Exchange: NASDAQ | Sector: Technology | Industry: Information Technology Services
Q1 2026
Published: Jun 2, 2025
Earnings Highlights
Revenue of $1.88B up 1.6% year-over-year
EPS of $1.42 decreased by 4% from previous year
Gross margin of 11.1%
Net income of 68.00M
"“We delivered net bookings of $2.4 billion for a book-to-bill of 1.3, which included securing a key recompete to five years system software lifecycle engineering contract for the Army, and an eight-year IT services program for the Pension Benefit Guarantee Corporation.”" - Toni Townes-Whitley
SAIC QQ1 2026 Results Analysis: Stable Revenue Growth, Backlog Momentum, and Margin Trajectory Amid DoD Budget Dynamics
Executive Summary
SAIC delivered a solid start to fiscal year 2026 (quarter ended May 2, 2025), highlighted by modest revenue growth, sizable net bookings, and a constructive backlog trajectory. Revenue of $1.877 billion rose roughly 2% year over year, supported by ramp on strategic programs (tCloud, IMDC2, GMAS) and offset by reduced revenue from contract completions and transitions. Net bookings reached $2.4 billion with a book-to-bill ratio of 1.3, anchoring near-term visibility and underpinning an expectation for continued bookings strength to support 1.2x trailing twelve-month book-to-bill in the coming quarters. The quarter featured an adjusted EBITDA of $157 million, for an 8.4% margin, pressured by seasonality in investments and higher costs on a fixed-price space program; management notes an expected margin improvement as the program transitions to sustainment and option periods extend. Net income was $68 million ($1.42–$1.43 per share), with adjusted diluted EPS of $1.92, flat YoY on a lower share count but offset by higher taxes and lower EBITDA.
Management reaffirmed FY26 guidance: revenue of $7.60–$7.75 billion (midpoint ~2.5% organic growth), adjusted EBITDA margin of 9.4%–9.6%, adjusted diluted EPS of $9.10–$9.30, and free cash flow of $510–$530 million (~$11 per share). The company continues to deploy capital into buybacks (approx. $125 million in Q1) and remains positioned to pursue tuck-ins while sustaining a robust pipeline (~$19.8 billion intended awards) and ~ $20 billion backlog. Given a flexible government CR environment and a diversified portfolio across DoD, civilian, intelligence, and space, SAIC is balancing defense priorities with civil agency demand (DOT/FAA, DHS, DOS Vanguard, VA) and expanding mission IT offerings. Investors should monitor: (1) evolving DoD priorities and agency procurement cycles, (2) timing of awards and potential rightward shifts in bookings, (3) fixed-price program execution maturity (notably in the SDA space program), and (4) the company’s ability to sustain on-contract growth to offset any near-term headwinds in new business.
- Revenue: $1.877B in Q1 FY2026; YoY +1.62%, QoQ +2.12% (per earnings data)
- Gross Profit: $209M; Gross Margin ~11.1% (YoY margin change -1.88%; QoQ -9.91%)
- Operating Income: $121M; Operating Margin ~6.45% (YoY -7.63%; QoQ -12.32%)
- Net Income: $68M; Net Margin ~3.62% (YoY -11.69%; QoQ -30.61%)
- EPS (GAAP): $1.43; Diluted EPS: $1.42; Adjusted Diluted EPS: $1.92 (flat YoY)
- Adjusted EBITDA: $157M; EBITDA Margin 8.4%
- Backlog: ~ $20B; Net bookings: $2.4B; Book-to-Bill: 1.3x
- Free Cash Flow (quarter): -$44M (timing of receivables); Operating Cash Flow: $100M; Capex: -$8M; Free Cash Flow Guidance: $510–$530M for FY26
- Cash and liquidity: Cash at end of period ~$55M; Cash and short-term investments ~$47M; Total debt ~$2.441B; Net debt ~$2.394B
- Capital deployment: Share repurchases ~$125M in Q1; Target annual repurchases $350M (range $150–$200M for M&A or buybacks)
- Guidance highlights: Organic revenue growth ~2.5% at midpoint; 1H growth 1–3%, 2H growth 2–4% (assuming ramp on new business)
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
1.88B
1.62%
2.12%
Gross Profit
209.00M
-1.88%
-9.91%
Operating Income
121.00M
-7.63%
-12.32%
Net Income
68.00M
-11.69%
-30.61%
EPS
1.43
-4.03%
-27.41%
Key Financial Ratios
Net Income vs. Revenue
Expense Breakdown
Management Commentary
- Strategy and market positioning: SAIC continues to pivot toward enterprise and mission IT, aligning with the new administration’s priorities and accelerating technology adoption. Toni Townes-Whitley emphasized the portfolio’s durability and the shift to enterprise IT as a growth engine.
