DXC Technology Co (DXC)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

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 MD&A is provided as a supplement to, and should be read in conjunction with, our financial statements and accompanying notes.

The MD&A is organized in the following sections:

•Background

•Results of Operations

•Liquidity and Capital Resources

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

Background

DXC is a leading enterprise technology and innovation partner delivering software, services, and solutions to global enterprises and public sector organizations — helping them harness AI to drive outcomes at a time of exponential change with speed. 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. 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%. Adjusted EBIT was $263 million, down 8.0% year-over-year with a corresponding margin of 8.2%;

•Diluted earnings per share of $0.61, compared to $0.31 in the same period a year ago; adjusted diluted earnings per share of $0.96, compared to $0.92 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.

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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

Consulting & Engineering Services

•Revenue was $3,767 million, down 1.6% year-over-year (down 3.8% on an organic basis).

•Segment profit was $394 million, down 14.7% year-over-year, with a corresponding margin of 10.5%.

Global Infrastructure Services

•Revenue was $4,793 million, down 3.5% year-over-year (down 6.1% on an organic basis).

•Segment profit was $332 million, down 0.3% year-over-year, with a corresponding margin of 6.9%.

Insurance Services

•Revenue was $954 million, up 4.8% year-over-year (up 3.4% on an organic basis).

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

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Revenues

Our revenues by geography and operating segment are provided below:

_______________

(1)Constant currency revenues are a non-GAAP measure calculated by translating current period activity into U.S. dollars using the comparable prior period’s currency conversion rates. This information is consistent with how management views our revenues and evaluates our operating performance and trends. For more information, see "Non-GAAP Financial Measures."

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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. The decrease against the comparative period includes a 4.3% decline in organic revenue partially offset by a 3.3% 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 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, 2025.

Costs and Expenses

Our total costs and expenses are provided below:

Costs of Services

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 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 administrativ

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

The purpose of the Management's Discussion and Analysis (“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 fiscal year ended March 31, 2026 and our financial condition as of March 31, 2026. The MD&A is provided as a supplement to, and should be read in conjunction with, our financial statements and notes.

The MD&A is organized in the following sections:

•Background

•Results of Operations

•Liquidity and Capital Resources

•Critical Accounting Estimates

The following discussion includes a comparison of our results of operations and liquidity and capital resources for fiscal 2026 and fiscal 2025. A comparison of our results of operations and liquidity and capital resources for fiscal 2025 and fiscal 2024 may be found in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” on Form 10-K filed with the Securities and Exchange Commission on May 15, 2025.

Background

DXC is a leading enterprise technology and innovation partner delivering software, services, and solutions to global enterprises and public sector organizations — helping them harness AI to drive outcomes at a time of exponential change with speed. 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.

We generate revenue by offering a wide range of information technology services and solutions primarily in North America, Europe, Asia, and Australia. 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 Software & Services ("Insurance").

Key Metrics

Key revenue, profitability and cash flow metrics for fiscal 2026 compared to fiscal 2025 are included below. We have presented organic revenue, adjusted earnings before income taxes, and adjusted diluted earnings per share on a non-GAAP basis. For more information see “Non-GAAP Financial Measures.”

•Revenues of $12.64 billion, down 1.8% year-over-year (down 4.8% on an organic basis);

•EBIT was $353 million with a corresponding margin of 2.8%. Adjusted EBIT was $970 million, down 4.8% year-over-year with a corresponding margin of 7.7%;

•Diluted earnings per share of $0.10, compared to $2.10 in fiscal 2025; adjusted diluted earnings per share of $3.23, compared to $3.43 in fiscal 2025;

•Cash generated from operations was $1,248 million, less capital expenditures of $535 million, resulted in free cash flow of $713 million, compared to free cash flow of $687 million in the prior-year

•Book-to-bill ratio (contract awards divided by annual revenue) of 0.98x, compared to 1.03x during fiscal 2025.

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Segment Highlights - Fiscal Year 2026

Consulting & Engineering Services

•Revenue was $5,023 million, down 0.8% year-over-year (down 3.8% on an organic basis).

•Segment profit was $518 million, down 10.7% year-over-year, with a corresponding margin of 10.3%.

