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Item 2. Management’s Discussion and Analysis

2026-07-31 compared with 2026-01-30 · 111 added, 240 removed, 237 unchanged (60% 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 2026 and our financial condition as of December 31, 2025.

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 2027 and our financial condition as of June 30, 2026.

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 2026 and fiscal 2025.

The following discussion includes a comparison of our results of operations and liquidity and capital resources for the first quarters of fiscal 2027 and fiscal 2026.

References are made throughout to the numbered Notes to the Condensed Consolidated Financial Statements (“Notes”) in this Quarterly Report on Form 10-Q.

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With deep expertise in Managed Infrastructure Services, Application Modernization, and Industry-Specific Software Solutions, DXC modernizes, secures, and operates some of the world’s most complex technology estates.

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 Third Quarter and First Nine Months of Fiscal 2026 and Fiscal 2025

Financial Highlights

Key metrics for the third quarter of fiscal 2026 compared to the third 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.

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

Our financial results are reported through three reportable segments that reflect the Company’s operational structure and how we deliver end-to-end IT solutions:

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

Key revenue, profitability and cash flow metrics for the first quarter of fiscal 2027 compared to the first quarter of fiscal 2026 are included below.

Organic revenue, adjusted earnings before income taxes, and adjusted diluted earnings per share are non-GAAP financial measures.

For more information see “Non-GAAP Financial Measures.”

• Revenues of $3.2 billion, down 1.0% year-over-year (down 4.3% on an organic basis);

• EBIT was $179 million up 22.6% year-over-year with a corresponding margin of 5.6%.

• Revenues of $2,999 million, down 5.1% year-over-year (down 6.7% on an organic basis);

• EBIT was $207 million, with a corresponding margin of 6.9%.

Adjusted EBIT was $150 million, down 30.6% year-over-year with a corresponding margin of 5.0%;

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adjusted diluted earnings per share of $0.40, compared to $0.68 in the same period a year ago;

• Year-to-date fiscal 2026 cash generated from operations was $1,009 million, less capital expenditures of $406 million, resulted in free cash flow of $603 million, compared to free cash flow of $576 million in the in the prior-year;

• Book-to-bill ratio (contract awards divided by quarterly revenue) of 1.12x, compared to 1.33x in the prior-year period.

Segment Highlights - Third Quarter Fiscal 2026

Consulting & Engineering Services

• Revenue was $1,266 million, down 0.1% year-over-year (down 3.6% on an organic basis).

• Segment profit was $144 million, down 12.2% year-over-year, with a corresponding margin of 11.4%.

• Book-to-bill ratio of 1.20x, compared to 1.28x during the third quarter of fiscal 2025.

Global Infrastructure Services

• Revenue was $1,607 million, down 2.7% year-over-year (down 6.2% on an organic basis).

• Segment profit was $113 million, up 0.9% year-over-year, with a corresponding margin of 7.0%.

• Book-to-bill ratio of 1.09x, compared to 1.43x during the third quarter of fiscal 2025.

Insurance Services

• Revenue was $321 million, up 4.6% year-over-year (up 3.2% on an organic basis).

• Segment profit was $35 million, down 30.0% year-over-year, with a corresponding margin of 10.9%.

• Book-to-bill ratio of 0.93x, compared to 1.04x during the third quarter of fiscal 2025.

Segment Highlights - First Nine Months Fiscal 2026

• Cash generated from operations was $418 million, less capital expenditures of $104 million, resulted in free cash flow of $314 million, compared to free cash flow of $97 million in the prior-year period.

Free cash flow in fiscal 2027 includes cash proceeds of $214 million related to the litigation judgment obtained against TCS, as discussed further in Note 18 - “Commitments and Contingencies”;

• Book-to-bill ratio (contract awards divided by quarterly revenue) of 0.99x, compared to 0.90x during fiscal 2026.

Segment Highlights

Consulting & Engineering Services

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• Segment profit was $100 million, down 4.8% year-over-year, with a corresponding margin of 8.1%.