- Bookings and backlog: Management highlighted $2.4B in net bookings and a 1.3x trailing book-to-bill, with a backlog of roughly $20B and a pipeline of ~$19.8B intended awards, signaling solid visibility into future revenue.
- Margin discipline and program execution: The quarter featured 8.4% adjusted EBITDA margin, affected by seasonality and a fixed-price space program. Management expects margin improvement as the SDA program transitions to sustainment and option periods extend. Civil margins improved year over year, while defense margins are aided by disciplined recompete and higher thresholds in bids.
- DoD budget and market dynamics: Toni noted that the defense budget request shows strength in Navy, Air Force, Space Force, with potential variation across branches; overall, funding levels and priorities remain supportive of SAIC’s growth strategy, albeit with some uncertainty in procurement and personnel turnover at agencies. Prabu emphasized the flexibility of the government CR and the potential for on-contract growth to offset any near-term New Business delays.
- Cash flow and capital allocation: 1Q free cash flow was negative due to working capital timing, but SAIC maintained its FY26 free cash flow target and continued buybacks, underscoring confidence in cash generation and capital flexibility.
- Guidance and execution risk: Management reaffirmed FY26 targets while acknowledging potential rightward shifts in awards due to procurement delays. The team highlighted a strong submit volume in Q2 and a plan to achieve a 1.2x trailing-book-to-bill, subject to macro and execution factors.
“We delivered net bookings of $2.4 billion for a book-to-bill of 1.3, which included securing a key recompete to five years system software lifecycle engineering contract for the Army, and an eight-year IT services program for the Pension Benefit Guarantee Corporation.”
— Toni Townes-Whitley
“Our guidance for revenue in a range of $7.6 billion to $7.75 billion represents organic growth of approximately 2.5% at the midpoint.”
— Prabu Natarajan
Forward Guidance
SAIC reaffirmed its FY2026 guidance, emphasizing disciplined cost management and growth in on-contract work. Key points:
- Revenue: $7.60–$7.75 billion (midpoint ~2.5% organic growth)
- Adjusted EBITDA Margin: 9.4%–9.6% for the year, with a plan to offset Q1 headwinds from timing of investments and fixed-price program costs in space via sustainment phase and post-close awards
- Adjusted Diluted EPS: $9.10–$9.30, assuming ~23% tax rate and ~47 million shares
- Free Cash Flow: $510–$530 million (roughly $11 per share); cash-flow timing will reflect payroll cycles (Q1 and Q3) with about $125 million outflow per quarter in those periods
- Capital allocation: Target annual share repurchases $350 million (range $150–$200 million for buybacks or tuck-ins)
- Outlook nuance: If ramp on new business shifts right due to macro or procurement delays, greater emphasis may be placed on on-contract growth to meet the 1.2x trailing twelve-month book-to-bill target; management notes flexibility in the CR environment and expects margin improvement as new programs scale up. Monitorables for investors:
- Sustainment progress on fixed-price space programs and margins on space vs. civil T&M/FIXED-price mix
- DoD calendar effects and defense budget dynamics by branch
- Civil agency spend cycles (DOT/FAA, DHS, DOS Vanguard) and the contribution to overall growth
- Inbound awards cadence and protest resolutions that may affect near-term bookings and revenue recognition.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
SAIC Focus
11.13%
N/A
N/A
N/A
LDOS
17.80%
12.50%
8.53%
11.92%
CACI
8.74%
8.74%
3.29%
23.41%
PSN
22.80%
7.03%
2.70%
23.77%
ASGN
28.40%
4.81%
1.17%
32.94%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
SAIC enters FY2026 with healthy backlog, a robust bookings pipeline, and a measured yet constructive growth trajectory driven by a strategic pivot to mission and enterprise IT. The company’s Q1 metrics show resilience: revenue of $1.877B (+~2% YoY), net bookings of $2.4B, and an Adjusted EBITDA margin of 8.4% amid space program cost pressures. Management reaffirmed full-year guidance for revenue of $7.60–$7.75B, adjusted EBITDA margin of 9.4–9.6%, and free cash flow of $510–$530M, underscoring confidence in the transition from development to sustainment on key programs and in-on-contract growth to support the top-line trajectory. The stock’s investment thesis hinges on: (1) sustaining and expanding on-contract growth to offset variability in new awards; (2) margin stabilization and normalization as projects transition to sustainment and as fixed-price elements are calibrated; (3) a diversified revenue mix that reduces reliance on any single sector, with civil and space opportunities complementing defense exposure; (4) strong liquidity and thoughtful capital deployment through buybacks and strategic tuck-ins.
