Core Insights - Unisys Corporation (UIS) stock increased by 8.4% in after-hours trading following the release of its Q2 2025 earnings, which exceeded Wall Street expectations with sequential revenue growth and improved profitability metrics [1][10] - The company has made strategic financial restructuring moves to mitigate pension volatility despite facing macro uncertainties [1] Financial Performance - Unisys reported revenues of $483.3 million, surpassing the Zacks Consensus Estimate of $443 million, reflecting a 1.1% year-over-year increase and an 11.8% sequential growth driven by higher License and Support (L&S) revenue [3][10] - Non-GAAP earnings were reported at 19 cents per share, significantly better than the expected loss of 34 cents per share and an improvement from 16 cents per share in the previous year [4][10] Margins and Profitability - Gross profit was $130 million, with a slight decrease in gross margin to 26.9% from 27.2% due to increased cost reduction charges [5] - Adjusted EBITDA rose by 5% year-over-year to $61.4 million, with the margin improving by 50 basis points to 12.7% [6] Segment Performance - Enterprise Computing Solutions (ECS) revenue increased by 7.3% year-over-year to $140.2 million, supported by license renewals and managed services [7] - Digital Workplace Solutions (DWS) revenue rose by 4.5% year-over-year to $138.1 million, aided by higher hardware sales [7] - Cloud, Applications & Infrastructure (CA&I) revenue decreased by 4.5% to $185.2 million, impacted by reduced public sector demand [8] Contract Value and Backlog - Total contract value (TCV) for the quarter was $437 million, down 5% year-over-year, but renewals were strong with Ex-L&S renewals up 85% year-over-year [9] - Backlog improved to $2.92 billion from $2.79 billion in the prior year, indicating a stable long-term revenue base [9] Balance Sheet and Liquidity - As of June 30, 2025, cash and cash equivalents were $300.8 million, down from $376.5 million at year-end 2024, primarily due to a $250 million pension contribution [11] - Adjusted free cash flow was negative $49.4 million in Q2, compared to a loss of $8.0 million a year ago, reflecting pension funding and working capital timing [12] Outlook - Unisys narrowed its 2025 constant-currency revenue guidance to a range of -1% to +1% while raising non-GAAP operating margin guidance to 8%-9% from the previous range of 6.5%-8.5% [2][13]

Core Insights - Unisys Corporation (UIS) is experiencing strong bookings in its Digital Workplace Solutions (DWS) segment, driven by a market shift towards AI-driven solutions [1] - The company is focusing on innovations that meet client needs in cost optimization, data integration, security, productivity, and AI enablement [1] Group 1: Digital Workplace Solutions (DWS) - Since 2024, UIS has been developing a significant pipeline for its Device Subscription Service (DSS), which is expected to create value by reducing costs and enhancing efficiency [2] - In Q1 2025, UIS secured scalable DSS signings, including a major deal with a global tech supplier for 380,000 devices across 14 countries, enhancing long-term revenue visibility [3] - Despite a 7.5% year-over-year revenue decline in the DWS segment due to weak discretionary spending, UIS anticipates recovery in the second half of 2025 as DSS signings increase [4] Group 2: Market Performance and Valuation - UIS shares have increased by 6.5% over the past three months, underperforming compared to the Zacks Computers - IT Services industry and the S&P 500 index [5] - UIS is trading at a forward price-to-sales (P/S) ratio of 0.14, indicating a discounted valuation compared to peers, which may present an attractive entry point for investors [10] - Competitors Wipro and DXC Technology have forward P/S ratios of 2.86 and 0.22, respectively, highlighting UIS's relative valuation advantage [11] Group 3: Earnings Estimates - Earnings estimates for UIS for 2025 and 2026 suggest year-over-year growth of 28.9% and 120.7%, respectively, indicating strong long-term growth potential [12] - The current earnings estimates for 2025 and 2026 remain unchanged, reflecting stability in the company's growth trajectory [12]

Core Insights - Investors are focusing on IT services stocks that balance innovation and stability, with Unisys Corporation (UIS) and International Business Machines Corporation (IBM) as key players in this sector [1] Unisys Corporation (UIS) - Unisys is undergoing a strategic transformation aimed at expanding solution-based revenue streams, operational optimization, and enhancing brand relevance in AI and cybersecurity [2] - The Device Subscription Services (DSS) and Digital Workplace Solutions (DWS) are major growth drivers, with significant contracts signed for large-scale device management [2] - The backlog in the DWS segment is growing at a double-digit pace year over year, positioning Unisys for sequential growth in the latter half of 2025 [3] - Unisys is enhancing its security portfolio with Post-Quantum Cryptography solutions and AI-enabled frameworks, which are expected to drive revenue growth despite current discretionary spending softness [4] - The company aims for $100 million in pre-pension free cash flow in 2025 through operational improvements and cost control [5] - The Zacks Consensus Estimate for UIS's EPS indicates a year-over-year increase of 28.9%, with earnings estimates for 2025 revised upward by 132% in the past 60 days [11] International Business Machines Corporation (IBM) - IBM is enhancing its AI portfolio by integrating governance and security into a unified platform, marking a significant step toward responsible AI deployment [6] - The software segment, which constitutes nearly 45% of IBM's business, achieved 9% growth in Q1 2025, driven by strong demand for Red Hat and AI-powered tools [8] - IBM's shift to subscription and platform-based services has resulted in an 80% recurring revenue base in software, contributing to high-margin gains [10] - The Zacks Consensus Estimate for IBM's 2025 EPS implies a year-over-year growth of 6%, with earnings estimates revised upward by 0.4% in the past 60 days [12] - IBM shares have surged 32.8% year-to-date, reflecting strong market performance [13] Comparative Analysis - Unisys is positioned for upside due to its transformation-driven momentum and focus on innovation in AI and cybersecurity, while IBM offers stability and scale but may have more moderate upside potential [17][18] - UIS is trading at a forward P/E ratio of 5X, below its median of 10.59X, while IBM's forward sales multiple is at 25.85X, above its median of 21.47X [15] - Unisys's emphasis on recurring revenues and emerging technologies provides a compelling turnaround narrative, contrasting with IBM's established market position [18][20]

Group 1 - Unisys reported Q1 2025 revenue of $432.1 million, reflecting an 11.4% year-over-year decline [1] - The revenue drop was primarily due to delays in software license renewals in the Enterprise Computing Solutions (ECS) segment [1] - Reduced project activity was noted within the Cloud, Applications & Infrastructure (CA&I) and Digital Workplace Solutions (DWS) segments [1]