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Booz Allen Hamilton Holding Corp (BAH)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 FY2025 delivered solid results: revenue $2.974B (+7.3% YoY), adjusted EBITDA $316M (+10.5% YoY), and adjusted diluted EPS $1.61 (+21.1% YoY); quarter-end backlog hit a record $37.0B and TTM book-to-bill was 1.39x .
  • Versus S&P Global consensus, Q4 revenue and EBITDA came in below expectations, while EPS was essentially in line; management highlighted strong Defense and Intelligence demand offset by Civil run‑rate reductions and a proactive Civil restructuring . Values retrieved from S&P Global.*
  • FY2026 guidance initiated: revenue $12.0–$12.5B (0–4% growth), adjusted EBITDA $1,315–$1,370M (~11% margin), ADEPS $6.20–$6.55, FCF $700–$800M; quarterly dividend maintained at $0.55 per share .
  • Strategic and technology positioning in AI was emphasized; AI revenue grew >30% YoY to ~$800M, and management is accelerating outcome‑based contracting and GSA/FAR procurement modernization—key stock narrative catalysts .

What Went Well and What Went Wrong

What Went Well

  • Strong top and bottom-line execution: Q4 revenue +7.3% YoY to $2.974B; adjusted EBITDA +10.5% YoY to $316M; adjusted EPS +21.1% YoY to $1.61, with record backlog ($37.0B) and 1.39x TTM book‑to‑bill .
  • Defense and Intelligence markets drove growth; management: “Our customers are looking for value and outcomes that matter... Booz Allen's tech works.” — Horacio Rozanski . Q4 Defense revenue rose to $1.527B and Intelligence to $458M .
  • AI leadership as growth engine: “In FY ’25, our AI business grew over 30% year-over-year to approximately $800 million,” with expanding enterprise deployments and missionized commercial tech partnerships (e.g., NVIDIA at the edge) .

What Went Wrong

  • Civil market softness and reset: five large Civil tech contracts reduced run rate (~3% firm‑wide revenue headwind), compounded by an additional ~3% headwind from the previously lost VA recompete; management is restructuring Civil (targeted cost and headcount actions) to match demand .
  • Quarterly book‑to‑bill of 0.71x implies near-term variability in converting bookings to revenue despite robust TTM metrics; qualified pipeline at $53.4B below FY2025’s record but above FY2024 .
  • Near-term margin upside limited: management guided margins roughly flat YoY for FY2026 (~11%), noting mix and outcome-based transition cadence; net interest expense remains a partial headwind .

Financial Results

Quarterly Comparison (oldest → newest)

MetricQ2 FY2025Q3 FY2025Q4 FY2025
Revenue ($USD Billions)$3.146 $2.917 $2.974
Adjusted Diluted EPS ($USD)$1.81 $1.55 $1.61
Adjusted EBITDA ($USD Millions)$363.95 $331.72 $316.00
Adjusted EBITDA Margin %11.6% 11.4% 10.6%
Net Income ($USD Millions)$390.11 $186.95 $193.00

Segment Revenue Mix (Q4 YoY)

Customer TypeQ4 FY2024 ($USD Millions)Q4 FY2025 ($USD Millions)YoY Change
Defense$1,343 $1,527 +13.7%
Intelligence$437 $458 +4.8%
Civil$992 $989 -0.3%
Total$2,772 $2,974 +7.3%

KPIs and Operating Metrics

KPIQ4 FY2025Reference
Backlog ($USD Billions)$37.0
Book-to-Bill (Quarter)0.71x
Book-to-Bill (TTM)1.39x
Total Headcount35,800
Customer Staff Headcount32,700
Free Cash Flow ($USD Millions)$194
Net Leverage Ratio2.4x
Contract Mix (Q4)59% Cost‑Reimb., 22% T&M, 19% Fixed‑Price

Actuals vs S&P Global Consensus (Q4 FY2025)

MetricConsensusActualBeat/Miss
Revenue ($USD Billions)$3.032*$2.974 Miss
Primary EPS ($USD)$1.61*$1.61 In‑line
EBITDA ($USD Millions)$331.56*$316.00 Miss

