Raul Fernandez, DXC Technology's new CEO, has a plan. He's diving deep into operational excellence, streamlining processes, and rallying the troops to tell a better story about what DXC actually does. But buried within his recent earnings call transcript lies a potential game-changer, a hidden gem that seems to be flying under the radar of most analysts: the quiet, yet potent growth of DXC's insurance software and services business. DXC Technology Company

Fernandez himself highlighted this during the Q4 2024 call, pointing to the unit's impressive 4.5% growth in the quarter. This might seem modest at first glance, but consider this: it represents a substantial acceleration from the 1% growth seen in the previous quarter. Even more striking, if we normalize for a significant one-time perpetual license sale in Q4 2023, the growth rate jumps to a staggering 9%. This puts the insurance software and services business firmly in a league of its own, outpacing DXC's other offerings, even in a challenging economic climate.

Fernandez seems to be acutely aware of this hidden potential, hinting at plans to further "accelerate the growth of this business unit and highlight the value of its leadership role in the industry and its mix of software and reoccurring services." This isn't just talk. He's actively exploring partnerships to inject even more fuel into this growth engine, focusing on strategic alliances that can "help us accelerate growth with a good SaaS and reoccurring services mix while maintaining control of that business unit."

DXC's Insurance Software and Services: A Quiet Powerhouse

So, what makes this insurance software and services business so special? It's the unsung hero powering a significant chunk of the global insurance industry. DXC quietly facilitates the operations of a whopping 80% of Fortune 500 insurance companies. This isn't just about providing IT support; they're deeply embedded in the core processes of these giants, facilitating everything from origination to claims processing.

Their technology processes one in five property and casualty transactions worldwide, and their customer roster boasts 21 of the top 25 global insurance carriers. This speaks volumes about the critical role DXC plays, the trust they've earned, and the sheer stickiness of their solutions. Just look at the numbers: in FY 2023, they secured an astounding 500 customer renewals, demonstrating the enduring value their platform delivers to insurers.

This isn't just a legacy business clinging to outdated technology. DXC is actively building out its SaaS portfolio, co-developing innovative solutions with its customers. This forward-looking approach ensures they remain relevant in a rapidly evolving market, cementing their position as a long-term strategic partner for insurers.

Hypotheses: The Implications of DXC's Insurance Business

Could DXC's current valuation be failing to fully capture the intrinsic value of this high-growth, recurring revenue insurance software and services business? A sum-of-the-parts analysis, benchmarking against software peers with similar growth and revenue profiles, might reveal a substantial valuation gap.

Could this insurance software and services unit become the much-needed growth catalyst to offset the declining revenue trends in DXC's other segments, especially Modern Workplace and ITO, which face a shrinking macro environment?

Could the high-margin, recurring revenue nature of this insurance business contribute significantly to DXC's profitability, offsetting the margin pressures from lower-margin offerings and the ongoing restructuring efforts?

Analyzing the Transcripts: Revenue Trends

Let's examine the revenue trends for DXC's key segments, based on data from the Q3 2024 and Q4 2024 earnings calls:

Visualizing the Growth

Conclusion: A Secret Weapon Poised to Change the Game

The data points to a compelling story: a potential turnaround driven by a high-performing software unit hiding in plain sight. This is more than just operational excellence. It's about recognizing and unleashing the hidden value within DXC's diverse portfolio. While Fernandez is playing his cards close to his chest, the signals are clear. DXC might just have a secret weapon, and it could be about to change the game.

"Fun Fact: DXC Technology processes a staggering volume of insurance transactions – equivalent to handling one out of every five property and casualty insurance interactions globally! This scale highlights their immense reach and the crucial role they play in the insurance ecosystem."