•Book-to-bill ratio of 1.10x, compared to 1.08x during fiscal 2025.

Global Infrastructure Services

•Revenue was $6,342 million, down 3.9% year-over-year (down 7.2% on an organic basis).

•Segment profit was $432 million, up 0.2% year-over-year, with a corresponding margin of 6.8%.

•Book-to-bill ratio of 0.94x, compared to 1.04x during fiscal 2025.

Insurance Software & Services

•Revenue was $1,279 million, up 5.4% year-over-year (up 3.6% on an organic basis).

•Segment profit was $129 million, down 20.4% year-over-year, with a corresponding margin of 10.1%.

•Book-to-bill ratio of 0.76x, compared to 0.77x during fiscal 2025.

Results of Operations

The following table provides financial data for fiscal 2026 and 2025:

(1) Income before income taxes, Net income, Net income attributable to DXC common stockholders, and Diluted earnings per common share include Pension and OPEB actuarial and settlement losses and (gains) that were $169 million and $(232) million for the fiscal years ended March 31, 2026 and March 31, 2025, respectively.

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Revenues

Our revenues by geography and operating segments are provided below:

(1) Constant currency revenues are a non-GAAP measure calculated by translating current period activity into U.S. dollars using the comparable prior period’s currency conversion rates. This information is consistent with how management views our revenues and evaluates our operating performance and trends. For more information, see "Non-GAAP Financial Measures."

For fiscal 2026, our total revenue was $12.6 billion, a decrease of $227 million or 1.8%, compared to the prior fiscal year. The decrease against the comparative period includes a 4.8% decline in organic revenue partially offset by a 3.1% favorable foreign currency exchange rate impact. Organic revenue is a non-GAAP measure, as discussed in our "Non-GAAP Financial Measures." In addition, for a discussion of risks associated with our foreign operations, see Part I, Item 1A - "Risk Factors."

Costs and Expenses

Our total costs and expenses were as follows:

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Costs of Services

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 $9.6 billion for fiscal 2026, a decrease of $157 million (-1.6%) compared to the prior-year period. The decline was primarily driven by a decrease in costs from lower revenue levels, the alignment of business development expenses to selling, general and administrative expenses in support of the offering model, 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 24.0% for fiscal 2026, a decline of 10 basis points against the prior fiscal year.

Selling, General and Administrative

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 $1,402 million for fiscal 2026, an increase of $54 million (+4.0%) compared to the prior-year period. The increase was primarily driven by the realignment of business development and certain other costs from COS, an unfavorable foreign currency exchange rate impact, and a gain from a legal settlement in the second quarter of fiscal 2025, partially offset by lower levels of merger-related indemnification expenses and transaction, separation, and integration ("TSI") costs in fiscal 2026.

SG&A as a percentage of revenue was 11.1% for fiscal 2026, an increase of 60 basis points against the prior fiscal year.

Depreciation and Amortization

Depreciation and amortization was $1,160 million for fiscal 2026, a decrease of $127 million (-9.9%) compared to the prior-year period. Depreciation expense decreased by $57 million due to lower average net property and equipment balances. Amortization expense decreased by $70 million due to lower transition and transformation contract cost balances and lower software amortization.

Restructuring Costs

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, during fiscal 2026 were $115 million, a decrease of $38 million (-24.8%) compared to the prior fiscal year, primarily from a reduction in workforce-related expenses.

See Note 12 - "Restructuring Costs" for additional information about our restructuring actions.

Interest Expense and Interest Income

Net interest expense (interest expense less interest income) was $35 million for fiscal 2026, a decrease of $31 million (-47.0%) as compared to the prior-year. The improvement 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 higher interest expense on our Senior notes (see Note 10 - Debt).

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Gain on Disposition of Businesses

During 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. The Company had no business dispositions during fiscal 2026.

Other Expense (Income), Net

Other expense (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 expense (income), net were as follows:

Other expense (income), net, increased $377 million compared to the prior fiscal year, primarily due to:

•pension income ($12 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 (gains) ($401 million) - primarily due to mark-to-market adjustments and other settlement losses (gains);

•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;

•real estate and facility sales ($23 million) - losses on real estate and facility sales in fiscal 2025, with insignificant net sales in fiscal 2026;

•miscellaneous items ($9 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 fewer impairment losses recognized in fiscal 2026 and a gain on the sale of a strategic investment in the second quarter of fiscal 2025.

