UIS Q2 Earnings Miss on ClearPath Timing Despite Revenue Beat

Total contract value (TCV) declined 3% year over year to $422 million due to lower renewal activity. However, New Business TCV increased 57% year over year and 22% sequentially to $192 million, reflecting improving client engagement. TS&S renewal TCV declined 26% to $196 million, while ClearPath renewal TCV fell 31% to $34 million. Quarter-end backlog was $2.82 billion compared with $2.92 billion a year ago, while trailing 12-month book-to-bill remained 1.2X for both the total company and TS&S.

UIS Revenue Mix Reflects ClearPath Timing

Technology Solutions & Services revenues increased 2.0% year over year to $403.8 million but declined 1.3% in constant currency. The business benefited from incremental volume at existing clients across all three segments.

ClearPath revenues fell 20.4% to $69.7 million, or 22.9% in constant currency. The timing of software license renewals was the primary drag on consolidated revenue and gross margin.

UIS Segment Results Stay Mixed

Digital Workplace Solutions revenues rose 2.8% to $141.9 million but slipped 1.1% in constant currency. Gross margin contracted 610 basis points to 10.8% due to known client attrition, a higher proportion of lower-margin hardware sales and transition costs tied to new-business implementations.

Cloud, Applications & Infrastructure Solutions revenues decreased 0.4% to $184.4 million and fell 3.2% in constant currency. Its gross margin expanded 420 basis points to 25%, supported by delivery improvements and labor-cost initiatives.

Enterprise Computing Solutions revenues declined 10.1% to $126 million, including a 13.2% constant-currency drop. Gross margin fell 870 basis points to 44.8%, reflecting the timing of ClearPath license renewals.

UIS Operating Details

Gross profit totaled $117.3 million, down from $130 million in the prior-year quarter. Gross margin contracted 210 basis points to 24.8%, reflecting the lower contribution from ClearPath revenues. TS&S gross profit increased to $77.8 million from $69.7 million in the prior-year quarter. The corresponding margin expanded 170 basis points to 19.3%, aided by delivery improvements and labor cost savings.

The company benefited from a first-quarter transaction in its U.K. business process outsourcing joint venture. That transaction added roughly 60 basis points to the TS&S gross margin and is expected to generate about $3 million of quarterly gross profit in 2026.

Selling, general and administrative expenses increased 2.2% year over year to $95.7 million, while research and development expenses declined 4.9% to $5.8 million. 

Non-GAAP operating profit declined to $25.3 million from $36.8 million, while the non-GAAP operating margin contracted 230 basis points to 5.3%.

The company posted a GAAP operating loss of $32.9 million compared with operating income of $30.3 million a year ago. Results included a $47.2 million non-cash goodwill impairment charge related to the Digital Workplace Solutions reporting unit. 

Adjusted EBITDA declined to $53.5 million from $61.4 million, with the adjusted EBITDA margin decreasing 140 basis points to 11.3%.

UIS Balance Sheet & Cash Flow Highlights

As of June 30, 2026, cash and cash equivalents totaled $324.3 million. Total debt excluding the pension deficit stood at $745 million, while net leverage excluding the pension deficit was $420.7 million, resulting in a net leverage ratio of 1.5X. The company reported an estimated $30 million improvement in its global pension deficit from year-end, reflecting continued progress in strengthening its balance sheet. 

Cash used for operations was $26.3 million compared with $316.2 million in the year-ago quarter. Free cash outflow narrowed to $49 million from $336.5 million, while adjusted free cash outflow improved to $9.4 million from $49.4 million.

UIS Bookings Strengthen, Outlook Reaffirmed

Unisys reaffirmed its previously improved full-year 2026 guidance, projecting constant-currency revenues to decline from 5.0% to 3.5% and reported revenues to decline from 2.6% to 1.1%. The company maintained its non-GAAP operating margin guidance of 9.0%-11.0%, with guidance assuming approximately $425 million in ClearPath revenues and a 6.0%-4.0% decline in TS&S constant-currency revenues. 

Management reiterated its artificial intelligence (AI)-first strategy, which focuses on building enterprise AI foundations, transforming business workflows and securely orchestrating AI deployments at scale to support long-term growth and operational efficiency.

UIS Zacks Rank & Stocks to Consider

Unisys currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Zacks Computer and Technology sector are Kimball Electronics KE, Datadog DDOG and Onto Innovation ONTO, each currently carrying a Zacks Rank of 1 ( Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Kimball Electronics have declined 15.8% in the year-to-date period. KE is set to report fourth-quarter fiscal 2026 results on Aug. 12.

Shares of Datadog have surged 94.3% in the year-to-date period. DDOG is slated to report second-quarter 2026 results on Aug. 6.

Onto Innovation shares have gained 38.3% in the year-to-date period. ONTO is set to report first-quarter fiscal 2027 results on Aug. 6.

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