Booz Allen Hamilton Holding Corporation (BAH) Earnings & Analysis

Latest quarter

Booz Allen reported Q2 FY2027 revenue below the consensus, although both the reported figure and the estimate rounded to $2.8 billion. Adjusted earnings per share were $1.76, above the $1.44 consensus.

Revenue declined from $2.9 billion a year earlier. CFO Troy Lahr attributed much of the decline to lower billable expenses; he said revenue excluding those expenses was down less than 1%. Civil revenue fell as follow-on contracts became smaller and new program starts slowed, while national security revenue grew.

The company reported diluted earnings per share of $1.50, compared with $1.42 a year earlier. Lahr said adjusted earnings benefited from profit growth, a reduced share count, a lower tax rate and a $10 million divestiture earn-out.

Gross margin declined to 52.0% from 53.6%, and operating margin fell to 8.82% from 9.79%. Free cash flow was $263.0 million, down from $395.0 million a year earlier; Lahr attributed the quarter’s cash generation to collections.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Horacio Rozanski said demand for advanced technology remained high despite uncertainty around federal budgets and funding. In the question-and-answer session, he said Booz Allen was watching how the continuing resolution and reliance on base-budget funding would play out. He also said some civil procurements and award decisions were being delayed, making bookings harder to predict.

Asked about civil contracts, President and COO Kristine Martin Anderson said smaller recompetes generally reflected less funding for the same activities rather than large sections of work being removed. She said Booz Allen was largely through those transitions and had no significant recompetes remaining for the fiscal year. CFO Troy Lahr said national security funded backlog gave him confidence in the growth anticipated in the latter part of the year.

Rozanski said the company was investing in cyber and defense technology, including its Velox product suite. He said the Guile cyber product was in private beta with government and commercial customers. Asked about the suite, he said the products were still early in development and that their promise would play out over years rather than quarters.

On margins, Rozanski said profit should grow faster than revenue over the next couple of years, pointing to outcome-based contracts and reusable technology. He described the contract shift as “a bet on ourselves and our ability to deliver excellent quality while continuing to drive the cost curve.” Lahr said the separation of growth from headcount would be gradual as products and technology became a larger part of the business.

Lahr said Booz Allen was integrating Ultra with its defense technology business. Asked about the acquisition’s contribution, he described its sales impact in the quarter and guidance as immaterial and said it offset civil pressure. For the next two quarters, he said civil revenue was expected to be flat to slightly down sequentially.

Guidance

For FY2027, Booz Allen raised its adjusted earnings guidance to $6.50 to $6.70 per share. Lahr said the range incorporates an investment gain, the divestiture earn-out and a lower expected tax rate.

Lahr said the company raised the bottom of its adjusted EBITDA range and anticipated a second-half margin step-down from seasonality and investment spending. Booz Allen also raised the floor of its free cash flow outlook, with a revised range of $850.0 million to $925.0 million.