Taxes

Our effective tax rate ("ETR") on income (loss) from continuing operations, before taxes, for fiscal 2026 and 2025 was 91.2% and 37.1%, respectively. A reconciliation of the differences between the U.S. federal statutory rate and the ETR, as well as other information about our income tax provision, is provided in Note 14 - "Income Taxes."

The Internal Revenue Service (the “IRS”) has examined, or is examining, the Company’s federal income tax returns for fiscal years 2009 through the tax year ended October 31, 2018. With respect to CSC’s fiscal years 2009 through 2017 federal tax returns, the Company participated in settlement negotiations with the IRS Office of Appeals. The IRS examined several issues for these tax years that resulted in various audit adjustments. The Company and the IRS Office of Appeals have settled various audit adjustments, and we disagree with the IRS’ disallowance of certain losses and deductions resulting from restructuring costs, foreign exchange losses, and a third-party financing transaction in previous years.

We have received notices of deficiency and a final partnership administrative adjustment with respect to fiscal years 2009, 2010, 2011 and 2013 and have timely filed petitions with the U.S. Tax Court.

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The U.S. Tax Court cases generally involve three primary issues. The first issue pertains to a capital loss the Company claimed in fiscal year 2013 in the amount of $651 million, which the IRS subsequently disallowed, and for which it proposed a substantial understatement penalty. The total cash tax payment the IRS is seeking is approximately $503 million, inclusive of penalties and interest, which continues to accrue. The U.S. Tax Court held a trial on this matter in two sessions in August and October 2025. Post-trial briefing concluded in April 2026. A decision from the court is now pending.

The second issue pertains to the Company’s deduction for restructuring expenses in fiscal year 2013 in the amount of $139 million, which the IRS has disputed. The total cash tax payment the IRS is seeking is approximately $108 million, inclusive of penalties and interest, which continues to accrue. In January 2025, the Court denied the IRS’ motion for summary judgment. A trial date is pending.

The third issue primarily pertains to foreign currency losses from 2009 that the Company claimed in fiscal years 2010 and 2011 in the amount of $163 million, resulting from the depreciation of the U.S. dollar against the Euro over an eight-year period (from 2001 to 2009) upon termination of a partnership interest involving two entities with different functional currencies. The total cash tax payment the IRS is seeking is approximately $125 million, inclusive of penalties and interest, which continues to accrue. In March 2026, the Court granted the IRS’ motion for summary judgment. A final decision on the Company’s tax liability is pending. During the current year, the Company increased its accrual to fully reserve the net amount of its expected tax liability in this matter.

As we believe we will ultimately prevail on the technical merits of the first and second issues above and are continuing to challenge them in the U.S. Tax Court, the first and second issues are not fully reserved and would result in incremental federal and state tax expense of approximately $523 million (including estimated interest and penalties) for the unreserved portion of these items, if we do not prevail. The total cash tax exposure across all three issues above is approximately $655 million. These amounts are net of an expected $81 million interest deduction tax benefit.

During fiscal 2024, the Company determined there were inadvertent omissions on previously filed tax returns related to gain recognition agreements and certain related tax forms and disclosures. The Company notified the IRS promptly and filed for relief under Treas. Reg. Sec. 1.367(a)-8(p) to correct the issue.

The Company’s fiscal years 2009, 2010, and 2013 are in the U.S. Tax Court, and consequently these years will remain open until such proceedings have concluded. The Company has agreed to extend the statute of limitations for fiscal and tax return years 2014 through 2021 to December 31, 2027. The Company expects to reach resolution for fiscal and tax return years 2009 through 2011 no earlier than fiscal year 2027. The Company expects to reach resolution for fiscal and tax return years 2012 and 2013 no earlier than fiscal year 2028. The Company expects to reach resolution for fiscal and tax return years 2014 through 2021 no earlier than fiscal year 2027.

The Company may settle certain other tax examinations for different amounts than the Company has accrued as uncertain tax positions. Consequently, the Company may need to accrue and ultimately pay additional amounts or pay lower amounts than previously estimated and accrued when positions are settled in the future.

