The quarter was mixed against expectations, not a clean upside surprise. Adjusted EPS loss of $0.12 was modestly better than the published consensus loss of about $0.16, but revenue of $3.618 billion missed the roughly $3.643 billion expectation by about $25 million. With annual guidance simply reaffirmed rather than raised, the earnings beat does not materially change the standing full-year picture.
| Metric | Q1 FY2027 actual | Q1 FY2026 | Expectation / implication |
|---|---|---|---|
| Revenue | $3.618B, down 3% constant currency (Segment Results) | $3.743B | ~$3.643B consensus; modest miss |
| Adjusted EPS | $(0.12) (Non-GAAP reconciliation) | $0.37 | ~$0.16 loss consensus; modest beat |
| Adjusted EBITDA | $512M; 14.2% margin (Non-GAAP reconciliation) | $647M; 17.3% margin | Material year-over-year margin contraction |
| Free cash flow | $(401)M (Free cash flow reconciliation) | $(222)M | Larger seasonal cash outflow |
| Quarterly signings | $3.9B (Signings table) | $3.2B | Improved year over year |
| FY2027 outlook | Adjusted pretax income $600M–$700M; FCF $400M–$500M; constant-currency revenue flat to down 2% (FY2027 Outlook) | — | Reaffirmed, not raised |
Underlying profitability weakened sharply even after adjustments. Adjusted EBITDA fell 21% and its margin dropped 310 basis points to 14.2%; adjusted pretax income swung to a $37 million loss from $128 million of income. The $152 million workforce-rebalancing charge explains a substantial portion of the deterioration, but it is included in the company's adjusted pretax measure, so the reported adjusted loss is still the relevant first-quarter starting point for a year targeting $600 million–$700 million of adjusted pretax income. (Non-GAAP reconciliation; Highlights)
Cash flow was worse, though seasonality was already part of the setup. Free cash flow used $401 million, versus a $222 million use a year earlier, as operating cash use widened to $310 million on software payments, lower billings and collections, and working-capital movements. Management had previously flagged the first half—particularly Q1—as cash-intensive, so the outflow itself is less surprising than it looks; nonetheless, it leaves more of the annual $400 million–$500 million free-cash-flow target dependent on the remaining three quarters. (Cash Flow statement; Free cash flow reconciliation)
The growth indicators are real but have not yet repaired consolidated results. Quarterly signings rose to $3.9 billion from $3.2 billion, Consult revenue grew 10%, and hyperscaler-related revenue grew 34%. But total revenue still fell 3% in constant currency, with every geography except the United States declining, while trailing-12-month signings fell to $14.2 billion from $18.3 billion. These initiatives support the longer-term turnaround case, but this filing does not show them yet offsetting pressure in the broader legacy base. (Highlights; Segment Results; Signings table)
Net read: the modest EPS beat keeps the quarter from being decisively negative, but the revenue shortfall, lower margins, and larger cash use outweigh it as evidence of near-term improvement. Reaffirming guidance preserves management's full-year case; without a raise, it is confirmation rather than new upside. (FY2027 Outlook)
Read the original 8-K on SEC EDGAR ↗