• Book-to-bill ratio of 0.98x, compared to 1.19x during the first quarter of fiscal 2026.

Global Infrastructure Services

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• Segment profit was $38 million, down 60.8% year-over-year, with a corresponding margin of 2.6%.

Insurance Services

• Book-to-bill ratio of 1.11x, compared to 0.74x during the first quarter of fiscal 2026.

Insurance Software & Services

• Revenue was $319 million, up 1.9% year-over-year (up 1.4% on an organic basis).

• Segment profit was $96 million, down 26.7% year-over-year, with a corresponding margin of 10.1%.

• Segment profit was $34 million, up 3.0% year-over-year, with a corresponding margin of 10.7%.

• Book-to-bill ratio of 0.54x, compared to 0.54x during the first quarter of fiscal 2026.

Results of Operations for the Three Months Ended June 30, 2026 and June 30, 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) December 31, 2025 December 31, 2024 U.S.

Constant Currency (1)

December 31, 2025 December 31, 2024

Geographic Market

United States $ 805 $ 902 (10.8) % (10.8) % 25.2 % 28.0 %

United Kingdom

451 441 2.3 % (1.6) % 14.1 % 13.7 %

Other Europe 1,094 1,041 5.1 % (2.8) % 34.3 % 32.3 %

Australia 278 286 (2.8) % (3.5) % 8.7 % 8.9 %

Other International 566 555 2.0 % 0.9 % 17.7 % 17.2 %

Total Revenues $ 3,194 $ 3,225 (1.0) % (4.3) % 100.0 % 100.0 %

Operating Segments

$ 1,266 $ 1,267 (0.1) % (3.6) % 39.6 % 39.3 %

1,607 1,651 (2.7) % (6.2) % 50.3 % 51.2 %

321 307 4.6 % 3.3 % 10.1 % 9.5 %

Total Revenues $ 3,194 $ 3,225 (1.0) % (4.3) % 100.0 % 100.0 %

Nine Months Ended Percentage Change

Percentage of Revenue

for the Nine Months Ended

(in millions) December 31, 2025 December 31, 2024 U.S.

Percentage of Revenue for the Three Months Ended

(in millions) June 30, 2026 June 30, 2025 U.S.

Constant Currency (1)

December 31, 2025 December 31, 2024

June 30, 2026 June 30, 2025

Geographic Market

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Total Revenues $ 2,999 $ 3,159 (5.1) % (6.7) % 100.0 % 100.0 %

Operating Segments

Reportable Segments

$ 1,231 $ 1,246 (1.2) % (3.0) % 41.0 % 39.4 %

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Total Revenues $ 2,999 $ 3,159 (5.1) % (6.7) % 100.0 % 100.0 %

_______________

(1) Constant currency revenues are a non-GAAP measure calculated by translating current period activity into U.S.

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

For the third quarter of fiscal 2026, our total revenue was $3.2 billion, a decrease of $31 million or 1.0%, compared to the same period a year ago.

For the first quarter of fiscal 2027, our total revenue was $3.0 billion, a decrease of $160 million or 5.1%, compared to the same period a year ago.

The decrease against the comparative period includes a 6.7% decline in organic revenue partially offset by a 1.6% favorable foreign currency exchange rate impact.

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

For the first nine months of fiscal 2026, our total revenue was $9.5 billion, a decrease of $188 million or 1.9%, as 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 2.5% favorable foreign currency exchange rate impact.

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, 2026.

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Our total costs and expenses are provided below:

Three Months Ended December 31,

Change Nine Months Ended December 31,

(in millions) 2025 2024 Dollar Percent 2025 2024 Dollar Percent

Costs of services $ 2,435 $ 2,416 $ 19 0.8 % $ 7,206 $ 7,369 $ (163) (2.2) %

Selling, general and administrative 309 335 (26) (7.8) % 1,069 989 80 8.1 %

Dollar Amount

Three Months Ended June 30, Change

(in millions)

2026 2025 Dollar Percent

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

Selling, general and administrative (excludes depreciation and amortization and restructuring costs) 328 394 (66) (16.8) %

Depreciation and amortization 267 304 (37) (12.2) %

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Interest income (89) (46) (43) 93.5 %

Gain on disposition of businesses — (7) 7 (100.0) % — (7) 7 (100.0) %

Other income, net (217) (39) (178) 456.4 %

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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 third quarter of fiscal 2026, an increase of $19 million (+0.8%) compared to the prior-year period.

