DXC Technology (DXC): Evaluating Valuation After Q2 Profit Beat and New AI Strategy Launch

DXC Technology (DXC) reported second quarter results that topped analyst forecasts on adjusted earnings and margins, despite ongoing revenue declines. The company is also doubling down on artificial intelligence with its new Xponential AI framework.

See our latest analysis for DXC Technology.

Following Thursday’s results, DXC Technology shares surged with a 1-day price return of 9.74 percent, recapturing some lost ground after a tough year. Although momentum picked up this week, the stock's 1-year total shareholder return is still down 30.73 percent and longer-term returns remain deeply negative. Recent leadership changes, continued cost controls, and new AI-driven partnerships add a sense of cautious optimism. However, the company’s ongoing revenue headwinds mean the road to a sustained turnaround will take time.

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With shares rebounding but long-term returns deeply negative, is DXC Technology now trading at an attractive discount because of its recent progress, or is the market already factoring in future growth expectations and challenges ahead?

Most Popular Narrative: 2% Undervalued

DXC Technology's widely followed narrative places its fair value at $14.50 per share, just above the last closing price of $14.20. The narrative’s implied discount suggests select analysts see the company’s future prospects as slightly underappreciated by the market, at least for now.

DXC's strong bookings momentum, with three consecutive quarters of double-digit growth and a sustained trailing 12-month book-to-bill ratio above 1.0, suggests improving deal flow linked to client demand for digital modernization, which should convert to organic revenue stabilization and growth over the next 12-18 months.

Read the complete narrative.

Wondering what bold financial forecasts justify this narrative's edge over the market? The fair value relies on projected margin shifts and declining revenues, but there are key assumptions hiding just beneath the surface. Unpack the full numbers and see what’s really driving this value gap.

Result: Fair Value of $14.50 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent revenue declines and competitive pressures in cloud and AI could undermine DXC’s turnaround story and cast doubt on a rapid recovery.

Find out about the key risks to this DXC Technology narrative.

Build Your Own DXC Technology Narrative

If you have a different perspective or want to dig into DXC Technology's financials on your own terms, you can build a custom narrative in just minutes. Do it your way.

A great starting point for your DXC Technology research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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