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    SAIC
    Earnings call· Jan 2026(Q4 FY26)

    Science Applications International Q4 FY26 earnings call SAIC

    Mar 16, 2026 Source

    Executive summary

    SAIC Q4 FY26 — Strong Margin and Cash Flow Despite Revenue Contraction

    SAIC concluded FY26 with robust margin and cash flow performance, exceeding prior guidance, despite revenue contraction driven by procurement delays and recompete losses in the large enterprise IT market. The company is pivoting its strategy to focus on higher-margin, differentiated work and improving business development processes, aiming for double-digit adjusted EBITDA margins in FY27. Management is also undertaking a multi-year enterprise transformation to enhance efficiency and investment capacity.

    Highlights

    5

    • FY26 adjusted EBITDA margin of 9.7%, 20 bps ahead of prior guidance.

    • Q4 adjusted EBITDA margin of 10.3%.

    • Full-year free cash flow of $577 million, exceeding initial guidance by 10%.

    • FY27 adjusted EBITDA margin guidance of 10% at midpoint, the first time guiding to double-digit margin.

    • FY27 free cash flow guidance of at least $600 million, translating to over $14 per share.

    Concerns

    4

    • Q4 revenue of $1.75 billion, representing an organic contraction of approximately 6% due to procurement delays and customer disruptions.

    • Full-year revenue of $7.26 billion, declined approximately 3% organically.

    • FY27 organic revenue contraction of 2% to 4% expected, mainly due to recompete losses (approx. $400 million headwind).

    • Slower than expected ramp-up of new business wins from FY25 and FY26.

    Guidance & targets

    6
    CategoryTargetConfidence
    Total Revenue
    $7 billion to $7.2 billion
    high materiality
    High
    Adjusted EBITDA
    $705 million to $715 million
    high materiality
    High
    Adjusted Diluted Earnings Per Share
    $9.50 to $9.70
    high materiality
    High
    Free Cash Flow
    at least $600 million
    high materiality
    High
    Free Cash Flow
    at least $530 million
    medium materiality
    Medium
    Business Development Submissions
    $25 billion to $28 billion
    medium materiality
    High

    Operational metrics

    26
    Total Revenue
    $1.75 billiondown 6% organically
    Q4 FY26

    Organic contraction due primarily to $60 million year-over-year reduction from Cloud One program (no-bid) and $45 million headwind from nonrecurring software license sale in prior year Q4.

    Total Revenue
    $7.26 billiondown 3% organically
    FY26

    Organic decline primarily due to decision to no-bid low-margin Cloud One revenue (approx. $200 million headwind for the year).

    Adjusted EBITDA
    $181 millionN/A
    Q4 FY26

    Reflects strong program execution and recently enacted cost efficiency efforts.

    Adjusted EBITDA Margin
    10.3%N/A
    Q4 FY26

    Reflects strong program execution and recently enacted cost efficiency efforts.

    Adjusted EBITDA Margin
    9.7%20 bps ahead of guidance
    FY26

    Roughly 20 basis points ahead of guidance provided last quarter.

    Adjusted Diluted EPS
    $2.62N/A
    Q4 FY26

    Benefited from stronger margins and a favorable tax rate, offsetting lower revenues.

    Adjusted Diluted EPS
    $10.75N/A
    FY26

    Benefited from stronger margins and a favorable tax rate, offsetting lower revenues.

    Free Cash Flow per Share
    over $14N/A
    FY27

    Based on guidance of at least $600 million FCF.

    Free Cash Flow per Share
    approximately $13N/A
    FY28

    Based on expected FCF of at least $530 million, excluding FY27 tax benefits.

    Revenue Headwind from Recompete Losses
    approximately $400 millionN/A
    FY27

    Main driver of year-over-year revenue decline.

    Revenue from New Business Wins
    $350 millionN/A
    FY26

    Revenue from new business wins from FY25 and FY26, ramping slower than expected.

    Revenue from New Business Wins (Assumption)
    $500 millionup from $350M in FY26
    FY27

    Assumed based on reasonable assumptions, compared to potential run rate in excess of $800 million based on contract value.

    Large Enterprise IT Market Revenue Share
    17%N/A
    FY25

    Shrinking piece of the pie.

    Large Enterprise IT Market Revenue Share
    10%down from 17% in FY25
    FY27

    Expected share, with good visibility into most of the remaining portfolio.

    Cost Reduction Target
    $100 millionN/A
    N/A

    Expected to provide operational and financial flexibility to invest and improve margins.

    Nonrecurring Cash Tax Benefits
    approximately $70 millionN/A
    FY27

    From recent legislation, included in FY27 FCF guidance.

    Organic Revenue Contraction
    approximately 3%N/A
    FY26

    Related to the decision to no-bid the Cloud One contract.

    Win Rate on New Business
    50% or moreN/A
    last couple of years

    In line with or higher than industry standards.

    Win Rate on Recompetes
    85% to 90%N/A
    N/A

    Good win rates outside of commoditized enterprise IT work.

    Capital Expenditures
    roughly $35 millionsimilar to last year
    FY27

    Adequate to meet current demand signals; flexible to increase if customer demand ramps up production.

    On-Contract Growth (OCG)
    2% to 3%consistent with last year
    FY27

    Assumed in current baseline guide for FY27, not expecting things to get worse.

    Defense Budget
    $1 trillion-plusN/A
    N/A

    Supportive budget environment with large appropriations already in place and expectations for further growth.

    Cloud One Revenue Headwind
    $60 millionyear-over-year reduction
    Q4 FY26

    Low-margin revenue from program SAIC decided to no-bid.

    Nonrecurring Software License Sale Headwind
    $45 millionyear-over-year headwind
    Q4 FY26

    Related to a nonrecurring software license sale in the prior year fourth quarter.