The increase was primarily driven by an unfavorable foreign currency exchange rate impact, partially offset by a decrease in costs and payroll-related expenses from lower revenue levels.

COS was $7.2 billion for the first nine months of fiscal 2026, a decrease of $163 million (-2.2%) 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 23.8% and 24.3% for the third quarter and first nine months of fiscal 2026, respectively, a decrease of 1.3% and an an increase of 0.3% against the comparative periods.

COS was $2.4 billion for the first quarter of fiscal 2027, unchanged from the prior-year period.

While the Company’s cost optimization initiatives reduced payroll and related employee benefit costs, professional services, and contractor-related expenses, cost reductions did not keep pace with the decline in revenue.

As a result, gross margin was 20.4% for the first quarter of fiscal 2027, a decline of 400 basis points against the prior-year period.

Selling, General and Administrative

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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 $309 million for the third quarter of fiscal 2026, a decrease of $26 million (-7.8%) compared to the prior-year period.

The decrease was primarily driven by the reversal of a merger-related indemnification payable and lower levels of transaction, separation and integration-related (“TSI”) costs in the current quarter, partially offset by higher stock based compensation related to exits in the third quarter of fiscal 2025 and an unfavorable foreign currency exchange rate impact.

SG&A was $1,069 million for the first nine months of fiscal 2026, an increase of $80 million (+8.1%) compared to the prior-year period.

The increase was primarily driven by the realignment of business development and certain other costs from COS, increased 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 by the reversal of a merger-related indemnification payable in the third quarter of fiscal 2026 and lower levels of TSI costs.

SG&A as a percentage of revenue was 9.7% and 11.2% for the third quarter and first nine months of fiscal 2026, respectively, a decrease of 0.7% and an increase of 1.0% against the comparative periods.

SG&A was $328 million for the first quarter of fiscal 2027, a decrease of $66 million (-16.8%) compared to the prior-year period.

The decline was primarily driven by lower payroll and related employee benefit costs, as well as reduced professional services and contractor related expenses.

SG&A as a percentage of revenue was 10.9% for the first quarter of fiscal 2027, an improvement of 160 basis points against the prior-year period.

Depreciation and Amortization

Depreciation and amortization was $283 million for the third quarter of fiscal 2026, a decrease of $37 million (-11.6%) compared to the prior-year period.

Depreciation expense decreased by $17 million due to lower average net property and equipment balances.

Amortization expense decreased by $20 million due to lower transition and transformation contract cost balances and lower software amortization.

Depreciation and amortization was $882 million for the first nine months of fiscal 2026, a decrease of $93 million (-9.5%) compared to the prior-year period.

Depreciation and amortization was $267 million for the first quarter of fiscal 2027, a decrease of $37 million (-12.2%) compared to the prior-year period.

Depreciation expense decreased by $12 million due to lower average net property and equipment balances.

Amortization expense decreased by $41 million due to lower transition and transformation contract cost balances and lower software amortization.

Amortization expense decreased by $25 million due to lower software amortization and transition and transformation contract cost balances.

Restructuring Costs

During fiscal 2026, 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 2026, total restructuring costs recorded, net of reversals, were $20 million and $92 million, respectively, a decrease of $23 million (-53.5%) and $32 million (-25.8%), respectively, as compared to the prior-year periods.

During fiscal 2027, 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 $26 million for the first quarter of fiscal 2027, an $11 million decrease (-29.7%) 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 $8 million and $23 million for the third quarter and first nine months of fiscal 2026, respectively, a decrease of $7 million (-46.7%) and $31 million (-57.4%), 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 and lower finance lease and asset financing costs, partially offset by debt extinguishment costs in the quarter.

