What Happened?
Shares of IT services provider DXC Technology (NYSE: DXC) jumped 7.5% in the afternoon session after it reported decent third-quarter 2025 results, where a miss on headline earnings was offset by strong underlying profitability and cash generation.
The company's revenue of $3.16 billion met Wall Street's expectations but was down 2.5% year-over-year, while its GAAP earnings per share of $0.20 missed the consensus estimate of $0.25. Despite these headline numbers, investors were encouraged by other key metrics. Adjusted EBITDA, a measure of operational profitability, came in at $457 million, beating forecasts. The standout figure was free cash flow, which reached a robust $411 million, marking a significant improvement from the prior year when the free cash flow margin was just 1.5% compared to 13% this quarter. The stock's jump suggested investors focused on the strong cash performance as a sign of operational health, looking past the slight revenue decline and earnings shortfall.
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What Is The Market Telling Us
DXC’s shares are quite volatile and have had 15 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 21 days ago when the stock dropped 4.8% on the news that worries over worsening trade relations with China were triggered by critical comments from President Donald Trump.
Trump targeted China's tightening controls on rare earth metals, which are vital components in many technology products from electric vehicles to defense systems. The president's tone and the suggestion of canceling a meeting with President Xi caused a rapid sell-off in the market. Earlier in the week, China announced new export controls on the critical minerals. Beijing's Commerce Ministry stated that foreign suppliers now need government approval to export products containing certain rare-earth materials. These materials are essential for producing high-tech goods, including computer chips, electric vehicles, and defense technology. Analysts viewed the move as a strategic assertion of China's dominance in the global rare earth supply chain, particularly amid ongoing trade tensions and ahead of an anticipated meeting between the US and Chinese presidents. Consequently, technology stocks with significant exposure to Chinese supply chains, such as Nvidia and AMD, experienced sharp declines. This downturn was exacerbated by the bearish sentiment surrounding a prolonged U.S. government shutdown, adding to overall market uncertainty.
DXC is down 29.3% since the beginning of the year, and at $13.96 per share, it is trading 38.9% below its 52-week high of $22.83 from November 2024. Investors who bought $1,000 worth of DXC’s shares 5 years ago would now be looking at an investment worth $736.29.
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