10-Q: Unisys Reports Q2 2026 Results, Faces Net Loss Amid Impairment

Unisys Corporation reported a net loss of $95.3 million for the second quarter of 2026, impacted by a significant goodwill impairment charge.

Summary

• Unisys Corporation reported a net loss attributable to Unisys Corporation of $95.3 million, or $1.31 per diluted share, for the three months ended June 30, 2026. This compares to a net loss of $20.1 million, or $0.28 per diluted share, for the same period in 2025.
• For the six months ended June 30, 2026, the net loss attributable to Unisys Corporation was $131.1 million, or $1.81 per diluted share, compared to a loss of $49.6 million, or $0.70 per diluted share, in the first half of 2025.
• The net loss for the second quarter and first half of 2026 includes a goodwill impairment charge of $47.2 million related to the Digital Workplace Solutions (DWS) segment.
• Revenue for the three months ended June 30, 2026, decreased by 2.0% to $473.5 million from $483.3 million in the prior year, primarily due to the timing of ClearPath license renewals.
• For the six months ended June 30, 2026, revenue decreased by 0.5% to $911.1 million from $915.4 million in the prior year, also impacted by ClearPath license renewal timing.
• Gross profit margin for the three months ended June 30, 2026, was 24.8%, down from 26.9% in the prior year, largely due to the ClearPath license renewal timing.
• Total Contract Value (TCV) for new business increased by 57% to $192 million in Q2 2026 compared to $122 million in Q2 2025, but overall TCV decreased by 3% to $422 million.
• Backlog stood at $2.82 billion as of June 30, 2026, down from $2.92 billion as of June 30, 2025.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this filing as negative due to the significant increase in net loss, revenue decline, and substantial goodwill impairment charge, despite some positive trends in new business TCV and specific segment margin improvements.

Positives

• New Business Total Contract Value (TCV) saw a significant increase of 57% to $192 million in Q2 2026 compared to $122 million in Q2 2025.
• Technology Solutions & Services (TS&S) gross profit increased to $77.8 million in Q2 2026 from $69.7 million in Q2 2025, with a gross profit margin improvement to 19.3% from 17.6%.
• The Cloud, Applications & Infrastructure Solutions (CA&I) segment showed improved gross profit margin to 25.0% in Q2 2026 from 20.8% in Q2 2025.
• The company expects to continue meeting covenants and conditions under its lending and funding agreements for at least the next 12 months.
• A first quarter transaction within the UK business process outsourcing joint venture is expected to generate a gross margin benefit of approximately $3 million quarterly and $12 million for the full 2026 year.

Negatives

• Reported a net loss attributable to Unisys Corporation of $95.3 million for Q2 2026, a significant increase from the $20.1 million loss in Q2 2025.
• Revenue decreased by 2.0% to $473.5 million in Q2 2026 compared to $483.3 million in Q2 2025.
• Gross profit decreased to $117.3 million in Q2 2026 from $130.0 million in Q2 2025, with gross profit margin declining to 24.8% from 26.9%.
• The Digital Workplace Solutions (DWS) segment experienced a decrease in gross profit margin to 10.8% in Q2 2026 from 16.9% in Q2 2025, attributed to client attrition and higher delivery costs.
• The Enterprise Computing Solutions (ECS) segment saw a decrease in revenue by 10.1% and gross profit margin by 8.7 percentage points in Q2 2026 compared to Q2 2025.
• Cash used for operating activities was $30.7 million for the six months ended June 30, 2026, compared to cash used of $282.9 million in the prior year period, which was heavily influenced by a large pension contribution.

Risks

• The company recorded a $47.2 million goodwill impairment charge for the Digital Workplace Solutions (DWS) reporting unit due to continued competitive pressure from industry and macro-economic conditions.
• An impairment charge of $1.5 million was recorded for a customer relationship intangible asset due to revised expectations regarding future cash flows.
• Future impairments of goodwill or intangible assets could further adversely affect results of operations.
• The company faces risks related to cybersecurity incidents, security breaches, and disruptions in IT systems.
• Adverse effects of volatile economic, geopolitical, and political conditions, as well as acts of war, terrorism, natural disasters, or widespread outbreaks of infectious diseases, could impact results.
• Aggressive competition in the industry poses a risk to the company's performance.
• The company must attract, retain, and develop skilled employees and strong leaders to meet global client demand.
• Meeting underfunded defined benefit pension plan obligations presents a financial risk.