Gain on Disposition of Businesses

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

Interest Income and Interest Expense

Net interest income (interest expense less interest income) was $34 million for the first quarter of fiscal 2027, an increase of $42 million as compared to the prior-year period.

Included in this amount is $46 million of interest income from the TCS litigation judgment, as discussed in Note 18 - “Commitments and Contingencies.”

Other Income, Net

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.

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

Three Months Ended Nine Months Ended

(in millions) December 31, 2025 December 31, 2024 Dollar Change December 31, 2025 December 31, 2024 Dollar Change

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

The components of Other income, net were as follows:

Three Months Ended

(in millions) June 30, 2026 June 30, 2025 Dollar Change

Non-service cost components of net periodic pension income $ (45) $ (43) $ (2)

Pension and OPEB actuarial and settlement losses

11 — 11 11 — 11

Foreign currency (gain) loss — (1) 1 (7) — (7)

Loss (gain) on real estate and facility sales — 3 (3) (7) 32 (39)

Other (gain) loss

(1) 10 (11) 4 (6) 10

Foreign currency gain (1) (5) 4

Gain on litigation (168) — (168)

Other miscellaneous (gain) loss (3) 9 (12)

Total $ (217) $ (39) $ (178)

Other income, net, increased $4 million and $33 million, respectively, compared to the third quarter and first nine months of fiscal 2025, primarily due to:

• higher pension income (+$2 million and +$8 million) - increase in net periodic pension income, primarily due to changes in expected returns on assets and other actuarial assumptions;

• pension and OPEB actuarial and settlement losses (-$11 million and -$11 million) - in the third quarter of fiscal 2026, the Company recognized net losses of $11 million, primarily reflecting a $15 million mark-to-market adjustment to its project benefit obligations in India following enactment of labor law reforms in November 2025;

• foreign currency impact (-$1 million and +$7 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 (+$3 million and +$39 million) - losses on real estate and facility sales in the comparative periods, partially offset by gains on real estate and facility sales in the second quarter of fiscal 2026;

• other miscellaneous items increased by $11 million and decreased by $10 million for the third quarter and first nine months, respectively.

In the third quarter comparison (+$11 million), the prior year period included an impairment loss.

For the nine months ended comparison (-$10 million), the Company recognized a $14 million impairment of goodwill in the first quarter of fiscal 2026 related to the change in operating segments, partially offset by an impairment loss recognized in the third quarter of fiscal 2025 and a gain on the sale of a strategic investment in the second quarter of fiscal 2025.

Our effective tax rate (“ETR”) was 35.7% and 51.9% for the three months ended December 31, 2025, and December 31, 2024, respectively, and 54.5% and 54.5% for the nine months ended December 31, 2025, and December 31, 2024, respectively.

For the three months ended December 31, 2025, the primary drivers of the ETR were the global mix of income, U.S.

tax on foreign income, and tax benefits resulting from the expiration of the statute of limitations relating to uncertain tax positions.

For the nine months ended December 31, 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 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.

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.

Other income, net, increased $178 million compared to the prior-year period primarily due to:

• pension income ($2 million) - increase in net periodic pension income, primarily due to changes in expected returns on assets and other actuarial assumptions;

• foreign currency impact ($4 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;

• gain on litigation ($168 million) - compensatory and punitive damages from the litigation judgment obtained against TCS;

• other miscellaneous items ($12 million) - the Company recognized a $14 million impairment of goodwill in the first quarter of fiscal 2026 related to the change in operating segments.

Our effective tax rate (“ETR”) was 47.7% and 73.1% for the first quarter of fiscal 2027 and the first quarter of fiscal 2026, respectively.

For the first quarter of fiscal 2027, the primary drivers of the ETR were the global mix of income, U.S.

tax on foreign income, and a reduction in a deferred tax asset for stock based compensation.

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.

