Science Applications International Corp. (SAIC) reported preliminary fourth‑quarter and full‑year 2026 results that fell short of revenue expectations but exceeded profitability targets. Q4 revenue was $1.745 billion, down 1.5% from the prior year’s $1.77 billion, and full‑year revenue totaled $7.26 billion, a 2.4% decline from FY2025’s $7.48 billion. Adjusted EBITDA for the year was $705 million, up 0.5 billion from the $710 million reported in FY2025, and the adjusted EBITDA margin rose to 9.7% from 9.5% in the prior year. Free cash flow reached $570 million, a 14% increase over FY2025’s $499 million.
The revenue shortfall was driven by a combination of procurement delays and two unfavorable recompete award decisions that reduced the company’s government‑contract pipeline. A brief 2025 government shutdown and adverse weather conditions further dampened demand for certain services. These headwinds offset the modest growth in the company’s higher‑margin technology‑transformation work, which has been a strategic focus for the past two years.
Despite the revenue miss, SAIC’s profitability beat expectations thanks to disciplined cost management and a lower effective tax rate. The company’s shift toward higher‑margin technology‑transformation contracts has improved its mix, allowing it to maintain a 9.7% adjusted EBITDA margin even as top‑line growth slowed. The 20% year‑over‑year increase in free cash flow reflects the company’s ability to convert operating cash from its core services while keeping discretionary spending in check.
In its updated FY2027 outlook, SAIC lowered full‑year revenue guidance to $7.0 billion–$7.2 billion, a 5% cut from the prior $7.35 billion–$7.55 billion range. The company also raised its adjusted EBITDA margin target to 9.9%–10.1% from 9.5%–9.7%, signaling confidence that cost controls and the higher‑margin mix will continue to drive profitability. Management cited ongoing procurement uncertainty and the impact of the recent recompete losses as the primary reasons for the revenue cut, while emphasizing its focus on maintaining margin expansion.
The market reacted negatively to the guidance revision, with SAIC’s shares falling 4.12% after the announcement. Investors were most concerned about the lower revenue outlook, which they viewed as a sign of continued procurement headwinds, even though the company’s margin expansion and cash‑flow performance were strong.
Management highlighted the company’s disciplined execution, noting that “our focus on cost discipline and strategic investments in high‑return verticals has allowed us to sustain profitability amid a challenging procurement environment.” The statement underscored confidence in the company’s ability to navigate short‑term revenue pressure while pursuing long‑term growth in technology‑driven services.
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