Executive Summary
Booz Allen Hamilton (BAH) delivered a mixed QQ2 2026 performance characterized by bifurcated demand across its portfolio. Revenue of 2.89 billion USD declined 8.15% year over year and 1.16% quarter over quarter, driven by a 22% year-over-year drop in the Civil segment (excluding discrete items) while the National Security portfolio expanded 5% YoY. Gross bookings reached 7.2 billion USD with net bookings of 4.8 billion USD, and total backlog climbed to 40.0 billion USD, up 3% YoY. Funded backlog rose 34% sequentially to about 5.0 billion USD but was down 6% YoY, signaling improved near-term visibility but continued mix-driven margin pressure given Civil’s higher fixed-price content.
Management acknowledged a historically bifurcated market where Civil funding cycles remain slow and uncertain, while National Security is more resilient though still subject to funding frictions and CR dynamics. As a result, Booz Allen revised FY26 guidance down across all key metrics: revenue of 11.3–11.5 billion USD, adjusted EBITDA margins in the mid-teens (stated as mid-10% range in the call materials), ADEPS of 5.45–5.65, and free cash flow of 850–950 million USD. The company plans to accelerate its VoLT framework, double down on growth vectors (cyber, AI including Agentic and edge AI, war-fighting tech, critical national security programs), and implement a net incremental ~150 million USD annualized cost reduction to protect near-term profitability and fund core technology investments. The near-term hurdle remains government shutdown risk and protracted procurement cycles, but management conveyed confidence in longer-term margin recovery and growth as these structural initiatives play out into FY2027 and beyond.
Key Performance Indicators
QoQ: 10.12% | YoY:-48.41%
QoQ: -34.94% | YoY:-55.14%
QoQ: -34.56% | YoY:-52.98%
Key Insights
Revenue: 2.89B, YoY -8.15%, QoQ -1.16% (gross revenue); Gross profit: 1.55B, Gross margin ~53.6%; Operating income: 283M, margin ~9.8%; Net income: 175M, EPS 1.42; Adjusted EBITDA: 324M, margin 11.2%; H1 adjusted EBITDA margin: 10.9%; Backlog: 40.0B (+3% YoY); Funded backlog: ~5.0B (+34% sequential; -6% YoY); Gross bookings: 7.2B; Net bookings: 4.8B; Book-to-bill: 1.7x (TTM 1.1x; ex ceiling removal >2.0x); Pipeline: ~25B; Cash: 816M; Net debt: ~3.1B; Net leverage (TTM EBITDA): 2.5x; Free cash...
Financial Highlights
Revenue: 2.89B, YoY -8.15%, QoQ -1.16% (gross revenue); Gross profit: 1.55B, Gross margin ~53.6%; Operating income: 283M, margin ~9.8%; Net income: 175M, EPS 1.42; Adjusted EBITDA: 324M, margin 11.2%; H1 adjusted EBITDA margin: 10.9%; Backlog: 40.0B (+3% YoY); Funded backlog: ~5.0B (+34% sequential; -6% YoY); Gross bookings: 7.2B; Net bookings: 4.8B; Book-to-bill: 1.7x (TTM 1.1x; ex ceiling removal >2.0x); Pipeline: ~25B; Cash: 816M; Net debt: ~3.1B; Net leverage (TTM EBITDA): 2.5x; Free cash flow (quarter): 395M; Share repurchases: 208M; Dividends: 68M; Dividend per share: 0.55; Guidance: Revenue 11.3–11.5B; ADEPS 5.45–5.65; Adjusted EBITDA ~1.19–1.22B; Free cash flow 850–950M.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
2.89B |
-8.15% |
-1.16% |
| Gross Profit |
1.55B |
-13.12% |
3.26% |
| Operating Income |
283.00M |
-48.41% |
10.12% |
| Net Income |
175.00M |
-55.14% |
-34.94% |
| EPS |
1.42 |
-52.98% |
-34.56% |
Management Commentary
- Strategy and market dynamics: The leadership described a bifurcated market, with Civil exposed to the most challenging funding environment in a generation and National Security showing stronger demand, albeit with funding friction and slower ramp-ups. Horacio Rozanski emphasized that “the reacceleration of our business will take longer than we expected when we spoke last quarter,” underscoring near-term softness despite longer-term growth prospects. (Transcript, Horacio Rozanski)
- Growth vectors and priorities: Management reiterated a three-part strategic framework: (1) cost reduction via AI-enabled internal efficiencies and a leaner senior structure; (2) targeted investment in growth areas (cyber, AI/Agentic, war-fighting tech, critical national security programs, tech ecosystem partnerships and quantum/6G); (3) transition to outcome-based contracting and productized solutions to improve pricing and margins (VoLT). (Transcript, Horacio Rozanski; Transcript, Matthew Calderone)
- Financial performance and outlook: CFO Matt Calderone highlighted the dip in civil revenue and persistently slower funding cycles as the key driver of revised FY26 guidance, noting that civil revenue is forecast to decline in the low-20s percentage for the year. He also called out funded backlog and pipeline strength as indicators of latent demand, while warning that the company does not anticipate a quick reacceleration. (Transcript, Matthew Calderone)
- Near-term profitability dynamics: The company expects margin pressure in the second half due to contract write-ups, seasonality, and mix shift away from Civil, partially offset by cost actions and the shift to outcome-based contracts. Horacio and Kristine Anderson stressed that margin normalization would likely occur in FY2027 as the cost actions amplify growth potential in high-value segments. (Transcript, Horacio Rozanski; Transcript, Kristine Anderson)
- Capital allocation and shareholder returns: Booz Allen returned ~208 million USD in share repurchases and 68 million USD in dividends in the quarter, while approving a higher share repurchase authorization of 880 million USD. This reflects management’s confidence in cash flow generation and capital discipline amid a volatile macro backdrop. (Transcript, Matthew Calderone)
"The reacceleration of our business will take longer than we expected when we spoke last quarter."
— Horacio Rozanski
"Our focus going forward will be on 3 areas: doubling down on areas of our business where we see significant growth potential, working with our customers to convert how the solutions we build are bought in a more commercially oriented outcomes-based approach and restructuring our business to take out a net incremental $150 million of cost on an annualized basis."
— Matthew Calderone
Forward Guidance
- Updated FY26 guidance reflects a slower funding environment and a continued bifurcation between Civil and National Security. Revenue expected at 11.3–11.5B USD; Adjusted EBITDA margin targeted in the mid-10% range; ADEPS 5.45–5.65; Free cash flow 850–950M. The guide assumes current funding trends persist through year-end, with on-contract and new award growth lagging historical norms. We model a modest headwind from the government shutdown (roughly $30M in revenue and $15M in profit at midpoint) should the shutdown extend into November. (Earnings Call and Slide 7)
- Achievability assessment: The backlog and pipeline suggest durable demand, particularly in National Security. However, Civil remains the primary near-term drag. Margin recovery is expected as cost reductions take hold and as fixed-price/cost-plus mix shifts in favor of more efficient, outcome-based models. Investors should monitor: funded backlog progression, new award timing, government funding cycles, civil procurement pricing pressure, and the pace of transition to fixed-price/outcomes-based contracts. (CEO and CFO commentary in call)