Earnings Per Share

Diluted EPS for the third quarter and first nine months of fiscal 2026 was $0.61 and $0.88, respectively, an increase of $0.30 and $0.20 compared with the prior-year periods primarily due to higher net income attributable to DXC common stockholders and a lower weighted average share count from the Company’s share repurchases.

Diluted EPS for the third quarter of fiscal 2026 includes $0.09 per share of restructuring costs, $0.40 per share of amortization of acquired intangible assets, $(0.19) per share of merger related indemnification costs, $0.01 per share of debt extinguishment costs, $0.05 per share of pension and OPEB actuarial and settlement losses, and $(0.01) per share of tax adjustments.

Diluted EPS for the first nine months of fiscal 2026 includes $0.41 per share of restructuring costs, $0.01 per share of transaction, separation and integration-related costs, $1.17 per share of amortization of acquired intangible assets, $(0.17) per share of merger related indemnification costs, $(0.04) per share of gains on real estate, facility sales, and dispositions, $0.01 per share of debt extinguishment costs, $0.06 per share of impairment losses, $0.05 per share of pension and OPEB actuarial and settlement losses, and $0.09 per share of tax adjustments.

Diluted EPS for the first quarter of fiscal 2027 was $0.73, compared to $0.09 in the first quarter of fiscal 2026.

The increase in earnings per share was primarily due to the Company's increase in net income attributable to DXC common stockholders and a lower weighted average share count from the Company’s share repurchases.

Diluted EPS for the first quarter of fiscal 2027 includes $0.08 per share of restructuring costs, $0.28 per share of amortization of acquired intangible assets, $(0.69) per share of gain on litigation award, and $(0.01) per share of gains on dispositions.

Non-GAAP Financial Measures

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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:

Three Months Ended December 31,

Change Nine Months Ended December 31,

(in millions) 2025 2024 Dollar Percent 2025 2024 Dollar Percent

Income before income taxes

$ 171 $ 131 $ 40 30.5 % $ 369 $ 292 $ 77 26.4 %

Dollar Amount

Three Months Ended June 30, Change

(in millions) 2026 2025 Dollar Percent

Income before income taxes $ 241 $ 67 $ 174 NM (1)

Non-GAAP income before income taxes $ 138 $ 208 $ (70) (33.7) %

$ 110 $ 63 $ 47 74.6 % $ 168 $ 133 $ 35 26.3 %

Net income $ 126 $ 18 $ 108 NM (1)

Adjusted EBIT $ 150 $ 216 $ (66) (30.6) %

(1) Calculation is not meaningful ("NM") due to the gain from the TCS litigation judgment, as discussed in Note 18 - “Commitments and Contingencies.

Reconciliation of Non-GAAP Financial Measures

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

• Pension and OPEB actuarial and settlement gains and losses – pension and OPEB actuarial mark to market adjustments and settlement gains and losses.

• Merger-related indemnification – represents the Company’s estimate of potential net liability 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.

• Gain on litigation award – reflects a gain related to the TCS litigation judgment.

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

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

• Impairment losses – non-cash charges associated with the permanent reduction in the value of the Company’s assets (e.g., impairment of goodwill and other long-term assets including fixed assets and impairments to deferred tax assets for discrete changes in valuation allowances).

Future discrete reversals of valuation allowances are likewise excluded.

• Debt extinguishment costs – costs associated with early retirement, redemption, repayment or repurchase of debt and debt-like items including any breakage, make-whole premium, prepayment penalty or similar costs as well as solicitation and other legal and advisory expenses.

• 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.

• 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).

