Unisys Lifts Full-Year Revenue Outlook After Q3 Beat

Unisys (NYSE:UIS) raised its full-year revenue outlook on October results that beat its own July guidance by more than $20 million. Third-quarter revenue came in at $472 million, up 2.5% year over year, or 0.6% in constant currency, and the company now expects full-year revenue to decline only 1.5% to 3% in constant currency — an improvement from its prior forecast of a 3.5% to 5% decline. The forecast for a non-GAAP operating profit margin of 9% to 11% and free cash flow of roughly negative $25 million stayed unchanged.

CFO Deb McCann delivered the numbers on the earnings call. CEO and President Mike Thomson framed the quarter around a renewal cycle that artificial intelligence has reshaped.

What drove the beat?

Technology Solutions and Services, or TS&S, revenue rose 2.6% to $387 million, or 0.9% in constant currency, exceeding the company's roughly $370 million expectation. New business from existing clients offset lower volumes tied to previously identified client attrition.

The booking figures point forward. Total contract value signed in the quarter reached $594 million, up 43% year over year. New business accounted for $221 million, an increase of 78%, while TS&S renewal contract value rose 20% to $275 million. Backlog ended the quarter at $2.92 billion, up 3% from a year earlier.

Thomson said the company has largely worked through a renewal cycle in which AI-related efficiencies pressured pricing for the same scope of work. "In many cases, customers added services or geographic coverage," he said, helping offset that pressure. He expects the effects of past client losses to begin lapping in the second half of 2027, and said the timing of sustained TS&S growth depends partly on closing new deals in the fourth quarter.

Recent wins include a global service desk contract with Heineken and renewals with a U.S. state agency, a U.S. defense contractor and a global bank in Mexico. The qualified new business pipeline grew sequentially for a third consecutive quarter. In plain terms: demand is rebuilding faster than the market assumed in July.

How did profit perform?

Non-GAAP operating profit was $34 million, a 7.2% margin, up from 5.4% a year earlier and well above the approximately 4% margin Unisys had forecast. McCann attributed part of the outperformance to higher ClearPath margins.

On a GAAP basis, operating profit was $24 million, compared with a $34 million loss a year earlier that included a $55 million non-cash goodwill impairment charge. The company reported a net loss of $201 million, or $2.76 per diluted share, including a $151 million after-tax non-cash pension settlement expense. The adjusted net loss was $8.5 million, or 12 cents per share.

Digital Workplace Solutions told a harder story. Revenue rose 1.7% in constant currency to $130 million, but gross margin fell to 9.5% from 16.2%. McCann cited client attrition, a greater hardware contribution and costs tied to transitioning a large new client. Thomson said he could not separate the effects but characterized hardware mix and intentional investment as the larger portion of the pressure. New workplace business signed in the quarter, he added, should be margin accretive.

What about ClearPath and cash?

ClearPath revenue was $84 million, above the roughly $80 million management expected. Unisys reaffirmed its forecast of approximately $425 million in ClearPath revenue for 2026 and an average of roughly $400 million annually in 2027 and 2028.

The revised outlook implies fourth-quarter revenue of approximately $570 million, including about $205 million from ClearPath. Thomson said he had a high degree of confidence in expected renewals, many tied to calendar year-end.

Cash timing remains the variable. McCann said the free cash flow forecast assumes most cash from those signings arrives in the fourth quarter, though late renewals could push collections into early 2027. Third-quarter free cash flow was negative $58 million, against positive $20 million a year earlier, when the company received a one-time $25 million legal settlement. Unisys ended September with $264 million in cash, down from $414 million at year-end. Its $125 million asset-based revolver remained undrawn, and no meaningful debt matures before 2031.

What is happening with the pension?

During the quarter, Unisys purchased an annuity that transferred approximately $200 million of projected U.S. defined-benefit pension liabilities, along with a similar amount of plan assets, to an insurer. McCann said the transaction did not materially affect the pension deficit or use company cash, but cut gross liabilities and ongoing maintenance costs.

The company has reduced roughly $520 million of U.S. qualified plan liabilities since July 2025, toward an approximately $600 million target. Another transaction in the first half of 2027 should substantially achieve that objective, McCann said, and Unisys could be positioned to fully remove its U.S. defined-benefit plans within three to four years, subject to continued operational and financial execution. For CFOs watching legacy liabilities, this is a live case study in steady de-risking.