Executive Summary

Q2 FY26 results missed consensus on revenue and EPS and prompted a broad guidance cut: revenue $2.90B vs $2.97B consensus, adjusted EPS $1.49 vs $1.51; adjusted EBITDA beat ($324M vs $319M) as mix and cost actions helped profitability .
Management described a “bifurcated” market: national security (defense+intel) growing mid-single digits while civil remains in its toughest environment in a generation; guidance lowered across revenue, EBITDA, EPS, and FCF .
Book-to-bill was 1.7x and backlog hit a Q2 record $40.2B; however, funded backlog -6% YoY and ramp on large wins expected to be slower given procurement friction and the October shutdown .
Cost program to remove $150M annualized begins to benefit H2 modestly, with margins expected to drift back toward historical levels in FY27; dividend maintained at $0.55 and buyback authorization +$500M (capacity ~$880M) .

What Went Well and What Went Wrong

What Went Well

National security portfolio strength: Q2 defense+intel revenue up mid-single digits YoY ex discrete items; four >$800M awards (e.g., Air Force “Shadow Raptor,” DIA AI/ML missions), gross bookings $7.2B; book-to-bill 1.7x; backlog $40.2B (+3% YoY) .
Profit resilience vs mix headwinds: adjusted EBITDA $324M (-11% YoY) with margin 11.2% (-40bps); adjusted EPS $1.49 (-17.7% YoY); free cash flow $395M; cash from ops $421M .
Strategic positioning and tech leadership: ThunderDome zero trust “met all the government’s milestones two years ahead of schedule” and won a 2025 cybersecurity award; management emphasized leadership in AI, cyber, edge tech with partners (NVIDIA, AWS, Shield AI) .

Quote: “We are lowering top and bottom line guidance...based on continuing friction in the overall procurement environment and fundamentally different dynamics within our civil and national security portfolios.” — CEO Horacio Rozanski .

What Went Wrong

Civil portfolio contraction: Q2 civil revenue down sharply; full-year civil revenue now expected to decline in the low-20% range; procurement velocity and near-term pipeline have not recovered .
Funding friction and slower ramps: funded backlog -6% YoY; shorter funding increments and slower ramp-ups on new wins; Q2 saw $1.1B ceiling reductions (largely FY28+), $1.3B backlog expirations, tempering net bookings .
Guidance reset: FY26 revenue cut to $11.3–$11.5B (from $12.0–$12.5B), adjusted EBITDA to $1.19–$1.22B (from $1.315–$1.37B), ADEPS to $5.45–$5.65 (from $6.20–$6.55), FCF to $850–$950M (from $900–$1,000M); management embedding shutdown impact ($~30M revenue, $~15M profit for Oct) .

Financial Results

Quarterly performance vs prior periods and estimates

Metric	Q4 FY25	Q1 FY26	Q2 FY26
Revenue ($USD Billions)	~$3.00	$2.924	$2.890
Revenue ex Billables ($USD Billions)	N/A	$2.043	$1.972
Adjusted EBITDA ($USD Millions)	$316	$311	$324
Adjusted EBITDA Margin %	10.6%	10.6%	11.2%
Net Income ($USD Millions)	$193	$271	$175
Diluted EPS ($USD)	$1.52	$2.16	$1.42
Adjusted Diluted EPS ($USD)	$1.61	$1.48	$1.49
Free Cash Flow ($USD Millions)	$194	$96	$395

Notes:

Q1 net income benefited from a one-time $106M tax item; Q2 prior-year comps included $113M claimed-cost reduction and $115M insurance recoveries .

Segment revenue mix

Segment Revenue ($USD Millions)	Q1 FY26	Q2 FY26
Defense	1,517	1,580
Intelligence	484	483
Civil	923	827
Total	2,924	2,890

Contract type mix (Q2): Cost-Reimbursable 59%, Time-and-Materials 22%, Fixed-Price 19% .

KPIs and operating metrics

KPI	Q1 FY26	Q2 FY26
Book-to-Bill (quarter)	1.42x	1.7x
Backlog ($USD Billions)	$38.3	$40.2
Funded Backlog ($USD Billions)	$4.05	$5.44
Gross Bookings ($USD Billions)	$4.2	$7.2
Net Bookings ($USD Billions)	N/A	$4.8
Qualified Pipeline (FY26, $USD Billions)	~$43	~$25 (remainder of FY26)
Cash on Hand ($USD Millions)	$711	$816
Net Leverage (LTM)	2.5x	2.5x
Share Repurchases ($USD Millions)	$154	$208
Quarterly Dividend ($/share)	$0.55	$0.55
Headcount (approx.)	~33,000	~33,000

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY26	$12.0–$12.5B	$11.3–$11.5B	Lowered
Revenue Growth (%)	FY26	0–4%	(4)–(6)%	Lowered
Adjusted EBITDA	FY26	$1,315–$1,370M	$1,190–$1,220M	Lowered
Adjusted EBITDA Margin	FY26	~11%	Mid-10%	Lowered
Adjusted Diluted EPS	FY26	$6.20–$6.55	$5.45–$5.65	Lowered
Free Cash Flow	FY26	$900–$1,000M	$850–$950M	Lowered
Adjusted Effective Tax Rate	FY26	23–25%	23–25%	Maintained
CapEx	FY26	~$110M	~$100M	Lowered
Dividend	Q2 FY26	$0.55/share	$0.55/share	Maintained
Buyback Authorization	As of Q2	N/A	+$500M to ~$880M capacity	Increased
Shutdown Impact (embedded)	FY26	N/A	~$30M rev, ~$15M profit (Oct)	New assumption

Cost program: net incremental $150M annualized cost reduction; modest FY26 benefit, larger in FY27; margin trajectory expected to move closer to historical levels by FY27 .