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

Three Months Ended December 31, 2025

Three Months Ended June 30, 2026

(in millions, except per-share amounts) As

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Costs Amortization

Assets Merger Related

Indemnification Debt Extinguishment Costs Pension and OPEB actuarial and settlement gains and losses Tax Adjustment Non-GAAP

Income before income taxes $ 171 $ 20 $ 87 $ (34) $ 1 $ 11 $ — $ 256

Income tax expense 61 4 17 — — 2 1 85

Net income 110 16 70 (34) 1 9 (1) 171

net income attributable to non-controlling interest, net of tax 3 — — — — — — 3

Net income attributable to DXC common stockholders $ 107 $ 16 $ 70 $ (34) $ 1 $ 9 $ (1) $ 168

Effective Tax Rate 35.7 % 33.2 %

Basic EPS $ 0.62 $ 0.09 $ 0.40 $ (0.20) $ 0.01 $ 0.05 $ (0.01) $ 0.97

Diluted EPS $ 0.61 $ 0.09 $ 0.40 $ (0.19) $ 0.01 $ 0.05 $ (0.01) $ 0.96

Weighted average common shares outstanding for:

Basic EPS 173.13 173.13 173.13 173.13 173.13 173.13 173.13 173.13

Diluted EPS 175.75 175.75 175.75 175.75 175.75 175.75 175.75 175.75

Nine Months Ended December 31, 2025

(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 Real Estate, Facility Sales and Dispositions Debt Extinguishment Costs Impairment Losses Pension and OPEB actuarial and settlement gains and losses Tax Adjustment Non-GAAP

Income before income taxes $ 369 $ 92 $ 2 $ 262 $ (32) $ (8) $ 1 $ 14 $ 11 $ — $ 711

Income tax expense 201 19 — 52 (2) (1) — 4 2 (17) 258

Net income 168 73 2 210 (30) (7) 1 10 9 17 453

net income attributable to non-controlling interest, net of tax 9 — — — — — — — — — 9

Net income attributable to DXC common stockholders $ 159 $ 73 $ 2 $ 210 $ (30) $ (7) $ 1 $ 10 $ 9 $ 17 $ 444

Effective Tax Rate 54.5 % 36.3 %

Basic EPS $ 0.90 $ 0.41 $ 0.01 $ 1.19 $ (0.17) $ (0.04) $ 0.01 $ 0.06 $ 0.05 $ 0.10 $ 2.51

Diluted EPS $ 0.88 $ 0.41 $ 0.01 $ 1.17 $ (0.17) $ (0.04) $ 0.01 $ 0.06 $ 0.05 $ 0.09 $ 2.46

Weighted average common shares outstanding for:

Basic EPS 177.21 177.21 177.21 177.21 177.21 177.21 177.21 177.21 177.21 177.21 177.21

Diluted EPS 180.16 180.16 180.16 180.16 180.16 180.16 180.16 180.16 180.16 180.16 180.16

Three Months Ended December 31, 2024

(in millions, except per-share amounts) As

Reported Restructuring

Costs Transaction,

Separation and

Integration-Related Costs Amortization

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

Assets Gain on

Litigation Award Gains on Dispositions Non-GAAP

Income before income taxes $ 241 $ 26 $ 87 $ (214) $ (2) $ 138

2 unchanged sentences

net income attributable to non-controlling interest, net of tax 4 — — — — 4

6 — — — — — — 6

Net income attributable to DXC common stockholders $ 122 $ 14 $ 47 $ (115) $ (1) $ 67

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Diluted EPS 166.27 166.27 166.27 166.27 166.27 166.27

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

Indemnification Impairment

Adjustments Non-GAAP

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

1 unchanged sentence

Net income 18 28 1 67 2 10 2 128

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

8 — — — — — — — 8

net loss attributable to non-controlling interest, net of tax 2 — — — — — — 2

Net income attributable to DXC common stockholders $ 16 $ 28 $ 1 $ 67 $ 2 $ 10 $ 2 $ 126

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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, 2025 December 31, 2024 December 31, 2025 December 31, 2024