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY2026—$12.0–$12.5B Initiated
Adjusted EBITDAFY2026—$1,315–$1,370M; margin ~11% Initiated
Adjusted Diluted EPSFY2026—$6.20–$6.55 (assumes adj. tax rate 23–25%; diluted shares 123–125M) Initiated
Free Cash FlowFY2026—$700–$800M (assumes Section 174 cash taxes ~$80M; CapEx ~$110M) Initiated
DividendQ1 FY2026—$0.55 per share (payable Jun 27, 2025; record Jun 11) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3)Current Period (Q4)Trend
AI/Technology InitiativesQ2: Discrete items plus strong momentum; VoLT strategy and record backlog ; Q3: double‑digit growth, strong Defense/Intel, adjusted margin +0.9pp .AI revenue >30% YoY to ~$800M; enterprise scale implementations; partnerships incl. NVIDIA for edge; missionized commercial tech .Accelerating adoption, broader enterprise scale.
Civil Procurement/MacroQ3: Softening civil procurement environment noted .Run‑rate reductions across five large Civil tech contracts (~3% revenue headwind) plus VA loss (~3% headwind); proactive Civil restructuring .Near‑term reset; recovery expected in 2H FY2026.
Outcome‑Based Contracting (Fixed‑Price)Q2: Emphasis on operating model strength; book‑to‑bill 2.61x .Expect more contracts to fixed‑price/outcomes; Booz Allen championing shift; converting large tech programs (e.g., Thunderdome) .Structural pivot under way; margin accretive over time.
Backlog/BookingsQ2: Backlog $41.3B; quarterly B2B 2.61x; TTM 1.52x .Backlog $37.0B; quarterly B2B 0.71x; TTM 1.39x; pipeline $53.4B .Strong TTM; quarterly variability expected.
Regulatory/GSA/FAR Modernization—Collaboration with GSA/FAS on procurement efficiencies; accelerating ACS procurement with GenAI; more commercial tech and outcomes .Policy changes a tailwind to Booz Allen’s model.
Capital Deployment/VentureQ2: $300M deployed (dividends, buybacks, strategic investments); buyback capacity ~$1.0B authorized subsequently .$403M deployed in Q4; $310M buybacks in Q4; investment in Shield AI; dividend $0.55 .Ongoing disciplined deployment with venture tilt.

Management Commentary

  • Strategic posture: “We are moving aggressively to lead the way in a changing market… we are committed to America’s priority missions and to enabling a more nimble and efficient federal government.” — Horacio Rozanski .
  • AI at scale: “In FY ’25, our AI business grew over 30% year-over-year to approximately $800 million” with solutions spanning computer vision, tailored generative models, and autonomy, and an edge partnership with NVIDIA .
  • Civil reset rationale: “We have made the decision to restructure and reset our civil business… targeted cost and head count reductions to match anticipated demand.” — Horacio Rozanski .
  • Procurement modernization: “We have a unique opportunity… to accelerate the move to ACS procurement and bring GenAI capabilities to enable these conversions.” — Horacio Rozanski .
  • Mission impact example: Building AI‑enabled tactical software with U.S. Army to reduce time-to-threat response from 15 minutes to 1 minute .

Q&A Highlights

  • Descoping/cancellations risk: Management views Civil reset as largely one‑time; cancellations minimal (~1% of portfolio) and legacy consulting; Defense/Intel procurement remains strong .
  • Multi‑year demand outlook: Expect Defense and Intel growth; Civil decline low double digits in FY2026 with improvement in 2H as procurement cadence normalizes; outcome-based contracting to expand .
  • Branding/perception: As a market leader, Booz Allen is more visible; management is clarifying positioning as an advanced tech company and strengthening relationships across the administration .
  • Margin and headcount: ~7% headcount reduction in Q1 FY2026 concentrated in Civil; near‑term margin guide flat (~11%); outcome‑based contracting accretive over time .
  • Capital returns: Continued flexibility to deploy capital—buybacks, tuck‑in M&A, and increased venture investments (e.g., Shield AI), leveraging a strong balance sheet .

Estimates Context

  • Q4 FY2025 actuals vs S&P Global consensus: revenue missed (actual $2.974B vs $3.032B*), EBITDA missed (actual $316M vs $332M*), EPS in line ($1.61 vs $1.61*). Civil softness and contract run‑rate reductions plus mix effects likely pressured EBITDA versus expectations; EPS was supported by profitability, lower share count, and non‑recurring investment gains . Values retrieved from S&P Global.*

  • Implications: Street may trim near‑term Civil revenue and EBITDA assumptions and shift growth to 2H FY2026; outcome‑based contracting and AI-driven mission outcomes could support medium‑term margin resilience .

Key Takeaways for Investors

  • Near‑term: Expect a choppy first half FY2026 as Civil resets; watch quarterly book‑to‑bill and redeployment pace; dividend maintained at $0.55 and FCF guidance $700–$800M provides support .
  • Medium‑term thesis: Defense and Intelligence growth plus AI scale and outcome‑based contracting should re‑accelerate revenue and sustain ~11% adjusted EBITDA margin in FY2026 .
  • AI leadership is tangible: ~$800M AI revenue in FY2025 with missionized commercial tech partnerships (e.g., NVIDIA) is differentiating and hard to replicate .
  • Backlog and pipeline underpin visibility: Record $37.0B backlog and 1.39x TTM book‑to‑bill support growth normalization post Civil reset .
  • Capital deployment remains disciplined: $403M deployed in Q4 including $310M buybacks; net leverage 2.4x, preserving optionality for venture/M&A and shareholder returns .
  • Monitor policy tailwinds: GSA/FAR modernization and fixed‑price/outcome contracts could structurally improve procurement efficiency and margins over time .
  • Risk checks: Civil demand trajectory, interest expense, and quarterly conversions of bookings to revenue are key watch items; management sees cancellations minimal and expects 2H improvement .

Notes: Values retrieved from S&P Global.*