    Cloud One Revenue Headwind
    approximately $200 millionN/A
    FY26

    Headwind for the full year due to decision to no-bid low-margin revenue.

    Total Employees
    23,000N/A
    N/A

    Mentioned in context of internal transformation initiative.

    Orderbook & backlog

    1
    Trailing 12-month book-to-bill1.1Q4 FY26

    N/A

    N/A

    Deals & partnerships

    1
    SilveredgeAcquisition of intellectual property and capabilities to serve intelligence customers with AI enablement in classified networks.a couple of hundred million

    Acquired for intellectual property and capabilities, particularly for AI enablement in classified networks for intelligence customers. Funded off balance sheet.

    Risks & headwinds

    5
    Procurement delays and customer disruptionsQ4 FY26

    Q4 revenue below initial expectations, organic contraction of approximately 6%.

    Mitigation: N/A

    Recompete losses in large enterprise IT marketFY27

    Approximately $400 million headwind in FY27, driving 2% to 4% organic contraction.

    Mitigation: Deemphasizing commoditized IT work, focusing on higher-margin, differentiated work, improving BD processes, and leveraging strong win rates in non-enterprise IT.

    Slower than expected ramp-up of new business winsFY27 (next 12-18 months)

    Revenue from new business wins was $350 million in FY26, compared to potential run rate in excess of $800 million. Assumed $500 million in FY27.

    Mitigation: Engaging with customers at highest levels, strong pipeline, alignment with customer priorities, supportive budget environment.

    Budget uncertainty and resource-constrained customer procurementOngoing

    Lingering effects causing slower ramp-up of new business wins.

    Mitigation: Actively engaging with customers, anticipating year-end flush of appropriations, focusing on speed and innovation in contracting.

    Volatility in recompete win rates for enterprise ITOngoing

    Hard to differentiate on predominantly cost-plus work, sometimes magic is in proposal writing.

    Mitigation: Consciously no-bidding low-margin, commoditized work (e.g., $200 million Cloud One revenue), focusing on areas with clear differentiation.

    What to watch in Q1 FY27

    4

    Ramp-up of new business wins

    Next 12-18 months (check Q1/Q2 FY27 for initial progress)
    Current$350 million in FY26, assumed $500 million in FY27
    TargetProgress towards potential run rate in excess of $800 million

    Why it matters

    This is a meaningful tailwind that could offset recompete losses and drive growth beyond current guidance.

    Total revenue from these programs was $350 million in FY '26, and we are assuming $500 million in FY '27 based on reasonable assumptions. This compares to a potential run rate in excess of $800 million based on contract value and period of performance. While there is potential downside should some of this ramp not materialize, we believe that on balance, the upside scenario is more likely over the next 12 to 18 months based on customer demand and support of budgets. This could be a meaningful tailwind.

    Q&A highlights

    7

    What is the single most significant portfolio pivot required for the next 10 years of government budget priorities, and how does SAIC address past growth issues like recompetes?

    Jim Reagan emphasized focusing on areas with a "right to win" and where customer retention is high, deemphasizing commoditized, cost-plus IT work. He highlighted leveraging Silveredge's IP and AI capabilities for intelligence customers. He noted that a full strategic reassessment is ongoing.

    “the first thing that I think that we needed to do, and I think of it as a bit of a pivot is to get focused on those areas where we have the right to win and those areas where customer retention is the reward for innovation and strong performance.”

    asked by Jeremy Jason · answered by James Reagan

    2 min read6 chapters

    Detailed Narrative

    01

    Leadership Transition and Strategic Focus

    Jim Reagan's appointment as permanent CEO emphasizes continuity and deep industry knowledge. His focus is on sharpening SAIC's portfolio, improving internal processes, and driving better results, particularly by being more selective in business development to pursue opportunities with a higher "right to win" and better margins.

    02

    Enterprise IT Portfolio Shift

    SAIC is strategically deemphasizing commoditized, cost-plus enterprise IT work, which has been a drag on results and differentiation. This segment is shrinking from 17% of FY25 revenues to an expected 10% in FY27, allowing resources to be reallocated to higher-margin, mission-focused IT and engineering solutions where SAIC can differentiate and achieve higher win rates.

    03

    Margin Expansion and Cost Efficiency

    The company achieved a 9.7% adjusted EBITDA margin in FY26, exceeding guidance, and is guiding to a double-digit margin of 10% at the midpoint for FY27. This is supported by strong program execution, cost efficiency efforts, and a multi-year enterprise transformation initiative aimed at streamlining processes and eliminating outdated procedures to create a more agile organization.

    04

    Cash Flow Resilience and Capital Deployment

    Despite revenue pressures, SAIC demonstrated strong free cash flow generation, exceeding initial guidance by 10% in FY26 with $577 million. The company expects to generate at least $600 million in free cash flow in FY27, including a $70 million cash tax benefit, and is committed to deploying this capital to maximize long-term shareholder value.

    05

    Business Development and Pipeline Discipline

    SAIC has hired a new Chief Growth Officer to prioritize business development, aiming for $25 billion to $28 billion in FY27 submissions focused on higher-return efforts. The company expects its trailing book-to-bill ratio to improve over the year as it shifts from defense to offense in captures, leveraging strong win rates in non-enterprise IT work.

    06

    Investment in Innovation and Talent

    SAIC is investing in areas with clear demand signals, such as expanding production capacity on key programs and enhancing innovation in mission-critical areas like AI enablement in classified networks. This includes strategic acquisitions like Silveredge for intellectual property and capabilities, and attracting key talent to refresh organizational structure and capabilities.

    AI-generated summary of the company’s earnings call. Not investment advice.