DXC Technology Company

This is our first report on DXC Technology, an emerging IT services player that helps organizations run their mission-critical systems while modernizing their architecture. The management has been in investing in its business to produce deeper customer relationships and a robust quality product. DXC’s recent results were mixed as it delivered a revenue beat but missed out on earnings. Engineering and Analytics have consistently grown for the company. DXC has also been engaging actively in restructuring its operations and has sold off portfolio-shaped businesses that were distractions to the company’s strategy. It has consistently narrowed the declines of the GIS and grown GBS while moving its revenue mix towards GBS’s higher value business. Capital allocation and debt are being managed quite well, and there has been an improvement in DXC Technology’s free cash flow generation in the quarter. Through its capital allocation program, DXC has delivered $900 million to its shareholders via its capital allocation program. We initiate coverage on the stock of DXC Technology with a ‘Hold’ rating.