Earnings Call Themes & Trends

Topic	Q4 FY25 (Q-2)	Q1 FY26 (Q-1)	Q2 FY26 (Current)	Trend
Market bifurcation (civil vs national security)	Civil reset underway; defense/intel strong	Civil restructuring actions completed; defense/intel growth	Civil delayed recovery, national security growth mid-single digits	Widened bifurcation
Funding normalization & ramp	Expect slower H1; reaccel H2	Funding improved but below historical; funded backlog down	No normalization; slower ramps; shutdown friction	Still constrained
Outcome-based/fixed-price shift	Advocated as future	Transition starting (e.g., ThunderDome)	Accelerating conversions; margin potential longer-term	Increasing adoption
AI leadership & ecosystem	AI ~$800M FY25; agentic/defensive AI	Deep partnerships; Ventures upsized +$200M	“Largest provider of AI to federal gov” reaffirmed; doubling down	Strengthening
Cyber/Thunderdome	Zero trust milestones ahead of schedule	Transition elements to outcome-based	Won CyberSecurity Breakthrough award; standardizing SASE	Recognition/traction
Backlog/book-to-bill	Q4 book-to-bill 0.71x; TTM 1.39x; backlog $37B	1.42x; backlog $38B	1.7x; backlog $40.2B	Strong awards, ramp lag

Management Commentary

“This is the most bifurcated environment I have seen...our civil and national security portfolios are experiencing completely different dynamics...we are lowering guidance across all key metrics.” — CEO Horacio Rozanski .
“We won $7.2B of new work in the quarter…four programs over $800M…we anticipate national security revenue will grow mid-single digits for the year.” — CFO Matt Calderone .
“We are taking significant actions…net incremental $150M of cost on an annualized basis…support margins returning closer to historical levels in FY27.” — CFO Matt Calderone .
“ThunderDome…becoming the standard for zero trust…met all the government’s milestones two years ahead of schedule.” — CEO Horacio Rozanski .
“We continue to be the largest provider of AI to the federal government, as Deltek recently reaffirmed.” — CEO Horacio Rozanski .

Q&A Highlights

Civil trajectory and stabilization: Management expects civil revenue down low-20% for FY26; no additional cuts seen in Q2 but competitive pricing on large procurements; stability after earlier run-rate reductions, with growth delayed by several quarters .
Ramp and funding dynamics: Large awards will ramp slower than historical; funded backlog down YoY; shorter increments and episodic funding patterns continue to create friction .
Margin mix and contracting: Civil historically higher margins (more fixed-price); mix shift away from civil compresses margins near term; shift to outcome-based expected to aid margins over medium term .
Hiring/utilization: Customer-facing staff down 3% seq./10% YoY; utilization improved; hiring focused on critical mission/tech areas; revenue per employee expected to rise with AI-assisted delivery and outcome models .
Capital deployment: Dividend maintained; ~$208M buybacks in Q2 (nearly 2% of shares); buyback authorization +$500M; Ventures performance top decile with strategic value .

Estimates Context

Results vs S&P Global consensus:

Metric	Q4 FY25 Estimate	Q4 FY25 Actual	Q1 FY26 Estimate	Q1 FY26 Actual	Q2 FY26 Estimate	Q2 FY26 Actual
Revenue ($USD)	$3,032,374,700*	$2,974,627,000*	$2,946,944,440*	$2,924,000,000*	$2,971,548,030*	$2,890,000,000*
Primary EPS ($)	$1.6143*	$1.61*	$1.4480*	$1.48*	$1.5115*	$1.49*
EBITDA ($USD)	$331,556,480*	$310,947,000*	$308,522,040*	$333,000,000*	$318,551,900*	$324,000,000*
# of Revenue Estimates	12*	—	12*	—	12*	—
# of EPS Estimates	12*	—	12*	—	12*	—

Interpretation:

Q2: revenue miss (~~$82M), EPS slight miss (~~$0.02), EBITDA beat (~$5.4M). Q1: EPS and EBITDA beats amid revenue slight miss. Q4 FY25: misses on revenue and EBITDA; EPS inline/slight miss.
Values retrieved from S&P Global.*

Key Takeaways for Investors

Guidance reset and civil weakness are the near-term overhang; the breadth of the cut across revenue, EBITDA, EPS, and FCF likely pressures sentiment until funding velocity improves and large awards ramp; watch CR/shutdown developments and funding cadence into Q3/Q4 .
National security momentum is real: $7.2B gross bookings, record backlog, and four >$800M awards support mid-single digit growth in defense+intel; however, expect slower-than-normal ramps due to procurement friction .
Margin path: mix shift away from civil compresses margins in H2; cost takeout ($150M annualized) and outcome-based conversions should underpin margin recovery toward historical levels by FY27; near-term ADEPS guided to $5.45–$5.65 .
Cash returns intact: dividend held at $0.55; buyback capacity expanded (~$880M available); net leverage at 2.5x provides flexibility for continued repurchases and selective venture/M&A investments .
Cyber/AI leadership a strategic hedge: ThunderDome’s recognition and AI leadership position should drive resilient demand; partnership ecosystem (NVIDIA, AWS, Shield AI) and Ventures enhance pipeline and optionality .
Execution priorities: accelerate outcome-based contracting, productize IP (ground systems/fire control “Golden Dome” concepts), and reallocate talent/investments to growth vectors (cyber, AI, warfighting tech) .
Trading implications: near-term prints may remain choppy on civil and funding delays; set alerts for award funding ramps, backlog-to-revenue conversion, and incremental progress on outcome-based transitions, which are catalysts for re-rating as visibility improves .

Booz Allen Hamilton Holding Corp (BAH)·Q2 2026 Earnings Summary