Executive Summary

Q1 FY26 delivered as expected: revenue declined 0.6% YoY to $2.924B while adjusted EPS rose 7.2% YoY to $1.48 on resilient margins and lower share count; book-to-bill was 1.42x and backlog hit a Q1 record $38.3B .
Versus S&P Global consensus, BAH posted a small EPS beat and slight revenue miss: Adjusted EPS $1.48 vs $1.45*; Revenue $2.924B vs $2.947B* .
FY26 guidance was maintained on revenue ($12.0–$12.5B), adjusted EBITDA ($1.315–$1.370B), and adjusted EPS ($6.20–$6.55), while free cash flow was raised to $900–$1,000M (from $700–$800M) due to a ~$200M incremental federal cash tax benefit from new S174 rules under the “One Big Beautiful Bill” .
Defense and Intel were bright spots (Defense +7% YoY, Intel +6%) offsetting Civil (-13%) amid a slower funding/procurement environment; management expects Civil reset effects in Q2 and aims to re-accelerate in 2H .

What Went Well and What Went Wrong

What Went Well
- Strong demand and quality of wins: quarterly book-to-bill of 1.42x; total backlog reached a Q1 record $38B, underscoring pipeline quality and positioning in advanced tech missions .
- Market mix: Defense revenue +7% YoY and Intelligence +6% YoY, reflecting traction in mission-critical tech programs (e.g., TOC‑L $315M award, MDK deployment) .
- Margin resilience and capital returns: Adjusted EBITDA +3% YoY to $311M, margin +30 bps to 10.6%; repurchased ~1.1% of shares and declared a $0.55 dividend .
What Went Wrong
- Modest top-line pressure: Revenue -0.6% YoY driven primarily by lower billable expenses; Civil revenue declined 13% YoY amid a slower funding environment and post-transition reviews .
- Funded backlog softness: Funded backlog ticked down even as total backlog rose; management cited slower funding flows and fewer contracting officers, with timing uncertainty as a near-term risk .
- Near-term headcount/delivery friction: Customer staff headcount down 5% YoY (7% seq.) reflecting Civil restructuring and supply/demand matching; hiring to ramp as funding normalizes .

Financial Results

Metric	Q1 FY25 (oldest)	Q4 FY25	Q1 FY26 (newest)
Revenue ($B)	$2.942	$2.974	$2.924
Adjusted EBITDA ($M)	$302	$316	$311
Adjusted EBITDA Margin on Revenue (%)	10.3%	10.6%	10.6%
Net Income ($M)	$165	$193	$271
Diluted EPS (GAAP) ($)	$1.27	$1.52	$2.16
Adjusted Diluted EPS ($)	$1.38	$1.61	$1.48
Cash from Operations ($M)	$52	$218	$119
Free Cash Flow ($M)	$20	$194	$96

Versus S&P Global Consensus (Q1 FY26)

Metric	Consensus	Actual
Revenue ($B)	$2.947*	$2.924
Adjusted EPS ($)	$1.45*	$1.48

Values marked with * retrieved from S&P Global.

Segment Revenue (Q1 FY26 vs Q1 FY25)

Customer Type ($M)	Q1 FY25	Q1 FY26
Defense	$1,421	$1,517
Intelligence	$457	$484
Civil	$1,064	$923
Total	$2,942	$2,924

KPIs and Mix

KPI	Q1 FY25	Q1 FY26
Book-to-Bill (x)	1.76x	1.42x
Total Backlog ($B)	$34.6	$38.3
Total Headcount	35,100	33,400
Contract Type Mix – Cost Reimbursable	56%	60%
Contract Type Mix – Time & Materials	23%	22%
Contract Type Mix – Fixed Price	21%	18%

Notes: GAAP net income and EPS benefited from a one-time $106M tax benefit related to an IRS agreement; Adjusted EPS excludes this effect .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY26	$12.0–$12.5B	$12.0–$12.5B	Maintained
Revenue Growth	FY26	0–4%	0–4%	Maintained
Adjusted EBITDA	FY26	$1,315–$1,370M	$1,315–$1,370M	Maintained
Adjusted EBITDA Margin ~	FY26	~11%	~11%	Maintained
Adjusted Diluted EPS	FY26	$6.20–$6.55	$6.20–$6.55	Maintained
Free Cash Flow	FY26	$700–$800M	$900–$1,000M	Raised
Adjusted Effective Tax Rate (assumption)	FY26	23–25%	23–25%	Maintained
Avg. Diluted Shares (assumption)	FY26	123–125M	123–125M	Maintained
Capex (assumption)	FY26	~$110M	~$110M	Maintained
Cash tax – S174 assumption	FY26	~$80M	+$200M federal cash tax benefit vs initial guide	Raised
Dividend	Next payable	$0.55/sh declared (Q4 release)	$0.55/sh payable Aug 29, 2025	Maintained