Earnings Per Share (EPS)

Diluted EPS for fiscal 2026 was $0.10, a decrease of $2.00 compared to the prior fiscal year. The decrease in diluted EPS against the prior fiscal year was primarily due to the Company's decrease in net income attributable to DXC common stockholders partially offset by a lower weighted average share count from the Company’s share repurchases.

Diluted EPS for fiscal 2026 includes $0.51 per share of restructuring costs, $0.02 per share of transaction, separation and integration-related costs, $1.56 per share of amortization of acquired intangible assets, $(0.19) per share of merger-related indemnification, $(0.01) per share of gains on real estate, facility sales, and dispositions, $0.01 per share of debt extinguishment costs, $0.07 per share of impairment losses, $0.73 per share of pension and OPEB actuarial and settlement losses, and $0.45 per share of tax adjustments primarily relating to tax litigation matters, to impair or recognize certain deferred tax assets, and adjustments for changes in tax legislation.

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Non-GAAP Financial Measures

We present non-GAAP financial measures of performance which are derived from the statements of operations of DXC. These non-GAAP financial measures include earnings before interest and taxes (“EBIT”), adjusted EBIT, non-GAAP income before income taxes, non-GAAP net income, non-GAAP net income attributable to DXC common stockholders, non-GAAP EPS, organic revenue growth, constant currency revenues, and free cash flow.

We believe EBIT, adjusted EBIT, non-GAAP income before income taxes, non-GAAP net income, non-GAAP net income attributable to DXC common stockholders, and non-GAAP EPS provide investors with useful supplemental information about our operating performance after excluding certain categories of expenses as well as gains and losses on certain dispositions and certain tax adjustments.

We believe constant currency revenues provides investors with useful supplemental information about our revenues after excluding the effect of currency exchange rate fluctuations for currencies other than U.S. dollars in the periods presented. See below for a description of the methodology we use to present constant currency revenues.

One category of expenses excluded from adjusted EBIT, non-GAAP income before income tax, non-GAAP net income, non-GAAP net income attributable to DXC common stockholders, and non-GAAP EPS, incremental amortization of intangible assets acquired through business combinations, if included, may result in a significant difference in period over period amortization expense on a GAAP basis. We exclude amortization of certain acquired intangible assets as these non-cash amounts are inconsistent in amount and frequency and are significantly impacted by the timing and/or size of acquisitions. Although DXC management excludes amortization of acquired intangible assets, primarily customer-related intangible assets, from its non-GAAP expenses, we believe that it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and support revenue generation. Any future transactions may result in a change to the acquired intangible asset balances and associated amortization expense.

Another category of expenses excluded from adjusted EBIT, non-GAAP income before income tax, non-GAAP net income, non-GAAP net income attributable to DXC common stockholders, and non-GAAP EPS is impairment losses, which, if included, may result in a significant difference in period-over-period expense on a GAAP basis. We exclude impairment losses as these non-cash amounts reflect generally an acceleration of what would be multiple periods of expense and are not expected to occur frequently. Further, assets such as goodwill may be significantly impacted by market conditions outside of management’s control.

Selected references are made to revenue growth on an “organic basis” so that certain financial results can be viewed without the impact of fluctuations in foreign currency rates and without the impacts of acquisitions and divestitures, thereby providing comparisons of operating performance from period to period of the business that we have owned during both periods presented. Organic revenue growth is calculated by dividing the year-over-year change in GAAP revenues attributed to organic growth by the GAAP revenues reported in the prior comparable period. Organic revenue is calculated as constant currency revenue excluding the impact of mergers, acquisitions or similar transactions until the one-year anniversary of the transaction and excluding revenues of divestitures during the reporting period. This approach is used for all results where the functional currency is not the U.S. dollar. We believe organic revenue growth provides investors with useful supplemental information about our revenues after excluding the effect of currency exchange rate fluctuations for currencies other than U.S. dollars and the effects of acquisitions and divestitures in both periods presented.

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 to pay debt, repurchase shares, and provide further investment in the business.

