Sign in

You're signed outSign in or to get full access.

AI

ASGN Inc (ASGN)·Q2 2025 Earnings Summary

Executive Summary

  • Revenues of $1.02B were above the high end of guidance; Adjusted EBITDA margin was 10.6% at the top end of expectations, with IT consulting mix rising to 63% of total revenue .
  • Versus Wall Street consensus (S&P Global), ASGN delivered a revenue beat ($1,020.6mm vs $996.6mm*) and an adjusted EPS beat ($1.17 vs $1.08*), aided by strong commercial consulting and ~$10mm higher-than-expected federal license revenue . Values retrieved from S&P Global*.
  • Gross margin compressed 40 bps YoY to 28.7% (federal license mix and DOGE-related loss of higher-margin work), while commercial gross margin expanded 30 bps on mix shift to consulting .
  • Q3 2025 guidance implies sequential revenue stability with a higher midpoint and margin expansion (Adj. EBITDA margin 10.9–11.2%); management highlighted an upcoming Investor Day and federal budget tailwinds as catalysts .

What Went Well and What Went Wrong

  • What Went Well

    • IT consulting growth and mix: Consulting revenues rose to $638.2mm (63% of revenue) from $590.5mm (57%) YoY; commercial consulting +15.7% YoY to $325.7mm, aided by TopBloc .
    • Bookings strength: Commercial consulting bookings were $417.5mm in Q2 (TTM book-to-bill 1.2x), winning larger, multi-capability deals; federal TTM book-to-bill at 1.1x with backlog >$2.9B .
    • Free cash flow and capital allocation: FCF of $115.8mm (~107% of Adj. EBITDA conversion) and $9.5mm repurchases (200k shares) with ~$470mm remaining authorization .

  • What Went Wrong

    • YoY revenue/margin decline: Revenue down 1.4% YoY; consolidated gross margin -40 bps YoY to 28.7% driven by low-margin federal license revenue and DOGE impacts .
    • Assignment revenue softness: Assignment revenues fell to $382.4mm from $444.2mm YoY, reflecting cyclicality and macro-sensitive exposure .
    • SG&A above plan: SG&A of $216.8mm included $8.3mm acquisition/integration/strategic planning expenses not in guidance; GAAP EPS $0.67 was down from $1.02 YoY .

Financial Results

Quarterly Performance (oldest → newest)

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$985.0 $968.3 $1,020.6
Gross Margin %29.0% 28.4% 28.7%
Net Income ($USD Millions)$42.4 $20.9 $29.3
Diluted EPS (GAAP) ($)$0.95 $0.48 $0.67
Adjusted Net Income ($USD Millions)$57.1 $40.4 $51.6
Adjusted EPS ($)$1.28 $0.92 $1.17
Adjusted EBITDA ($USD Millions)$109.7 $93.6 $108.5
Adjusted EBITDA Margin %11.1% 9.7% 10.6%
Cash from Operations ($USD Millions)$100.2 $16.8 $124.9
Free Cash Flow ($USD Millions)$88.9 $6.6 $115.8

Segment and Mix (oldest → newest)

MetricQ2 2024Q2 2025
Commercial Revenue ($USD Millions)$725.7 $708.1
Federal Revenue ($USD Millions)$309.0 $312.5
Consolidated Revenue ($USD Millions)$1,034.7 $1,020.6
Commercial Gross Margin %32.7% 33.0%
Federal Gross Margin %20.6% 19.2%
Consolidated Gross Margin %29.1% 28.7%
IT Consulting Revenues ($USD Millions)$590.5 $638.2
IT Consulting Mix (%)57% 63%
Assignment Revenues ($USD Millions)$444.2 $382.4

KPIs and Bookings (oldest → newest)

KPIQ1 2025Q2 2025
Commercial Consulting Bookings ($USD Millions)$336.9 $417.5
Commercial Book-to-Bill (TTM)1.1x 1.2x
Federal New Contract Awards ($USD Millions)$343.1 $72.0
Federal Book-to-Bill (TTM)1.2x 1.1x
Federal Backlog ($USD Billions)$3.1 $2.9
Net Leverage Ratio (x)2.6x 2.46x
Share Repurchases (Shares/$USD Millions)0.6mm / $50.4 0.2mm / $9.5

Results vs S&P Global Consensus

MetricQ2 2025 Consensus*Q2 2025 Actual
Revenue ($USD Millions)996.6*1,020.6
Adjusted EPS ($)1.082*1.17

Values retrieved from S&P Global*.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenues ($USD Millions)Q3 2025 vs Q2 2025$985.0–$1,015.0 $992.0–$1,012.0 Raised midpoint (+$2mm), narrowed range
SG&A ($USD Millions)Q3 2025 vs Q2 2025$209.8–$214.2 $206.5–$210.5 Lowered
Amortization of Intangibles ($USD Millions)Q3 2025 vs Q2 2025$16.9 $16.6 Lowered
Gross Margin (%)Q3 2025 vs Q2 202529.0%–29.3% 29.3%–29.6% Raised
Effective Tax Rate (%)Q3 2025 vs Q2 202528.0% 28.0% Maintained
Adjusted EBITDA ($USD Millions)Q3 2025 vs Q2 2025$101.0–$108.0 $108.5–$113.5 Raised
Adjusted EBITDA Margin (%)Q3 2025 vs Q2 202510.3%–10.6% 10.9%–11.2% Raised
Adjusted EPS ($)Q3 2025 vs Q2 2025$1.03–$1.14 $1.18–$1.26 Raised
GAAP EPS ($)Q3 2025 vs Q2 2025$0.66–$0.78 $0.82–$0.90 Raised
Billable Days (days)Q3 2025 vs Q2 202563.25 63.50 +0.25

