$7.27
$34.82
bear $7.27
base $15.25
bull $34.82
margin of safety $8.50
market price* $13.62
DXC Technology is a large IT services company with three segments: Consulting & Engineering Services (about $5.0 billion of revenue in the fiscal year ended March 31, 2026), Global Infrastructure Services (about $6.3 billion), and Insurance Software & Services (about $1.3 billion). Total revenue was $12.6 billion, down from $14.4 billion in fiscal 2023, and it has declined every year since the company was formed in 2017. Reported revenue fell only 1.8 percent in fiscal 2026, but that was flattered by a weaker dollar; excluding currency and acquisitions it fell 4.8 percent. On that basis Global Infrastructure fell 7.2 percent and Consulting & Engineering 4.0 percent, while Insurance grew 3.6 percent. In the first quarter of fiscal 2027 (April to June 2026) the decline excluding currency was 6.7 percent, with Global Infrastructure down 9.4 percent as reported. New contract awards were 0.98 times revenue in fiscal 2026 (Consulting & Engineering 1.10, Global Infrastructure 0.94, Insurance 0.76) and 0.99 times in the latest quarter, up from 0.90 a year earlier. What changed since our previous estimate. We previously valued the cash left for shareholders after interest and did not separately deduct DXC's debt. That understated what the debt costs: DXC's bonds carry unusually low fixed rates, as low as 0.45 percent, that will reset to market rates as they mature, and a shrinking business cannot carry the same debt forever. We now value the business before its lenders are paid and then subtract what it owes, net of surplus cash. We also now use the latest share count (about 166 million diluted shares, down from 179 million as buybacks continued) and a decline rate based on revenue excluding currency effects, which is steeper than the reported figure the earlier estimate relied on. The base value falls from $23.30 to about $15.25. How we measured earnings. We start from cash generated by operations, remove swings in receivables, payables, deferred revenue and taxes, and subtract share-based pay as a real cost. We also subtract every kind of reinvestment DXC needs to keep its contracts running: purchases of equipment, contract setup (transition and transformation) costs, purchased and developed software, and repayments of equipment leases and equipment financing. Because revenue has shrunk, none of this is treated as growth spending. Owner earnings were $399 million in fiscal 2023, $385 million in 2024, $541 million in 2025 and $698 million in 2026. To measure the business before its lenders, we add back net interest (interest expense less interest income) of $65 million, $84 million, $66 million and $35 million, giving $464 million, $469 million, $607 million and $733 million. We add back net rather than gross interest because most of DXC's $216 million of gross interest expense in fiscal 2026 was matched by interest income on its cash and its multi-currency cash pools; only the net figure is the cost of its borrowing. We measure the business from fiscal 2023 to 2026. Earlier years were distorted by large divestitures and by heavy equipment-financing repayments that have since fallen from $990 million in fiscal 2022 to $188 million, and before that the company was far larger. The median of the four years is $538 million, about $3.24 per share. We do not anchor on fiscal 2026's $733 million because the rise came from lower reinvestment, not from the operations: cash from operations fell from $1,398 million to $1,248 million, and fiscal 2026 spending on equipment ($212 million) and contract setup ($106 million) was below the related depreciation ($294 million) and amortization ($169 million), which may not be sustainable. Growth check: cash flow before lenders rose 21 percent in fiscal 2026, while the base case assumes a 5 percent decline in year one. The lower rate is deliberate: last year's rise came from cutting reinvestment, which cannot repeat indefinitely, while revenue excluding currency is falling 5 to 7 percent a year. Intangible amortization is large ($697 million in fiscal 2026) and is a non-cash add-back; we carry the decay of past acquisitions in the declining path rather than by lowering the earnings level. In the latest quarter DXC collected $214 million from a court judgment against Tata Consultancy Services, including $46 million of interest. It is one-time and excluded from earnings, but the cash is counted in the balance sheet below. What DXC owes. At June 30, 2026 total debt was $3,504 million. The bonds are $400 million at 1.80 percent due in calendar 2026, 750 million euros at 0.45 percent due in fiscal 2028, $650 million at 2.375 percent due in fiscal 2029, 650 million euros at 4.25 percent due in fiscal 2031 (issued in fiscal 2026 to refinance maturing notes, a sign the company can still borrow, but at higher rates), and 600 million euros at 0.95 percent due in fiscal 2032. We subtract $3,352 million of bonds and other borrowings, less about $305 million for the value of the below-market fixed rates until each bond matures; add $271 million for outside owners of partly owned subsidiaries; and deduct about $1.2 billion of the $1,957 million of cash as surplus, keeping about $750 million (roughly three weeks of revenue) for operations. Net debt is about $2.11 billion, or $12.69 per share. Equipment leases ($152 million) are not subtracted because their repayments are already deducted as reinvestment in earnings; subtracting them again would count them twice. A credit downgrade would raise the rate on the 4.25 percent notes. Base case, about $15.25 per share. Cash flow before lenders starts at $538 million and declines 5 percent a year, in line with the demonstrated decline excluding currency (4.8 percent in fiscal 2026, 6.7 percent in the latest quarter), with no end date because we cannot name what stops it. The business is worth about $4.65 billion ($27.94 per share); it owes about $2.11 billion net ($12.69 per share); shareholders' share is about $15.25. The $16.4 billion of remaining contracted revenue, 41 percent of it due in fiscal 2027, supports the near term. No growth is credited. Left out: Insurance growth (its new awards were only 0.76 times revenue), new AI services, a bookings recovery, margin improvement and future buybacks, because none is yet shown to offset the decline. Bear case, about $7.25 per share. Reinvestment returns to the fiscal 2023 to 2024 pattern, so cash flow before lenders is about $464 million, and it declines 7 percent a year, Global Infrastructure's pace excluding currency. The business is worth about $3.32 billion ($19.96 per share) against $2.11 billion ($12.69) owed, leaving about $7.25. In this case $3.3 billion of bonds maturing between late 2026 and fiscal 2032 are refinanced at market rates; cash flow before lenders still exceeds interest on refinanced debt (about $170 million a year) for roughly 14 years, enough to pay debt down, but little is left for shareholders. Bull case, about $34.80 per share. The fiscal 2026 level of $733 million, which DXC actually reported, holds and declines only 3 percent a year, supported by Consulting & Engineering's awards above revenue (1.10 times) and the improvement in overall awards to 0.99 times. The business is worth about $7.90 billion ($47.51 per share), less $12.69 owed, about $34.80. What could make this wrong: fiscal 2026 reinvestment below depreciation may mean under-investment that has to be repaid, which the bear case reflects; on the other side, awards have moved close to revenue, which could slow the decline more than the base case assumes. Our estimate of surplus cash is a judgement; treating all cash as surplus would add about $4.50 per share to each case. We could not tie every one-time cash item in fiscal 2020 and 2021 to a specific cause, which is one reason those years are not used. Margin-of-safety price: $8.50, about 44 percent below the base value and just above the bear case, because the business is shrinking, carries meaningful debt that must be refinanced over the next five years, and is hard to forecast.