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There are limitations to the use of the non-GAAP financial measures presented in this report. One of the limitations is that they do not reflect complete financial results. We compensate for this limitation by providing a reconciliation between our non-GAAP financial measures and the respective most directly comparable financial measure calculated and presented in accordance with GAAP. Additionally, other companies, including companies in our industry, may calculate non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes between companies. Selected references are made on a “constant currency basis” so that certain financial results can be viewed without the impact of fluctuations in foreign currency rates, thereby providing comparisons of operating performance from period to period. Financial results on a “constant currency basis” are non-GAAP measures calculated by translating current period activity into U.S. Dollars using the comparable prior period’s currency conversion rates. This approach is used for all results where the functional currency is not the U.S. Dollar. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Revenues.”

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

(1) The dollar and percent change for Income before income taxes and Net income include Pension and OPEB actuarial and settlement losses and (gains) that were $169 million and $(232) million for the fiscal years ended March 31, 2026 and March 31, 2025, respectively.

(2) Calculation is not meaningful ("NM") due to inclusion of Pension and OPEB actuarial and settlement losses and (gains).

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Reconciliation of Non-GAAP Financial Measures

Our non-GAAP adjustments include:

•Restructuring costs – includes costs, net of reversals, related to workforce and real estate optimization and other similar charges.

•Transaction, separation and integration-related (“TSI”) costs – includes third party costs related to integration, separation, planning, financing and advisory fees and other similar charges associated with mergers, acquisitions, strategic investments, joint ventures, and dispositions and other similar transactions incurred within one year of such transactions closing, except for costs associated with related disputes, which may arise more than one year after closing.

•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.

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

•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, tax litigation matters, and adjustments to transition tax. Income tax expense (benefit) from the impact of mergers and divestitures is separately computed based on the underlying transaction. Income tax expense of all other (non-discrete) non-GAAP adjustments is computed by applying the jurisdictional tax rate to the pre-tax adjustments on a jurisdictional basis. In fiscal 2026, includes the unfavorable summary judgment in a tax matter relating to a foreign exchange tax case.

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

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

Reconciliations of net income to adjusted EBIT are as follows:

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Liquidity and Capital Resources

Cash and Cash Equivalents and Cash Flows

As of March 31, 2026, our cash and cash equivalents ("cash") were $1.7 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. federal income tax upon repatriation. However, a portion of this cash may still be subject to foreign and U.S. state income tax consequences upon future remittance. Therefore, if additional funds held outside the U.S. are needed for our operations in the U.S., we plan to repatriate these funds not designated as indefinitely reinvested.

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.

The following table summarizes our cash flow activity:

Operating cash flow

Net cash provided by operating activities was $1,248 million and $1,398 million, respectively, in fiscal 2026 and fiscal 2025, reflecting a year-over-year decrease of $150 million. Operating cash flow against the comparative period included:

•a decrease in net income, net of adjustments of $132 million; and

•a $18 million unfavorable change in working capital due to higher working capital outflows during fiscal 2026.

The following table contains certain key working capital metrics:

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Investing cash flow

Net cash used in investing activities was $484 million and $512 million, respectively, in fiscal 2026 and fiscal 2025, reflecting a year-over-year change of $28 million. The change was primarily due to:

•a $176 million decrease in capital expenditures primarily from lower levels of software purchased and developed; partially offset by

•a decrease in proceeds from sale of assets of $126 million, and

•$26 million in cash inflows from business dispositions in fiscal 2025 that did not occur in fiscal 2026.

Financing cash flow

Net cash used in financing activities was $776 million and $317 million, respectively, in fiscal 2026 and fiscal 2025, reflecting a year-over-year change of $459 million. The change was primarily due to:

•principal payments on long term debt, net of proceeds from bond issuance in fiscal 2026 of $320 million,

•a $229 million increase in cash used for share repurchase activity and related taxes paid on net share settlements, and

•a $22 million decrease in cash inflows from other financing activities; partially offset by

•a $110 million decrease in payments on capital leases and borrowings for asset financings, as the Company continues reducing the volume of these financing arrangements.

Debt Financing

The following table summarizes our total debt:

The $324 million decrease in total debt during fiscal 2026 was primarily attributable to principal payments on long-term debt, net of proceeds from our bond issuance in fiscal 2026 (see Note 10 - "Debt”), decreases in finance lease liabilities 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. dollar against the Euro.

