DXC Technology Company DXC shares have gained 10.3% over the past six months and outperformed the broader Zacks Computer and Technology sector’s return of 4.9%, reflecting investor confidence. The company has made significant strides in its operational performance, innovation capabilities and financial stability, making it an attractive investment opportunity. Here are three compelling reasons to consider adding DXC stock to investors’ portfolios right now.

DXC’s Transformation Efforts

DXC’s sustained efforts toward transforming itself from a struggling, highly leveraged company to a high-growth, business-oriented firm are commendable. DXC was formed by the merger of Computer Sciences Corporation (“CSC”) and the Enterprise Services Division of Hewlett Packard Enterprise Company HPE, which was completed on April 1, 2017. CSC, prior to the completion of the merger, took an additional debt. This amplified DXC’s total long-term liability, thereby increasing its interest cost burden while limiting its scope for investing in growth opportunities.

To overcome this situation, DXC resorted to debt refinancing and divestment, as well as a spin-off of non-core assets. The strategy significantly reduced its outstanding debt level to $3.83 billion as of Sept. 30, 2024, from $10.33 billion as of June 30, 2020.

Divestment and spinning off non-core assets have improved DXC’s focus on its core businesses. Also, it enhances the firm’s ability to execute acquisition strategies across high-growth businesses, including enterprise software-as-a-service, technology security solutions and autonomous driving.

The trimmed business is likely to help DXC focus on reviving its financial performance, which has been hurt by a slowdown in IT spending. Additionally, a low-leverage balance sheet will provide it with financial flexibility in investing in growth areas.

DXC Technology Company. Price and Consensus

DXC Technology Company. price-consensus-chart | DXC Technology Company. Quote

DXC’s Leadership in AI and Digital Services Innovation

DXC is leveraging artificial intelligence (AI) to enhance its product offerings and differentiate itself in a competitive IT services market. A prime example is its Generative AI Center of Excellence, which has been instrumental in deploying AI-powered solutions across industries.

Moreover, with its most recent launch of AI Impact in January 2025, a strategy aimed at assisting clients in resolving their most urgent problems, DXC leverages its extensive industry knowledge and technological know-how to jointly develop solutions, services and experiences that will produce tangible business results utilizing the newest technological advancements.

DXC is also focusing on assisting customers in managing the entire GenAI life cycle, from initial deployments to creating comprehensive solutions that safely expand with their companies. This entails matching the most recent language models to satisfy customer demands and guaranteeing that GenAI solutions have access to accurate, up-to-date, and clean data.

In the second quarter of fiscal 2025, DXC showcased its innovation with a generative AI virtual service agent developed for Equitable Holdings. This solution improved response times by an impressive 80%, underscoring the company’s ability to deliver tangible business outcomes for its clients. As enterprises increasingly adopt AI to drive efficiency and innovation, DXC’s early leadership in this space positions it for significant growth.

Additionally, the company’s focus on digital transformation is evident in its expanding Global Business Services (GBS) segment, which constitutes over half of its total revenues. The GBS segment delivered a profit margin of 12.8% in the second quarter, with the core insurance services and software businesses growing by 5% year over year.

DXC’s Attractive Valuation

DXC’s valuation adds to its appeal. The stock trades at a forward price-to-earnings (P/E) ratio of 6.27, significantly below the Zacks Computers - IT Services industry average of 38.11. This reasonable valuation, coupled with the company’s growth potential, offers an appealing entry point for investors seeking exposure to the IT services industry.

The stock’s current P/E multiple is also lower than other peers in the IT Services industry, including Science Applications International SAIC and Amdocs DOX. At present, SAIC and DOX trade at a P/E multiple of 12.66 and 11.81, respectively.

Zacks Rank

DXC’s focus on transformational efforts, innovation in AI and digital services, and attractive valuation make it a compelling buy. DXC currently flaunts a Zacks Rank #1 (Strong Buy), implying that existing investors should keep holding the stock while new buyers should accumulate the stock. You can see the complete list of today’s Zacks #1 Rank stocks here.

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