Three Months Ended

June 30, 2026 June 30, 2025

Total revenue growth (5.1) % (2.4) %

(1.0) % (5.1) % (1.9) % (5.6) %

Foreign currency (1.6) % (2.0) %

(3.3) % 0.7 % (2.5) % 0.7 %

Acquisition and divestitures — % 0.1 %

— % 0.2 % 0.1 % 0.2 %

Organic revenue growth (6.7) % (4.3) %

(4.3) % (4.2) % (4.3) % (4.7) %

CES revenue growth

1 unchanged sentence

Foreign currency (1.8) % (2.0) %

(3.5) % 0.9 % (2.5) % 0.8 %

Acquisition and divestitures — % 0.3 %

— % 0.4 % 0.3 % 0.2 %

CES organic revenue growth

1 unchanged sentence

GIS revenue growth (9.4) % (3.5) %

(2.7) % (8.2) % (3.5) % (9.2) %

Foreign currency (1.7) % (2.2) %

(3.5) % 0.8 % (2.6) % 0.7 %

Acquisition and divestitures — % — %

— % 0.2 % — % 0.2 %

GIS organic revenue growth (11.1) % (5.7) %

(6.2) % (7.2) % (6.1) % (8.3) %

Insurance revenue growth

4.6 % 6.6 % 4.8 % 5.8 %

Foreign currency (0.5) % (1.8) %

(1.4) % (0.2) % (1.4) % 0.2 %

Acquisition and divestitures — % — %

— % — % — % — %

Insurance organic revenue growth

3.2 % 6.4 % 3.4 % 6.0 %

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

Three Months Ended Nine Months Ended

(in millions) December 31, 2025 December 31, 2024 December 31, 2025 December 31, 2024

Three Months Ended

(in millions) June 30, 2026 June 30, 2025

Total profit for reportable segments $ 172 $ 235

$ 292 $ 326 $ 822 $ 926

Corporate expenses (22) (19)

(29) (40) (89) (137)

Adjusted EBIT 150 216

263 286 733 789

Restructuring costs (26) (37)

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

Amortization of acquired intangible assets (87) (87) (262) (263)

Amortization of acquired intangibles (87) (87)

Merger related indemnification — (2)

Gain on litigation award

Gains on dispositions 2 —

(Losses) gains on real estate and facility sales

Impairment losses — (14)

— (12) (14) (12)

Pension and OPEB actuarial and settlement losses

(11) — (11) —

179 146 392 346

Interest income 89 46

46 51 138 153

Interest expense (55) (54)

(54) (66) (161) (207)

Income before income tax 241 67

171 131 369 292

Income tax expense 115 49

(61) (68) (201) (159)

$ 110 $ 63 $ 168 $ 133

Net income $ 126 $ 18

Liquidity and Capital Resources

Cash and Cash Equivalents and Cash Flows

As of December 31, 2025, our cash and cash equivalents (“cash”) were $1.7 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.

As of June 30, 2026, our cash and cash equivalents (“cash”) were $2.0 billion, of which $0.7 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.

8 unchanged sentences

The following table summarizes our cash flow activity:

Nine Months Ended

(in millions) December 31, 2025 December 31, 2024 Change

Three Months Ended

(in millions) June 30, 2026 June 30, 2025 Change

Net cash provided by (used in):

3 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents 21 (3) 24

Net (decrease) increase in cash and cash equivalents $ (65) $ 499 $ (564)

Net increase (decrease) in cash and cash equivalents $ 220 $ (4) $ 224

Cash and cash equivalents at beginning of year 1,737 1,796

1 unchanged sentence

Operating cash flow

Net cash provided by operating activities was $1,009 million and $1,083 million, respectively, during the first nine months of fiscal 2026 and fiscal 2025, reflecting a year-over year decrease of $74 million.

Operating cash flow against the comparative period included:

• a $134 million unfavorable change in working capital;

partially offset by

• an increase in net income, net of adjustments of $60 million.

Net cash provided by operating activities was $418 million and $186 million, respectively, during the first quarters of fiscal 2027 and fiscal 2026, reflecting a year-over-year increase of $232 million.

The increase was primarily due to:

• a $147 million favorable change in net income, net of adjustments, primarily driven by the $214 million TCS litigation judgment;

• an $85 million favorable change in working capital due to lower working capital outflows during the first quarter of fiscal 2027 primarily as a result of lower annual executive compensation payments.

