Why is FY27 CapEx guidance only $35 million, similar to last year, given opportunities for investment in a changing environment?

Jim Reagan stated current CapEx is adequate for existing demand, but SAIC is prepared to increase plant capacity and tooling if customers signal demand for ramped-up production. Prabu Natarajan added that $100 million in cost reductions free up capacity for non-CapEx investments (talent, BD, Mission Labs, Silveredge acquisition). “we have a flexible business model, and we're in active discussions with customers about what they might see as the need to ramp up production on certain programs. And to the extent that we get the demand signals... we're prepared to increase the plant capacity, increase space, spend money on tooling to meet those demands.”

How long will it take for the sharpened BD process to convert into revenue, and what is the short-term opportunity for organic growth?

Jim Reagan noted sales cycles are long, but win rates on new work are in line with expectations. With less recompete exposure in FY27, SAIC expects to achieve the necessary book-to-bill for growth. Prabu Natarajan added that the FY27 guide assumes 2-3% OCG, similar to last year, with potential upside from enacted budgets. Win rates on non-enterprise IT work are 50%+ for new business and 85-90% for recompetes. “our win rates on new work in the year and in the most recent quarters has been in line with our expectation and industry averages. So I think that we're really pleased with that. And with less exposure in FY '27 to the large recompetes like we had some significant exposure last year. I feel really good about our ability to achieve the kind of book-to-bill that we need to get us back on a growth trajectory.”

What changed regarding enterprise IT work (SAIC decision vs. competitive landscape)? How will the $25 billion pipeline enable SAIC to play offense?

Jim Reagan explained that some customers are buying based on "cookie-cutter" recipes for commoditized IT, where differentiation is hard. SAIC is deemphasizing this and focusing on mission-focused IT. Prabu Natarajan clarified that the decision to be selective on cost-plus enterprise IT was a conclusion reached over several months, driven by difficulty differentiating and low win rates in those areas. The pipeline is inflecting towards higher levels of non-EIT work, with more takeaway opportunities. “I think it's just a recognition that we've come to. We also had perhaps more of that enterprise IT work in our pipeline 5 years ago than we do today. So that's been a gradual evolution. Our decision to consciously no bid $200 million of compute and store as part of Cloud One... that is not the kind of work we want to be doing long term.”

SAIC

Science Applications International (SAIC) Q4 FY26 earnings call: guidance and Q&A

Earnings call· Jan 2026 (Q4 FY26)· Information Technology· Mar 16, 2026

Source: earnings call transcript

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

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

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

Category	Target	Timeline	Confidence
Total Revenue	$7 billion to $7.2 billion high materiality	FY27	High
Adjusted EBITDA	$705 million to $715 million high materiality	FY27	High
Adjusted Diluted Earnings Per Share	$9.50 to $9.70 high materiality	FY27	High
Free Cash Flow	at least $600 million high materiality	FY27	High
Free Cash Flow	at least $530 million medium materiality	FY28	Medium
Business Development Submissions	$25 billion to $28 billion medium materiality	FY27	High

SAIC operating KPIs by quarter

SAIC operating KPIs stated on its earnings calls, by fiscal quarter
KPI	This call Jan 2026 Q4 FY26	Apr 2026 Q1 FY27	Jul 2026 Q2 FY27	Change vs prior quarter
Book-to-bill ratio	—	1.1 ratio This resulted in a quarterly book-to-bill of 1.1x or 1.0x on a trailing 12-month basis. Source: earnings call transcript	0.6 ratio This resulted in a quarterly book-to-bill of 0.6,x, or 0.8x on a trailing 12-month basis. Source: earnings call transcript	-45.5%
Employees	23K I think at least once or twice every week, I get an e-mail from one of our 23,000 employees applauding what we're doing and giving me some real-life examples of things that we could do differently to help them get their jobs done easier. Source: earnings call transcript	23K I want to recognize our 23,000 employees whose relentless commitment to execution excellence made these results possible sustaining strong margins and industry-leading cash flow reflects the team's discipline and focus in a dynamic environment. Source: earnings call transcript	—	0%

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Orderbook & backlog

Trailing 12-month book-to-bill 1.1 Q4 FY26

N/A

Deals & partnerships

Silveredge Acquisition 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

Procurement delays and customer disruptions Q4 FY26

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

Mitigation:N/A

Recompete losses in large enterprise IT market FY27

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 wins FY27 (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 procurement Ongoing

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 IT Ongoing

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

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

Target Progress 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.

Find out whether SAIC delivers this. Inve re-checks your case every morning.

Q&A highlights

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 read 6 chapters

Detailed narrative

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.

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.

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.

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.

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.

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.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.