We were in compliance with all financial covenants associated with our borrowings as of March 31, 2026 and March 31, 2025.

As of March 31, 2026, our credit ratings were as follows:

For information on the risks of ratings downgrades, see Part I, Item 1A - "Risk Factors" subsection titled "Failure to maintain our credit rating, manage our indebtedness, and raise additional capital for future needs could adversely affect our liquidity, capital position, borrowing cost, and access to capital markets."

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Liquidity

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; however, should we require funds greater than that generated from our operations to fund discretionary investment activities, such as business acquisitions, we have the ability to raise capital through debt financing, including the issuance of capital market debt instruments such as commercial paper and bonds. In addition, we currently utilize and will further utilize an accounts receivable sales facility, and our cross-currency cash pool for liquidity needs. There is no guarantee that we will be able to obtain debt financing, if required, on terms and conditions acceptable to us, if at all, in the future.

Our exposure to operational liquidity risk is primarily from long-term contracts which require significant investment of cash during the initial phases of the contracts. The recovery of these investments is over the life of the contract and is dependent upon our performance as well as customer acceptance.

Our liquidity of $4.7 billion as of March 31, 2026, 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.

Share Repurchases

See Note 15 - "Stockholders' Equity."

Dividends

To maintain our financial flexibility, we continued to suspend payment of quarterly dividends for fiscal 2026.

Off-Balance Sheet Arrangements

In the normal course of business, we are a party to arrangements that include guarantees, the receivables sales facility and certain other financial instruments with off-balance sheet risk, such as letters of credit and surety bonds. We also use performance letters of credit to support various risk management insurance policies. No liabilities related to these arrangements are reflected in the Company's balance sheets. See Note 4 - "Receivables" and Note 21 - "Commitments and Contingencies" for additional information regarding these off-balance sheet arrangements.

Cash Commitments

For a description of the Company’s cash commitments to debt, leases, pension and other benefit plans, and minimum purchase commitments, refer to “Note 10 - Debt,” Note 5 - "Leases,” "Note 21 - Commitments and Contingencies," and “Note 13 - Pension and Other Benefit Plans,” for the estimated future benefit payments under our Pension and OPEB plans.

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Our other cash commitments as of March 31, 2026, were as follows:

(1) The transition tax is payable over eight years. We have remitted the first seven installment payments. Our remaining liability from the originally computed transition tax in 2018 is $71 million. We are in the process of amending our tax return for historical transactions and other adjustments which are expected to reduce our overall transition tax obligation by approximately $108 million, resulting in a net refund due of $37 million.

(2) Amounts represent scheduled interest payments on long-term debt.

Critical Accounting Estimates

The preparation of the financial statements, in accordance with GAAP, requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, as well as the disclosure of contingent assets and liabilities. The Company bases its estimates on assumptions regarding historical experience, currently available information, and anticipated developments that it believes are reasonable and appropriate. However, because the use of estimates involves an inherent degree of uncertainty, actual results could differ materially from those estimates. 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. We have discussed the selection of our critical accounting policies and the effect of estimates with the Audit Committee of our Board.

Revenue Recognition

Most of our revenues are recognized based on objective criteria and do not require significant estimates that may change over time. However, some arrangements may require significant estimates, including contracts which include multiple performance obligations.

Contracts with multiple performance obligations

Many of our contracts require us to provide a range of services or performance obligations to our customers, which may include a combination of services and products and may also contain leases embedded in those arrangements. Significant judgment may be required to determine the appropriate accounting, including whether the elements specified in contracts with multiple performance obligations should be treated as separate performance obligations for revenue recognition purposes, and, when considered appropriate, how the total transaction price should be allocated among the performance obligations and any lease components and the timing of revenue recognition for each. For contracts with multiple performance obligations and lease components, we allocate the contract’s transaction price to each performance obligation and lease component based on the relative standalone selling price. Other than software sales involving multiple performance obligations, the primary method used to estimate standalone selling price is the expected cost plus a margin approach, under which we forecast our expected costs of satisfying a performance obligation and then add an appropriate margin for that distinct good or service. Certain of our contracts involve the sale of DXC proprietary software, post-contract customer support and other software-related services. The standalone selling price generally is determined for each performance obligation using an adjusted market assessment approach based on the price charged where each deliverable is sold separately. In certain limited cases (typically for software licenses) when the historical selling price is highly variable, the residual approach is used. This approach allocates revenue to the performance obligation equal to the difference between the total transaction price and the observable standalone selling prices for the other performance obligations. These methods involve significant judgments and estimates that we assess periodically by considering market and entity-specific factors, such as type of customer, features of the products or services and market conditions.

