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DXC CEO: Cloud Services Provided Company a Lift in Q2

Continued strength in DXC Technology’s cloud services provided the company with another revenue boost in its second quarter (ended Sept. 30), according to CEO and president Mike Lawrie. 
Shares in the company were up more than 6% at $98.65 in early afternoon trading Nov. 8, after it reported total Q2 revenue grew to $6.2 billion from $1.9 billion a year ago, while it swung to a $265 million profit from a $123 million loss a year earlier.

Digital revenue widened 23% year-over-year, Lawrie said Nov. 7 in an earnings call with analysts, noting that DXC’s digital business “cuts across all three” of its reporting segments – Global Business Services (GBS), Global Infrastructure Services (GIS) and U.S. Public Sector (USPS) – and includes enterprise cloud apps, consulting, cloud infrastructure, analytics and security.

Enterprise cloud apps and consulting revenue grew 26% year-over-year, he said, adding DXC’s enterprise cloud apps team is “continuing to drive this momentum by introducing 16 quick-start offerings to help clients plan, pilot and test enterprise and cloud application software accelerating their digital business solutions with software from DXC as well as our strategic partners.”

Cloud revenue increased 33% year-over-year, with drivers of bookings growth including a deal with “a major insurance company to provide a large-scale digital transformation enabled by DXC’s cloud offerings,” he said, without naming the insurance company.

Analytics revenue grew 30%, but security revenue dipped 4%. DXC continued to invest in security via the increased hiring of security consultants and it’s “already beginning to see growth in managed security services and this was reflected in our bookings for the quarter, which were up 78% year-over-year,” he said.

DXC continued to expand its partner offerings in the quarter, including solutions to “more effectively leverage the benefits of public cloud,” he said.

The company also announced new application and managed services offerings for Microsoft Azure and the Azure Stack, he noted. Those offerings “provide a wide range of services to accelerate and scale digital strategies across public and private clouds,” and include application services, analytics offerings and hybrid cloud solutions based on the Azure Stack, he said.

DXC’s alliance with PwC, meanwhile, “continues to show positive momentum” and DXC scored a “significant win” during the quarter by signing long-term deals with luxury brands Bally, Jimmy Choo and Belstaff, he said. In collaboration with PwC, DXC will optimize those brands’ e-commerce, finance and accounting services to “reduce operating costs and deliver process innovation,” he said, adding: “We’re also strengthening the pipeline with PwC by expanding areas where we provide services for each other that we can then take to market together and we currently have two dozen large accounts. We are teaming to develop joint proposals for digital transformation.”

DXC is also “continuing to invest in the business and our people consistent with the plan we outlined” at the Investor Day event it held March 29, he said. Since then, the company bought Logicalis SMC, a Netherlands-based provider of technology-enabled solutions for the service management sector.

The combination of Logicalis with DXC’s Fruition Partners division “further solidifies DXC as one of the most experienced global integrators” for cloud computing company ServiceNow, a “key strategic partner” of DXC’s, Lawrie said Nov. 7.

DXC also “achieved several key merger integration milestones” in Q2 and continued to “execute on the build, sell, deliver operating model we have previously discussed,” he told analysts. The company is “on track to meet our targets” of $1 billion in year-one cost savings and $1.5 billion of run-rate cost savings exiting the current fiscal year, he said. DXC announced in October that it’s combining its USPS business with Vencore and KeyPoint to create a separate independent, publicly-traded technology company to serve U.S. government clients.

The new company will have about $4.3 billion in combined revenue and a “highly skilled workforce” of more than 14,000 people, Lawrie said.