The following table contains certain key working capital metrics:

Three Months Ended

December 31, 2025 December 31, 2024

June 30, 2026 June 30, 2025

Days of sales outstanding in accounts receivable 71 69

2 unchanged sentences

Investing cash flow

Net cash used in investing activities was $365 million and $343 million, respectively, during the first nine months of fiscal 2026 and fiscal 2025, reflecting a year-over-year increase of $22 million.

The change against the comparative period was primarily due to:

• a decrease in proceeds from sales of assets of $100 million and from business dispositions of $26 million;

partially offset by

• a $101 million decrease in capital expenditures.

Net cash used in investing activities was $99 million and $77 million, respectively, during the first quarters of fiscal 2027 and fiscal 2026, reflecting a year-over-year change of $22 million.

The change was primarily due to:

• a $15 million increase in capital expenditures primarily from higher purchases of property and equipment;

• a $7 million decrease in proceeds from asset sales and other net investing activities.

Financing cash flow

Net cash used in financing activities was $674 million and $257 million, respectively, during the first nine months of fiscal 2026 and fiscal 2025, reflecting a year-over-year increase of $417 million.

The change against the comparative period was primarily due to:

• principal payments on long-term debt, net of proceeds from bond issuance in fiscal 2026 of $315 million;

• a $169 million increase in cash used for share repurchases and related taxes paid on net share settlements;

• a decrease in other financing cash inflows of $23 million;

Net cash used in financing activities was $120 million and $110 million, respectively, during the first quarters of fiscal 2027 and fiscal 2026, reflecting a year-over-year change of $10 million.

The change was primarily due to:

• a $21 million increase in share repurchase activity and related taxes paid on net share settlements;

partially offset by

2 unchanged sentences

The following table summarizes our total debt:

(in millions) December 31, 2025 March 31, 2025

(in millions) June 30, 2026 March 31, 2026 Change

Short-term debt and current maturities of long-term debt $ 501 $ 520 $ (19)

1 unchanged sentence

Total debt $ 3,504 $ 3,552 $ (48)

The $252 million decrease in total debt during the first nine months of fiscal 2026 was primarily attributable to principal payments on long-term debt, net of proceeds from our bond issuance in fiscal 2026 (see Note 9 - "Debt”), decreases in finance leases and borrowings for asset financing attributable to payments exceeding minimal additions, partially offset by the impact of the foreign currency exchange rate of U.S.

The $48 million decrease in total debt during the first quarter of fiscal 2027 was driven by cash payments for finance leases and borrowings for asset financing exceeding new additions and the impact of the 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, 2025.

We were in compliance with all financial covenants associated with our borrowings as of June 30, 2026 and June 30, 2025.

Our credit ratings are as follows:

Rating Agency Long Term Ratings Short Term Ratings Outlook

Moody’s Baa2 P-2 Negative

Fitch BBB- F3 Stable

Moody’s Baa3 P-3 Stable

S&P BBB- - Stable

7 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 $4.7 billion as of December 31, 2025, includes $1.7 billion of cash and cash equivalents and $3.0 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.

Our total liquidity of $5.0 billion as of June 30, 2026, includes $2.0 billion of cash and cash equivalents and $3.0 billion of available borrowings under our revolving credit facility.

Share Repurchases

7 unchanged sentences

Cash Commitments

The transactions below represent material changes to our cash commitments since March 31, 2025.

• Issuance of €650 million in aggregate principal amount of 4.25% senior notes due fiscal 2031;

• Repayment in full of the €650 million senior notes due fiscal 2026;

• Redemption of $300 million of the aggregate principal amount of its $700 million senior notes due fiscal 2027.

There have been no material changes, outside the ordinary course of business, to our cash commitments since March 31, 2026.

For further information see “Cash Commitments” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended March 31, 2026.

8 unchanged sentences

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, 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.”

During the three months ended June 30, 2026, 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, 2026 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