Science Applications International Corp (NASDAQ:SAIC), a prominent government technology integrator, reported financial results for its fourth quarter and full fiscal year 2026 that presented a mixed picture, leading to a muted initial market reaction. The company delivered adjusted earnings that significantly surpassed analyst expectations, but this was paired with a revenue miss and a cautious outlook for the coming year.
Earnings and Revenue Versus Estimates
The core of the quarterly report reveals a divergence between profitability and top-line growth.
- Adjusted Earnings Per Share (EPS): SAIC reported Q4 adjusted diluted EPS of $2.62. This substantially exceeded the consensus analyst estimate of $1.97, representing a beat of approximately 33%.
- Revenue: Quarterly revenues came in at $1.75 billion. This fell short of the Wall Street estimate of $1.79 billion, marking a miss of roughly 2.4%.
For the full fiscal year 2026, the pattern held: adjusted EPS of $10.75 beat expectations, while annual revenue of $7.26 billion declined compared to the prior year's $7.48 billion.
Market Reaction and Price Action
Following the earnings release, SAIC's stock showed modest positive momentum in pre-market trading, with an indicated gain of about 1.2%. This suggests investors are initially weighing the strong earnings beat against the revenue softness and forward guidance. The stock's performance over recent weeks has been relatively flat, indicating a lack of strong directional bias leading into the report.
Key Elements from the Earnings Release
Beyond the headline numbers, management highlighted several important operational and strategic points:
- Margin Strength: Despite revenue pressure, the company emphasized improved operational execution. The adjusted EBITDA margin for Q4 expanded to 10.3%, up 70 basis points from the prior year quarter, driven by lower selling, general, and administrative expenses.
- Cash Flow and Capital Return: SAIC generated robust cash flow, with free cash flow for the year reaching $577 million. The company aggressively returned capital to shareholders, deploying $524 million in fiscal 2026 through $422 million in share repurchases and $70 million in dividends.
- Bookings and Backlog: The quarterly book-to-bill ratio was 0.3, reflecting lower net bookings of $0.6 billion. However, the trailing twelve-month book-to-bill ratio remained healthy at 1.1. The company's total backlog stands at approximately $22.6 billion, with $3.6 billion funded.
- Fiscal 2027 Guidance: SAIC provided its outlook for the new fiscal year, which appears to be a key factor for investors. The company expects:
- Revenue between $7.0 billion and $7.2 billion, implying an organic decline of 2% to 4%.
- Adjusted EPS in a range of $9.50 to $9.70.
- Adjusted EBITDA between $705 million and $715 million.
- Free cash flow greater than $600 million.
Outlook Versus Analyst Expectations
The company's revenue guidance for fiscal 2027, which forecasts a contraction, is notably below the current analyst sales estimate of $7.49 billion for the period. Similarly, the midpoint of SAIC's adjusted EPS guidance ($9.60) is below the Street's future projection. This conservative outlook likely tempers enthusiasm from the significant Q4 earnings beat and contributes to the stock's restrained reaction.
For a detailed view of SAIC's historical earnings performance and future analyst projections, you can review the earnings history and analyst estimates & forecasts.
Disclaimer: This article is for informational purposes only and does not constitute investment advice, nor does it recommend buying or selling any security. Investors should conduct their own research and consult with a qualified financial advisor before making any investment decisions.