Science Applications (SAIC) Q4 2025 Earnings Report

Revenue (Q4 2025): $1.838B, up 6% YoY; Gross margin: 12.6% (gross profit $232M); Operating margin: 7.5% (operating income $138M); EBITDA: $172M (EBITDA margin ≈9.36%); Net income: $98M (net margin ≈5.33%); EPS (GAAP): $1.97; Diluted EPS: $2.00; Weighted avg shares: 49.75M (non-dd); Cash flow from operations: $115M; Free cash flow (Q4): $100M; Free cash flow per share: ≈$10; FY2025 revenue: $7.48B; FY2025 EBITDA: $710M (EBITDA margin ≈9.5%); FY2026 revenue guidance: $7.60–$7.75B; EBITDA margin guidance: 9.4–9.6%; Free cash flow guidance: $510–$530M (≈$11/sh); Backlog/submitted bids: backlog >$20B; submitted bids: $28B in FY2025; 2H recovery implied by recompete tailwinds; Debt and liquidity: total debt $2.39B; net debt $2.337B; cash & equivalents $56M; current ratio 0.83; ROE 6.21%; ROA 1.87%; D/E ≈1.52; P/E ≈13.7x; P/FCF ≈53.9x.

- Strategy and market conditions: Government focus on accelerating tech deployment and outcome-based contracting; management expects procurement environment to emphasize mission-critical IT and cloud/AI capabilities. SSLE win and a $28B bid pipeline underpin a path to higher bookings. - Operational performance: Q4 revenue up 6% YoY; full-year organic growth at 3.1%; Q4 adjusted EBITDA margin near 9.6%; full-year EBITDA margin 9.5% with favorable incentive compensation vs prior year. - Growth and capital allocation: Commercial sector expanding (target ≈$100M by FY2028; DevSecOps as flagship offering). Discussion of moving cost-plus programs toward fixed-price where feasible, with potential margin uplift and guardrails (service level agreements) to manage risk. - Backlog, bookings, and guidance: Net bookings Q4 $1.3B; FY2025 bookings $6.6B; backlog of submitted bids >$20B; target book-to-bill 1.2 by 1H FY2026; FY2026 revenue guidance and long-range margin/FCF targets reiterated. - Risks and uncertainties: CR environment, recompete headwinds (≈2% revenue headwind from NASA exit), ~$200M headwind from no-bid Air Force CloudOne revenue, procurement delays, and ongoing normalization with new administration; management emphasizes mission-critical focus and execution discipline as mitigants.

SAIC enters FY2026 with a solid earnings trajectory underpinned by a strong backlog, a diversified mix of mission-critical IT services, and a clear plan to improve margins through disciplined fixed-price transitions and ongoing cost optimization. The guidance implies mid-single-digit organic growth and a deliberate margin uplift of ~10 bps in FY2026, with further improvement possible in FY2027 as recompete activity evolves and the company accelerates the adoption of fixed-price contracts. The company’s cash generation remains robust, with FCF guidance of ~$11 per share in FY2026 and ~$12 in FY2027, enabling meaningful buybacks and strategic M&A capacity. Management also highlighted the expanding commercial IT footprint (DevSecOps) and the potential to leverage digital engineering in space and defense programs, which could broaden SAIC’s total addressable market over time. Key considerations for investors include: (1) the trajectory of the book-to-bill toward the target of 1.2 in 1H FY2026, (2) the pace and profitability of the fixed-price transition across cost-plus programs, (3) the evolution of the NASA recompete headwinds and other recompete timing, and (4) the government’s approach to efficiency initiatives and civil-defense budget allocation. Compared with peers (CACI, Leidos, L3Harris, LDOS, EXLS, ASGN), SAIC’s valuation metrics (P/E around 13–14x, EV/EBITDA ≈ 44–45x) reflect a stable, growth-oriented government IT services franchise with scope for margin expansion, albeit with higher government-cyclicality risk. Overall, a constructive long-term posture with moderate upside risk given execution discipline, backlog visibility, and a scalable commercial IT expansion.