Key risks to monitor include DoD budget shifts by branch (Navy/Air Force/Space vs Army), potential CR-induced timing delays in awards, and execution risk on complex space and defense initiatives. If SAIC can sustain on-contract growth in the mid-to-high single digits and advance the book-to-bill toward 1.2x for the trailing twelve months, the company is well positioned to achieve its FY2027 growth target of ~4–5% and to compound earnings through improved margins in the civil segment and better leverage on space/DoD programs. Investors should track quarterly progression in Q2 and Q3 bookings, sustainment progress on SDA and space programs, and the trajectory of civil IT modernization deals to validate the mid-term growth framework.
Key Investment Factors
Growth Potential
- Strong backlog and pipeline (backlog ~$20B; intended awards ~$19.8B) support 1.2x TTM book-to-bill and mid-single-digit revenue growth through FY2027. - Civil segment poised for margin expansion and growth, with projected ramp in IT modernization work across DHS, DOS, DOT/FAA, Treasury, and VA, contributing to diversification away from defense-only exposure. - Space and DoD leverage: SDA program integration and space-related sustainment opportunities offer incremental EBITDA potential as cost structures normalize post-transition.
Profitability Risk
- Near-term procurement delays and CR-related budgetary uncertainty could push awards/timing to subsequent quarters, potentially pressuring short-term revenue visibility.
- Fixed-price space program has caused a ~$3–5M quarterly EBITDA headwind and a 50–60bp margin impact; sustainment phase expected to improve yields but execution risk remains on complex development programs.
- Recompete exposure (NASA NCAPS, etc.) and protest-associated delays introduce earnings variability across fiscal years.
- Customer turnover and longer procurement cycles in DoD agencies may weigh on award timing and transition planning.
- High sensitivity to DoD budget shifts across Navy/Air Force/Space Force vs Army; potential deprioritization in Army transformations could affect bid mix.
Financial Position
- Balance sheet shows total assets ~$5.211B and total liabilities ~$3.707B, with total debt ~$2.441B and net debt ~$2.394B; cash at end of period ~$55M; cash and short-term investments ~$47M.
- Free cash flow guidance ($510–$530M) supports a solid liquidity profile, though quarterly FCF can be volatile due to working capital timing (Q1 had ~ $70M receivables timing impact).
- Share repurchases: ~$125M in Q1, with ongoing ambition to deploy $350M annually in buybacks or tuck-ins; this augments earnings per share and capital efficiency while maintaining liquidity buffers.
SWOT Analysis
Strengths
Diversified portfolio across DoD, civilian agencies, intelligence, and space, reducing single-market risk
Solid backlog (~$20B) and $2.4B of net bookings in Q1, supporting revenue visibility
Robust civil segment opportunities (DOT/FAA, DHS, DOS Vanguard, Treasury, VA modernization) and enterprise IT transition
Proven capability in mission-critical IT, digital engineering, cloud, and cybersecurity
Active capital deployment (share repurchases) and a clear framework for tuck-ins
Sustained demand signals from DoD priorities (readiness, lethality, enterprise IT) and new SDA integration program
Weaknesses
Quarterly EBITDA margin susceptible to fixed-price program costs and space program cost overruns (EAC adjustments)
Near-term cash flow volatility driven by working capital timing in large programs
Significant exposure to defense budgets and procurement cycles, including CR-related uncertainties
Military-to-civilian mix and customer turnover creating execution and transition risks
Opportunities
Space Development Agency mission integrator role expansion and sustainment opportunities
Civilian IT modernization and cloud migration projects with agencies like DOT/FAA, DHS, DOS, Treasury, VA
Expansion of Intel and space-focused pipelines (GMAS, space integration wins)
Improvement in gross and operating margins through higher-value fixed-price work and disciplined transitions
Continued buybacks and potential tuck-in acquisitions to accelerate growth
Threats
Federal budget volatility and CR-related delays impacting award timing
Competition for large defense and civilian IT contracts could pressure win rates
Execution risk on complex fixed-price and space programs; EAC exposure if delays persist
Regulatory and policy shifts around DoD contracting and service provider roles (integration/consulting debates)
Geopolitical tensions and evolving cyber threats affecting defense and civilian IT budgets