Booz Allen Hamilton (BAH -1.80%), a major provider of technology consulting services to the U.S. government, released its results for the first quarter of fiscal 2026 on July 25, 2025. Revenue was $2.92 billion for the period, falling short of the $3,102.40 million (GAAP) expected by analysts. Adjusted diluted EPS reached $1.48, also below estimates of $1.60. Management stated that results were aligned with internal targets, bolstered by strong defense and intelligence growth. However, a sharp drop in the civil segment and ongoing headcount reductions signaled near-term challenges. Overall, the quarter highlighted the company’s resilience in core areas but also the impact of spending cuts and shifting government priorities.
| Metric | Q1 FY26(Three Months Ended June 30, 2025) | Q1 Estimate(Three Months Ended June 30, 2025) | Q1 FY25(Three Months Ended June 30, 2024) | Y/Y Change |
|---|---|---|---|---|
| Revenue | $2.92 billion | $3.10 billion | $2.94 billion | (-0.7%) |
| Adjusted Diluted EPS | $1.48 | $1.60 | $1.38 | 7.2% |
| Adjusted Net Income | $184 million | $180 million | 2.2% | |
| Adjusted EBITDA | $311 million | $302 million | 3.0% | |
| Free Cash Flow | $96 million | $20 million | 380.0% |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q4 2025 earnings report.
Company Overview and Recent Focus
Booz Allen Hamilton is an advanced technology company delivering outcomes for the nation's most critical defense, civil, and national security priorities. The company works across defense, intelligence, and civil sectors, helping clients modernize, digitize, and secure critical systems. With a strong presence in both advanced technology fields and traditional consulting, the firm remains a key partner for federal modernization efforts.
In recent years, Booz Allen Hamilton has sharpened its focus on artificial intelligence (AI), cybersecurity solutions, and digital transformation. Success hinges on winning government contracts, innovating in tech-driven fields, and maintaining strong compliance and risk management. Human capital—especially staff with technical expertise and security clearances—remains central to the firm's ability to deliver for clients.
Quarterly Highlights and Developments
The quarter's headline news was a revenue figure that declined 0.6% year-over-year, missing analyst estimates by a sizable margin. Most of this shortfall came from the civil segment, where revenue fell 13.3% year over year. Management had anticipated "a low double-digit decline" for civil business in FY2026.
In contrast, the defense and intelligence segments both posted solid growth. Defense revenue (GAAP) increased 6.8% to $1,517 million compared to Q1 FY2025. Intelligence revenue increased 5.9% to $484 million compared to Q1 FY2025. These units benefited from steady client demand and a heightened emphasis on advanced capabilities like AI and cybersecurity. For example, management reported that its AI business reached approximately $800 million in annual revenue for FY2025, reflecting an over 30% growth rate in that area in FY2025. Strategic partnerships with technology companies such as NVIDIA remained a part of Booz Allen Hamilton's technology approach during the period.
The firm ended the quarter with a record backlog of $38.3 billion, up 10.7% from the same period last year (Q1 FY2025). Book-to-bill, a measure of orders received against revenue billed, reached 1.42 for the quarter. However, it's notable that the portion of backlog that was actually funded declined, while unfunded and priced option elements grew from June 30, 2024 to June 30, 2025. This contract mix, which included a higher share of cost-reimbursable agreements, could affect margins in future periods.
Profitability metrics showed positive trends. Adjusted net income was up 2.2%, and, adjusted EBITDA increased 3.0% compared to Q1 FY2025. Free cash flow (non-GAAP) rebounded to $96 million, compared to $20 million in Q1 FY2025. The company repurchased 1.1% of its shares, spending $181 million on buybacks during the quarter. It also declared a $0.55 per share quarterly dividend. These moves highlight continued capital return even during a period of operational challenge and transition for the business.
Booz Allen Hamilton’s service portfolio includes AI-powered software systems, cybersecurity services, and cloud migration solutions. With AI now embedded in most client projects—including tactical military applications and enterprise-scale modernization efforts—the company’s investment in new technologies is central to its long-term plans. It continued to invest in research, partnerships, and upskilling staff, especially in preparation for future U.S. government procurement cycles that will increasingly prioritize commercial technology and outcome-based contracts—agreements that pay based on results rather than effort or input.
Outlook and What to Watch
Management reaffirmed its full-year forecast for FY2026. It projects revenue in the $12.0–$12.5 billion range with flat to 4% growth for FY2026, adjusted EBITDA of $1.315–$1.370 billion (at an ~11% margin) for FY2026 (non-GAAP guidance), and adjusted diluted EPS of $6.20–$6.55 for FY2026. The company expects free cash flow (non-GAAP) of $900–$1,000 million for FY2026. Guidance for FY2026 reflects a cautious tone for the first half, with expectations for activity and hiring to pick up later in the year as government procurement accelerates, particularly in defense and intelligence. No reduction in the dividend was announced; the current quarterly payout remains at $0.55 per share.
Investors and observers should watch for signs of recovery in the civil segment, progress converting backlog to revenue, and evolving government procurement frameworks that could impact both contract revenue and margins. Other areas to monitor include further shifts in contract mix, ongoing workforce adjustments, and how Booz Allen Hamilton continues to invest in and deploy advanced technologies to match mission needs.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