Once the total revenues have been allocated to the various performance obligations and lease components, revenues for each are recognized based on the relevant revenue recognition method for each. Estimates of total revenues at contract inception often differ materially from actual revenues due to volume differences, changes in technology or other factors which may not be foreseen at inception.

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Contract modifications

A contract modification is a legally binding change to the scope, price, or both of an existing contract. Contract modifications are reviewed to determine whether they should be accounted for as part of the original contract, the termination of an existing contract and the creation of a new contract, or as a separate contract, and whether they modify an embedded lease. This determination requires significant judgment, which could impact the timing of revenue recognition.

Costs to obtain contracts with customers

Accounting for the costs to obtain contracts with customers requires significant judgments and estimates with regards to the determination of sales commission payments that qualify for deferral of costs and the related amortization period. Most of our sales commission plans are quota-based and payments are made by achieving targets related to a large number of new and renewed contracts. Certain sales commissions earned by our sales force are considered incremental and recoverable costs of obtaining a contract with a customer. We defer and amortize these costs on a straight-line basis over an average period of benefit of five years, which is determined and regularly assessed by considering the length of our customer contracts, our technology and other factors. Significant changes in these estimates or impairment may result if material contracts terminate earlier than the expected benefit period, or if there are material changes in the average contract period.

Income Taxes

We are subject to income taxes in the United States (federal and state) and numerous foreign jurisdictions. Significant judgment is required in determining our provision for income taxes, analyzing our income tax reserves, the determination of the likelihood of recoverability of deferred tax assets and any corresponding adjustment of valuation allowances. In addition, our tax returns are routinely audited, and settlements of issues raised in these audits sometimes affect our tax provisions.

As a global enterprise, our ETR is affected by many factors, including our global mix of earnings among countries with differing statutory tax rates, the extent to which our non-U.S. earnings are indefinitely reinvested outside the U.S., changes in the valuation allowance for deferred tax assets, changes in tax regulations, acquisitions, dispositions and the tax characteristics of our income. We cannot predict with certainty what our ETR will be in the future because there is uncertainty regarding these factors. Future events, such as changes in tax laws, tax regulations, or interpretations of such laws or regulations, could have an impact on the provision for income tax and the effective tax rate. Any such changes could significantly affect the amounts reported in the consolidated financial statements in the year these changes occur.

The Organization for Economic Co-operation and Development (“OECD”), along with members of its inclusive framework, have, through the Base Erosion and Profit Shifting project, proposed changes to numerous long-standing tax principles (“Pillar Two Rules”), which imposes a global minimum corporate tax rate of 15%. Although the U.S. has not yet enacted legislation implementing Pillar Two Rules, other countries where the Company does business, including the U.K. and Germany, have enacted legislation implementing Pillar Two Rules recently and several other countries are also considering changes to their tax laws to implement it. When and how these rules are adopted or enacted by the various countries in which we do business could increase tax complexity and uncertainty and may adversely affect our provision for income taxes in the U.S. and non-U.S. jurisdictions.

As of March 31, 2026, the Company had undistributed earnings from foreign subsidiaries that were not indefinitely reinvested and had a deferred tax liability of $16 million for the estimated taxes associated with the repatriation of these earnings. The Company also had undistributed earnings and other outside basis differences in foreign subsidiaries that were indefinitely reinvested for which no taxes have been provided and the quantification of the deferred tax liability, if any, was not practicable. If future events, including material changes in estimates of cash, working capital and long-term investment requirements, necessitate that these earnings be distributed, an additional provision for taxes may apply, which could materially affect our future effective tax rate.

