SAIC Lifts Full-Year Outlook Amid Strong Contract Wins and Robust Free Cash Flow
Backlog Nears $24 Billion as SAIC Secures Notable Federal Awards
Science Applications International Corporation (SAIC) reported third-quarter fiscal 2026 results showing both headwinds and bright spots. Revenue for the quarter dropped 6% year-over-year to $1.87 billion, driven by contract ramp-downs and an estimated $16 million impact from a government shutdown. However, the company’s robust contract win rate propelled net bookings to $2.2 billion for the quarter and $7.2 billion year-to-date. SAIC's total estimated backlog has grown to approximately $23.79 billion, with $3.82 billion funded. A book-to-bill ratio of 1.2 signals healthy demand and positions SAIC for continued stability in its core government and defense markets.
| Backlog Breakdown | October 31, 2025 | January 31, 2025 |
|---|---|---|
| Funded Backlog | $3,823M | $3,444M |
| Negotiated Unfunded Backlog | $19,965M | $18,413M |
| Total Backlog | $23,788M | $21,857M |
Operational Margins Show Resilience, Despite Revenue Pressure
Operating income fell 20% to $128 million and net income slipped 26% to $78 million. Despite these declines, SAIC delivered an adjusted EBITDA margin of 9.9%, just 0.1 percentage points lower than the year-ago quarter, highlighting disciplined cost controls and contract mix resilience.
| Key Financials (Q3 FY26) | October 31, 2025 | November 1, 2024 | % Change |
|---|---|---|---|
| Revenues ($M) | 1,866 | 1,976 | -6% |
| Operating Income ($M) | 128 | 160 | -20% |
| Net Income ($M) | 78 | 106 | -26% |
| Adjusted EBITDA Margin | 9.9% | 10.0% | -0.1pp |
| Free Cash Flow ($M) | 135 | 9 | +1,400% |
| Adjusted Diluted EPS | 2.58 | 2.61 | -1% |
Cash Generation and Shareholder Returns Stand Out
Free cash flow soared to $135 million from $9 million in the year-ago quarter. The company put this capital to work by returning $120 million to shareholders through $94 million in share repurchases and $17 million in cash dividends. Management announced another quarterly dividend of $0.37 per share, payable in January, underscoring their commitment to consistent capital returns.
Full-Year Guidance Raised Amid Confidence in Pipeline
Reflecting confidence in its operational execution and pipeline, SAIC raised several key metrics for its full-year fiscal 2026 outlook. The company now expects revenue of $7.275–$7.325 billion (ticking up the lower end), adjusted EBITDA near $695 million (up from $680–$690 million prior), an adjusted EBITDA margin of approximately 9.5%, and adjusted diluted EPS between $9.80–$10.00, compared to prior guidance of $9.40–$9.60. Free cash flow is projected at greater than $550 million.
| FY26 Guidance | Current | Prior |
|---|---|---|
| Revenue | $7.275B – $7.325B | $7.250B – $7.325B |
| Adjusted EBITDA | ~$695M | $680M – $690M |
| Adjusted EBITDA Margin | ~9.5% | 9.3% – 9.5% |
| Adjusted Diluted EPS | $9.80 – $10.00 | $9.40 – $9.60 |
| Free Cash Flow | >$550M | >$550M |
Contract Awards Span Key National Priorities
The latest quarter featured significant new and recompete awards across all major segments. Notable contracts included a $1.4 billion Air Force engineering task order, a $413 million Army OSINT contract, $515 million in Space and Intelligence awards, and multiple Navy and Naval Undersea Warfare Center wins totaling over $400 million. These awards are expected to fuel backlog conversion and revenue stability.
Acquisition and Strategy Updates Support Growth
SAIC completed its $203 million acquisition of SilverEdge Government Solutions, broadening its capabilities in IP-based solutions and furthering its digital transformation agenda. This move reflects ongoing investments in advanced mission technology for core government customers.
Sector Margins Reflect Portfolio Strength
| Segment | Revenue ($M) | Adj. Operating Margin |
|---|---|---|
| Defense & Intelligence | 1,439 | 8.2% |
| Civilian | 427 | 14.5% |
While Defense and Intelligence revenues slipped 5%, Civilian margins surged to 14.5% on improved profitability. Management noted progress in driving margin improvement, particularly across its Civilian contracts, and continued focus on portfolio optimization.
Key Takeaway: Cash Generation, Bookings, and Guidance Lift Underscore Resilience
SAIC is navigating headwinds in top-line growth but is demonstrating its ability to manage costs, drive free cash flow, and win critical contracts that secure future revenues. The raised full-year guidance and a fortified backlog give investors and stakeholders reasons to monitor how the new CEO’s growth strategy translates into sustained value creation over the next year. The strong capital deployment and consistent dividends remain core pillars as SAIC works to deliver on its digital transformation mission for government clients.
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