Earnings Call Themes & Trends

TopicQ4 2024 (Previous Mentions)Q1 2025 (Previous Mentions)Q2 2025 (Current Period)Trend
AI/Technology InitiativesGenAI pilots; alliances (AWS, ServiceNow); plan to add ERP/Workday capability via TopBloc Closed TopBloc; AI/data/cyber engagements; AI workshops/literacy; cost-saving automation AI Innovation Center launched; accelerators; AWS agent published; internal AI efficiency; Workday/ServiceNow momentum Intensifying investment and commercialization
Federal/DOGE/MacroLower federal licenses; cautious award velocity; durable mission-critical work DOGE <2% of revenue impact expected; strong bookings; FBI/DoD wins; backlog >$3.1B DOGE impact in line; federal margin pressure from licenses; backlog >$2.9B; budget tailwind from defense bill Near-term pressure, medium-term tailwinds
Commercial Vertical TrendsTMT, Consumer & Industrial strength; financial services stabilizing Consumer & Industrial mid-single-digit growth; pharma/biotech up; e-commerce mid-teens; big banks flattish Consumer & Industrial up double-digits; healthcare flat; financial services/business services/TMT declined YoY; sequential gains in 4/5 verticals Mixed but improving breadth
Assignment BusinessSeasonal decline Q4→Q1; structurally stable Macro-sensitive; softness persists Stable entering Q3; consulting within Creative Circle growing 20–25% of that business Stabilizing
Alliances/PlatformsAWS, Azure, ServiceNow partnerships emphasized TopBloc/Workday added; Databricks use cases AWS GovCloud migrations; Elastic AI search; ServiceNow GenAI; Workday multi-country implementations Expanded breadth and depth

Management Commentary

  • “Revenues of $1.02 billion were above the high-end of our guidance range, while Adjusted EBITDA margin of 10.6 percent was at the top end of our expectations” (Ted Hanson, CEO) .
  • “TopBloc… is performing above our expectations and contributed to the continued growth of our IT consulting business, which reached 63 percent of total revenues” .
  • “Clients remain focused on… cloud and data solutions to modernize legacy systems and enable AI… accelerating time-to-value… across commercial and government sectors” .
  • On AI strategy: ASGN launched an AI Innovation Center with solution accelerators and AI University to upskill teams and share IP with clients .
  • On federal tailwinds: “One Big Beautiful bill represents one of the largest single-year increases in U.S. defense spending… focusing on AI and automation, cloud migration, secure communications” .

Q&A Highlights

  • TopBloc tracking ahead of revenue and bookings targets; EBITDA margins in high teens as expected .
  • Assignment business is cyclical but stable; consulting within Creative Circle is growing and ~20–25% of that unit .
  • Federal margins: long-term range ~20–21%; plan to increase direct labor and reduce low-margin license mix over time .
  • DOGE impact: <2% of total revenue in Q2 and expected similar in Q3; loss of higher-margin federal work affected gross margin .
  • Federal baseline run-rate revenues: ~$290–$295mm after backing out pass-through licenses; backlog supports future growth .
  • Internal AI use: productivity gains in recruiting/sales, proposal/bid processes; cybersecurity workflows increasingly reliant on AI .
  • Cost of AI investments: not degrading margins; adding to margin profile as initiatives mature .

Estimates Context

  • Q2 2025: ASGN beat S&P Global consensus on revenue ($1,020.6mm vs $996.6mm*) and adjusted EPS ($1.17 vs $1.08*), reflecting strong commercial consulting and higher-than-expected federal license revenue . Values retrieved from S&P Global*.
  • Q3 2025: Company guidance for revenue ($992–$1,012mm) brackets S&P consensus ($1,003.9mm*); guidance for adjusted EPS ($1.18–$1.26) brackets consensus ($1.224*); guidance for Adj. EBITDA ($108.5–$113.5mm) brackets consensus ($110.5mm*) . Values retrieved from S&P Global*.
MetricQ3 2025 Consensus*Company Guidance (Q3 2025)
Revenue ($USD Millions)1,003.9*$992.0–$1,012.0
Adjusted EPS ($)1.224*$1.18–$1.26
Adjusted EBITDA ($USD Millions)110.5*$108.5–$113.5

Values retrieved from S&P Global*.

Key Takeaways for Investors

  • Mix shift into higher-margin consulting is structurally supportive; commercial consulting up 15.7% YoY with IT consulting now 63% of revenue .
  • Near-term gross margin pressure from federal license mix and DOGE should abate as direct labor increases and license mix normalizes; federal margins targeted in ~20–21% range .
  • Balance sheet flexibility and strong FCF (Q2 FCF $115.8mm; net leverage 2.46x) support continued M&A, share repurchases, and investment in AI capabilities .
  • Q3 guidance points to modest sequential improvement in profitability (Adj. EBITDA margin up to 10.9–11.2%), with billable days +0.25 and steady demand in cloud/data/AI .
  • Federal tailwinds from the newly passed defense bill and backlog (> $2.9B) underpin medium-term visibility despite award timing noise .
  • AI strategy is maturing: Innovation Center, accelerators, AWS Marketplace agent (Peak CX-AI) and platform partnerships (Workday, ServiceNow, Elastic) enhance differentiation and monetization potential .
  • Watch banking/financial services vertical for inflection; management remains cautiously optimistic as forward indicators improve but large-bank spend remains flattish .

Appendix: Additional Relevant Press Releases

  • Apex Systems launched Peak CX-AI in AWS Marketplace’s new AI Agents & Tools category, reinforcing ASGN’s agentic AI push and partner-led go-to-market .