Parsons (PSN -1.40%), a global provider of technology-driven solutions for critical infrastructure, defense, and cybersecurity, released its Q2 FY2025 earnings on August 6, 2025. The company delivered mixed headline results: Non-GAAP earnings per share came in at $0.78, comfortably ahead of analyst estimates, at $0.78 versus the analyst estimate of $0.74, but GAAP revenue of $1,584 million fell short of the $1,597.7 million consensus expectation and declined year over year. Management attributed the revenue drop to reduced volume on a key confidential federal contract, but highlighted resilient growth elsewhere. Parsons raised its full-year FY2025 outlook for revenue, adjusted EBITDA, and cash flow from operating activities, indicating a confident view of its underlying business momentum.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $0.78 | $0.74 | $0.84 | (7.1%) |
| Revenue | $1,584 million | N/A | $1,670 million | (5.1%) |
| Adjusted EBITDA | $149 million | $150 million | (0.7%) | |
| Adjusted EBITDA Margin | 9.4% | 9.0% | 0.4 pp | |
| Cash Flow from Operating Activities | $160 million | $161 million | (0.6%) |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Business Overview and Focus Areas
Parsons operates at the intersection of technology and essential national needs. It delivers engineering services, defense solutions, and cyber operations primarily to government agencies, infrastructure owners, and defense clients worldwide. Its business falls into two main segments: Federal Solutions focuses on cybersecurity, intelligence, and defense, while Critical Infrastructure targets transportation systems, water, and environmental projects.
The company has strategically positioned itself in sectors with strong, sustained demand—especially cyber and intelligence, environmental remediation, and advanced transportation. Key drivers of success include its long-standing relationships with government clients, a strong acquisition track record, and investment in innovative technologies like artificial intelligence and digital transformation. Winning large contracts and growing backlog underpin its growth strategy, with sustainability and resilience remaining top priorities across its projects.
Quarter in Detail: Segment Performance, Margins, and Contract Activity
GAAP revenue declined 5% year over year, with reduced volume on a confidential federal contract dampening overall results. Excluding the impact of this contract, total revenue actually rose 13%. Organic revenue (excluding contributions from acquisitions) increased 8%. Management emphasized that cyber and transportation markets drove this underlying growth, capitalizing on robust public-sector demand and ramp-up of recent contract wins.
Federal Solutions segment revenue fell 19% to $805 million, reflecting the lower confidential contract contribution and a 20% decline in organic terms. Without the confidential contract's effect, Federal Solutions segment revenue increased 11% (8% organically), led by gains in cyber, intelligence, and aviation. However, Federal Solutions' adjusted EBITDA margin contracted to 8.3%, down from 10.4%, due to changes in contract mix and increased spending on new business pursuits and personnel, aiming for stabilization as the business mix evolves.
In contrast, Critical Infrastructure segment revenue climbed 14% to $779 million, with 8% organic growth and the rest attributed to recent acquisitions such as BCC Engineering and TRS Group. Adjusted EBITDA for Critical Infrastructure surged 73% to $82 million, and the segment's adjusted EBITDA margin expanded to 10.5%, up 3.5 percentage points year over year. This notable margin improvement in adjusted EBITDA reflected improved program performance and accretive acquisitions.
70% of Parsons’ $8.9 billion backlog is funded, the highest level since IPO. The overall book-to-bill ratio—the measure of new contract wins compared to revenue—stood at 1.0x, with nearly $8.9 billion in total backlog (up $111 million from Q2 FY2024) and a record $6.2 billion in funded backlog (70% of total). Among the major contract wins was a $176 million deal with the US Army Corps of Engineers to support ammonium nitrate facility work, a $138 million cyber operations contract, and a $134 million award for environmental remediation in Canada. The company closed on the acquisition of Chesapeake Technologies International for $89 million, expanding its defense and cyber capabilities further.
Financial Position, Cash Flow, and Capital Allocation
Operating cash flow (GAAP) held steady at $160 million, a slight decrease from $161 million in Q2 2024. However, For the first six months of FY2025, cash flow from operating activities rose 51%, reflecting improved collections and working capital management. The company finished with $411 million in cash and cash equivalents, $1.2 billion in long-term debt, and $2.5 billion in shareholders’ equity. Parsons’ net leverage remains conservative, providing flexibility for ongoing acquisitions and investments.
Share repurchases continued under a $250 million buyback authorization, reinforcing management’s intent to return capital to shareholders. The company remains focused on disciplined capital allocation, pursuing targeted acquisitions that offer both revenue growth and adjusted EBITDA margins exceeding 10% (on an adjusted, non-GAAP basis).
Guidance and Outlook
Following the quarter’s performance, Parsons increased its full-year FY2025 guidance. The revenue target moved to a new range of $6,480–$6,680 million for FY2025, up from $6,450–$6,650 million. Adjusted EBITDA guidance for FY2025 was raised to $595–$635 million, and operating cash flow is now expected to reach $400–$440 million for FY2025. This upward revision is supported by strong underlying growth, ongoing integration of acquisitions, and robust contract wins and backlog. No explicit net income guidance was provided due to volatility from deal activity and taxes.
Management stressed that the FY2025 outlook assumes confidential contract volumes track roughly with initial 2025 expectations, though the future of this work remains a source of uncertainty. Investors will want to monitor ongoing Federal Solutions margin trends, future developments concerning the confidential contract, and continued momentum in large contract awards—especially in cyber, transportation, and environmental projects. Only 2% of revenue is up for recompete in 2025.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