Earnings Call Themes & Trends

Topic	Previous Mentions (Q-2: Q3 FY25; Q-1: Q4 FY25)	Current Period (Q1 FY26)	Trend
AI/Advanced Tech posture	“Advanced technology company driving speed to outcomes” ; continued VoLT-driven tech execution	Tech-first differentiation; AI-assisted coding; MDK deployment; TOC‑L award; partnerships with hyperscalers and model providers	Accelerating
Procurement/Funding environment	Strong growth but variability in bookings-to-revenue conversion noted intra-FY25	Environment “stabilized” but still below historical speed; fewer contracting officers; funded backlog lagging; expecting normalization	Improving but still slow
Outcome-based/fixed-price contracts	Emphasis on outcomes and efficiency	Explicit push to outcome-based (e.g., ThunderDome) and fixed-price constructs viewed as win-win	Increasing adoption
Civil segment	FY25: Civil flat in Q4	Civil -13% YoY; restructuring largely completed; prepare to return to growth	Reset in Q1; recovery planned
Defense/Intel momentum	Broad-based growth across markets	Defense +7% YoY; Intel +6% YoY; large-scale battlefield systems awards (TOC‑L)	Strengthening
Ventures/Tech ecosystem	Active investments; Shield AI highlighted in FY25	Venture commitment tripled to $300M; portfolio performance top decile; strategic co-creation with startups	Expanded
Regulatory/Policy (FAR/EOs)	—	FAR rewrite and AI executive orders expected to streamline and accelerate tech deployment	Supportive policy backdrop

Management Commentary

“Our first quarter performance played out as we expected… Top and bottom line performance matched our expectations, with the brightest spots being book to bill and the resulting record backlog.” — Horacio Rozanski .
“We are reimagining how we deliver our work to prepare for a shift to outcome-based opportunities… ThunderDome is our proven zero-trust solution… an ideal candidate because it has clearly defined mission outcomes.” — Horacio Rozanski .
“We achieved an excellent quarterly book-to-bill of 1.42 times, and total backlog hit an all-time Q1 record of $38 billion.” — Matt Calderone .
“Adjusted diluted EPS increased 7% year over year… benefited from overall profitability, a reduction in share count, and an unrealized gain from one of our venture investments.” — Matt Calderone .
On the funding outlook: “The procurement environment has improved, but is still operating below historical speeds.” — Management .

Q&A Highlights

Funding cadence and funded backlog: Management acknowledged funded backlog softness amid slower processing and fewer contracting officers; normalization timing remains the swing factor for FY26 .
Outcome-based/fixed-price contracting: Company expects increased use; called it a “win-win,” aligned with tech-enabled delivery (e.g., ThunderDome) .
Civil trajectory and hiring: Civil reset largely complete; confident in medium-term growth; hiring paced to demand and clearances with AI-enabled talent matching .
Key programs and competitive positioning: Highlighted $315M TOC‑L award and MDK deployments; partners view BAH as the integrator that makes commercial tech work in mission environments .
Cash tax and IRS agreement: ~+$200M FY26 federal cash tax benefit from S174 rules; ~$170M refund expected next fiscal year from IRS agreement; noted small recurring benefit thereafter .

Estimates Context

Q1 FY26 results vs S&P Global consensus: Revenue $2.924B vs $2.947B* (slight miss), Adjusted EPS $1.48 vs $1.45* (small beat). 12 estimates for each metric* .
Drivers: Revenue pressure tied to lower billable expenses and Civil softness; Adjusted EPS helped by margin discipline, share count reduction, and an unrealized venture gain (Adjusted EPS excludes the $106M one-time tax benefit) .
Implications: Street may modestly raise FCF estimates on the updated $900–$1,000M guide and incorporate the tax-driven cash tailwind; near-term revenue estimates likely reflect a cautious Q2 (Civil reset) and 2H recovery contingent on funding normalization .