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Considerations impacting the recoverability of deferred tax assets include the period of expiration of the tax asset, planned use of the tax asset, historical and projected taxable income as well as deferred tax liabilities for the tax jurisdiction to which the tax asset relates. In determining whether the deferred tax assets are realizable, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, taxable income in prior carryback years, projected future taxable income, tax planning strategies and recent results of financial operations. We recorded a valuation allowance against deferred tax assets of approximately $2.4 billion as of March 31, 2026, due to uncertainties related to the ability to utilize these assets. However, valuation allowances are subject to change in future reporting periods due to changes in various factors such as when inputs or estimates used in determining valuation allowances significantly change or upon the receipt of new information.

We determine whether it is more likely than not a tax position will be sustained upon examination by the appropriate taxing authorities before any portion of the tax benefit is recorded in our financial statements and only the portion of the tax benefit that is measured as greater than 50% likely to be realized upon settlement with a taxing authority (that has full knowledge of all relevant information) is recognized. We may be required to change our provision for income taxes when the ultimate outcome of a tax position is agreed to by taxing authorities or otherwise effectively settled.

Defined Benefit Plans

The computation of our pension and other post-retirement benefit costs and obligations is dependent on various assumptions. Inherent in the application of the actuarial methods are key assumptions, including discount rates, expected long-term rates of return on plan assets, mortality rates, rates of compensation increases and medical cost trend rates. Our management evaluates these assumptions annually and updates assumptions as necessary. The fair value of assets is determined based on observable inputs for similar assets or on significant unobservable inputs if observable inputs are not available. Two of the most significant assumptions are the expected long-term rate of return on plan assets and the discount rate.

Our weighted average rates used for determining net periodic pension cost were:

The assumption for the expected long-term rate of return on plan assets is impacted by the expected asset mix of the plan; judgments regarding the correlation between historical and future outperformance due to active management of the investments and expected investment expenses. The discount rate assumption is based on current market rates for high-quality, fixed income debt instruments with maturities similar to the expected duration of the benefit payment period. The following table provides the impact that changes in the weighted-average assumptions would have had on our net periodic pension benefits and settlement and contractual termination charges for fiscal 2026:

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Valuation of Assets

We review long-lived assets, intangible assets, and goodwill for impairment in accordance with our accounting policy disclosed in Note 1 - "Summary of Significant Accounting Policies." Assessing the fair value of assets involves significant judgment including estimation of future cash flows, the timing of such cash flows, and discount rates reflecting the risk inherent in projecting future cash flows. The valuation of long-lived and intangible assets involves management estimates about future values and remaining useful lives of assets, particularly purchased intangible assets. These estimates are subjective and can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy and forecasts.

Evaluation of goodwill for impairment requires judgment, including the identification of reporting units, assignment of assets, liabilities, and goodwill to reporting units and determination of the fair value of each reporting unit. The identification of reporting units requires consideration of components of the operating segments and whether or not there is discrete financial information available that is regularly reviewed by management. Additionally, we consider whether or not it is reasonable to aggregate components that have similar economic characteristics. The assumptions used to estimate the fair value of a reporting unit change from year to year based on operating results, market conditions, and other factors. Changes in these assumptions may be impacted by a significant change in the business climate, established business plans, operating performance indicators or competition which could materially affect the estimates of fair value for each reporting unit.

We estimate the fair value of our reporting units using a combination of an income approach, utilizing a discounted cash flow analysis, and a market approach, using performance-metric market multiples. The discount rate used in an income approach is based on our weighted-average cost of capital and may be adjusted for the relevant risks associated with business-specific characteristics and any uncertainty related to a reporting unit's ability to generate the projected future cash flows.

Assumptions and Estimates Used to Analyze Contingencies and Litigation

We are subject to various claims and contingencies associated with lawsuits, insurance, tax and other issues arising in the normal course of business. The financial statements reflect the treatment of claims and contingencies based on management's view of the expected outcome. DXC consults with outside legal counsel on issues related to litigation and seeks input from other experts and advisors with respect to matters in the ordinary course of business. If the likelihood of an adverse outcome is probable and the amount is estimable, we accrue a liability in accordance with ASC 450 "Contingencies." Significant changes in the estimates or assumptions used in assessing the likelihood of an adverse outcome could have a material effect on our results of operations.

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