains) and Losses on Real Estate and Facility Sales Impairment Losses Tax adjustment Non-GAAP

Assets Gains and losses on sale of real estate Non-GAAP

Income before income taxes $ 68 $ 39 $ 7 $ 87 $ 2 $ 203

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Reconciliations of revenue growth to organic revenue growth are as follows:

Three Months Ended Nine Months Ended

(in millions) December 31, 2024 December 31, 2023 December 31, 2024 December 31, 2023

Three Months Ended

June 30, 2025 June 30, 2024

Total revenue growth (2.4) % (6.1) %

(5.1) % (4.7) % (5.6) % (5.1) %

Foreign currency (2.0) % 1.4 %

0.7 % (1.7) % 0.7 % (1.0) %

Acquisition and divestitures 0.1 % 0.3 %

0.2 % 1.9 % 0.2 % 2.2 %

Organic revenue growth (4.3) % (4.4) %

(4.2) % (4.5) % (4.7) % (3.9) %

GBS revenue growth

CES revenue growth

(2.7) % (3.0) %

Foreign currency (2.0) % 1.7 %

0.9 % (1.4) % 0.9 % (0.7) %

Acquisition and divestitures 0.3 % 0.4 %

0.4 % 4.1 % 0.4 % 4.6 %

GBS organic revenue growth

CES organic revenue growth

(4.4) % (0.9) %

GIS revenue growth (3.5) % (10.1) %

(8.5) % (6.8) % (9.4) % (8.1) %

Foreign currency (2.2) % 1.3 %

0.7 % (2.1) % 0.5 % (1.2) %

Acquisition and divestitures — % 0.2 %

— % — % — % — %

GIS organic revenue growth (5.7) % (8.6) %

(7.8) % (8.9) % (8.9) % (9.3) %

Reconciliations of net income to adjusted EBIT are as follows:

Three Months Ended Nine Months Ended

(in millions) December 31, 2024 December 31, 2023 December 31, 2024 December 31, 2023

Net income $ 63 $ 140 $ 133 $ 281

Income tax expense 68 72 159 137

Interest income (51) (56) (153) (158)

Interest expense 66 78 207 222

EBIT 146 234 346 482

Insurance revenue growth

Foreign currency (1.8) % 0.9 %

Acquisition and divestitures — % — %

Insurance organic revenue growth

Reconciliations of segment profit and adjusted EBIT to net income are as follows:

Three Months Ended

(in millions) June 30, 2025 June 30, 2024

Total profit for reportable segments $ 235 $ 268

Corporate expenses (19) (44)

Adjusted EBIT 216 224

Restructuring costs (37) (39)

Transaction, separation and integration-related costs (1) (7)

Amortization of acquired intangible assets 87 88 263 266

Amortization of acquired intangibles (87) (87)

Merger related indemnification (2) —

Gains on dispositions

(8) (104) (13) (132)

Losses (gains) on real estate and facility sales

Losses on real estate and facility sales

Impairment losses (14) —

Adjusted EBIT $ 286 $ 256 $ 789 $ 725

Interest income 46 51

Interest expense (54) (72)

Income before income tax 67 68

Income tax expense 49 43

Net income $ 18 $ 25

Liquidity and Capital Resources

Cash and Cash Equivalents and Cash Flows

As of December 31, 2024, our cash and cash equivalents (“cash”) were $1.7 billion, of which $0.9 billion was held outside of the U.S.

As of March 31, 2024, our cash was $1.2 billion, of which $0.6 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.

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.

A significant portion of the cash held by our foreign subsidiaries is not expected to be impacted by U.S.

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The following table summarizes our cash flow activity:

Nine Months Ended

(in millions) December 31, 2024 December 31, 2023 Change

Three Months Ended

(in millions) June 30, 2025 June 30, 2024 Change

Net cash provided by (used in):

3 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents (3) 2 (5)

Net increase (decrease) in cash and cash equivalents $ 499 $ (167) $ 666

Net (decrease) increase in cash and cash equivalents $ (4) $ 93 $ (97)

Cash and cash equivalents at beginning of year 1,796 1,224

1 unchanged sentence

Operating cash flow

Net cash provided by operating activities was $1,083 million and $1,081 million, respectively, during the first nine months of fiscal 2025 and fiscal 2024, reflecting a year-over year increase of $2 million.