Future Outlook

The company expects to continue meeting covenants and conditions under its lending and funding agreements for at least the next 12 months. Future cash contributions to global defined benefit pension plans are estimated at approximately $97 million for 2026 and $104 million in 2027. The company may explore additional debt and equity sources for liquidity and capital needs and may repurchase its securities.

Management Comments

• The company updated naming conventions for solution groupings in Q2 2026, renaming 'License and Support' to 'ClearPath' and 'Excluding License and Support' to 'Technology Solutions & Services (TS&S)'.
• The decrease in revenue for Q2 2026 was primarily driven by the timing of ClearPath license renewals.
• TS&S gross profit and margin increased due to delivery improvement and labor cost savings initiatives.
• The DWS segment's gross profit margin decreased due to known client attrition, a greater proportion of lower-margin hardware revenue, and increased delivery costs.
• The ECS segment's revenue and gross profit margin decreases were primarily driven by the timing of ClearPath license renewals.
• The company believes it will have adequate sources of liquidity to meet its expected cash requirements for at least the next twelve months.

Industry Context

StockSavvy.ai notes that Unisys's results reflect challenges common in the IT services sector, including the cyclical nature of software license renewals (as seen with ClearPath) and ongoing competitive pressures impacting margins, particularly in segments like Digital Workplace Solutions (DWS). The increase in new business TCV is a positive sign, but the overall revenue decline and significant goodwill impairment highlight the need for strategic adjustments to navigate market dynamics.

Comparison to Industry Standards

• The IT services industry typically sees revenue fluctuations based on contract cycles and technology adoption rates. Unisys's decline in ClearPath revenue aligns with a broader trend of legacy system modernization and a shift towards cloud-based solutions.
• Gross profit margins in the IT services sector vary widely by segment. While Unisys's CA&I segment shows improvement, the decline in DWS margins due to client attrition and delivery costs is a concern, as client retention and efficient service delivery are key industry benchmarks.
• Goodwill impairment charges, like the one recorded by Unisys, can occur in industries undergoing significant technological shifts or facing intense competition, impacting companies that have made substantial acquisitions.
• The increase in new business TCV for Unisys is a positive indicator, as securing new contracts is crucial for sustained growth in the competitive IT services landscape.

Corporate Governance

Legal Proceedings

• The company is involved in various lawsuits, claims, investigations, and proceedings, including those related to commercial and government contracts, labor, employee benefits, environmental matters, intellectual property, and non-income tax matters.
• Brazilian operations face litigation including governmental assessments for indirect taxes and disputes with former employees and contract labor.
• At June 30, 2026, unreserved tax-related matters, including interest, are estimated to be approximately $100 million.
• An estimated environmental liability of approximately $18 million exists for a site previously operated by a predecessor company.

Stakeholder Impact

• Shareholders are impacted by the increased net loss and goodwill impairment, which negatively affects the company's reported financial performance and potentially its stock value.
• Employees may be affected by ongoing cost-reduction actions and the need to attract and retain skilled personnel.
• Creditors and lenders will monitor the company's ability to meet its debt obligations and covenants, although the company expects to meet these.
• Customers may be impacted by changes in service delivery and pricing, particularly in segments experiencing margin pressures or client attrition.

Next Steps

• The company will continue to monitor and evaluate goodwill and intangible assets for impairment.
• The company expects to make cash contributions of approximately $40 million to its global defined benefit pension plans for the remainder of 2026.
• The company may explore additional debt and equity sources to fund liquidity and capital needs.
• The company may, from time to time, redeem, tender for, or repurchase its securities.

Key Dates

Recommendation

While the company faces significant headwinds, including increased net losses and a substantial goodwill impairment, there are some positive signs such as growth in new business TCV and margin improvements in certain segments. The company's ability to meet its debt obligations and its stated expectation of continued liquidity provide a floor. However, the persistent losses and the impact of the impairment suggest a cautious approach, making 'hold' appropriate until a clearer path to profitability and sustainable growth emerges.

Keywords

Unisys, 10-Q, Quarterly Report, Goodwill Impairment, Net Loss, Digital Workplace Solutions, Enterprise Computing Solutions, Financial Results