Operating cash flow against the comparative period included:

• a $119 million favorable change in working capital primarily from improvements in our cash conversion cycle;

partially offset by

• a decrease in net income, net of adjustments of $117 million.

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:

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

The following table contains certain key working capital metrics:

Three Months Ended

December 31, 2024 December 31, 2023

June 30, 2025 June 30, 2024

Days of sales outstanding in accounts receivable 69 68

2 unchanged sentences

Investing cash flow

Net cash used in investing activities was $343 million and $367 million, respectively, during the first nine months of fiscal 2025 and fiscal 2024, reflecting a year-over-year change of $24 million.

The change against the comparative period was primarily due to:

• an increase in proceeds from sales of assets of $56 million;

partially offset by

• a $27 million increase in capital expenditures;

• a decrease in cash inflows from business dispositions of $5 million.

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:

• a $104 million decrease in capital expenditures primarily from lower levels of software purchased and developed, and

• a $7 million increase in cash inflows from other net investing activities.

Financing cash flow

Net cash used in financing activities was $257 million and $877 million, respectively, during the first nine months of fiscal 2025 and fiscal 2024, reflecting a year-over-year change of $620 million.

The change against the comparative period was primarily due to:

• a $757 million decrease in cash used for share repurchase activity and related taxes paid on net share settlements;

• a $91 million decrease in payments on capital leases and borrowings for asset financing, as the Company continues reducing the volume of these financing arrangements;

Net cash (used in) provided by financing activities was $(110) million and $41 million, respectively, during the first quarters of fiscal 2026 and fiscal 2025, reflecting a year-over-year change of $151 million.

The change was primarily due to:

• $151 million from commercial paper borrowings, net of repayments in the first quarter of fiscal 2025 that did not occur in the first quarter of 2026;

• a $41 million increase in share repurchase activity and related taxes paid on net share settlements in fiscal 2026;

partially offset by

• a $228 million decrease in cash inflows from commercial paper borrowings, net of repayments and other financing activities.

• 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.

Debt Financing

The following table summarizes our total debt:

(in millions) December 31, 2024 March 31, 2024

(in millions) June 30, 2025 March 31, 2025 Change

Short-term debt and current maturities of long-term debt $ 929 $ 880 $ 49

1 unchanged sentence

Total debt $ 4,029 $ 3,876 $ 153

The $259 million decrease in total debt during the first nine months of fiscal 2025 was primarily attributable to the decreases in finance leases and borrowings for asset financing attributable to payments exceeding additions and a favorable foreign currency exchange rate of U.S.

dollar against the Euro.

We were in compliance with all financial covenants associated with our borrowings as of December 31, 2024.

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.

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

Our credit ratings are as follows:

4 unchanged sentences

For information on the risks of ratings downgrades, see Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended March 31, 2025.

We expect our existing cash and cash equivalents, together with cash generated from operations, will be sufficient to meet our normal operating requirements for the next 12 months.

We expect our existing cash and cash equivalents, together with cash generated from operations, will be sufficient to meet our normal operating requirements for the next 12 months and beyond.

We expect to continue using cash generated by operations as a primary source of liquidity;

4 unchanged sentences

The recovery of these investments is over the life of the contracts and is dependent upon our performance as well as customer acceptance.

Our total liquidity of $4.9 billion as of December 31, 2024, includes $1.7 billion of cash and cash equivalents and $3.2 billion of available borrowings under our revolving credit facility.

On November 1, 2024, the Company extended the term of our revolving credit facility to November 1, 2029 .

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.

Share Repurchases

16 unchanged sentences

We consider the following policies to be critical because of their complexity and the high degree of judgment involved in implementing them:

revenue recognition, income taxes, defined benefit plans, valuation of assets and loss accruals for litigation.

revenue recognition, income taxes, defined benefit plans, valuation of assets, and loss accruals for contingencies and litigation.

We have discussed the selection of our critical accounting policies and the effect of estimates with the Audit Committee of our Board of Directors.

During the three months ended December 31, 2024, there were no changes to our critical accounting policies and estimates from those described in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024 except as mentioned in Note 1 – “Summary of Significant Accounting Policies.”

During the three months ended June 30, 2025, there were no changes to our critical accounting policies and estimates from those described in our Annual Report on Form 10-K for the fiscal year ended March 31, 2025 except as mentioned in Note 1 – “Summary of Significant Accounting Policies.”

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis