Booz Allen Hamilton (NYSE: BAH) reported adjusted earnings of $1.76 per share for the second quarter of fiscal 2027 (ended Sept. 30, 2026), against an analyst estimate of $1.48, while revenue of $2.78B came in below the $2.81B estimate. The result shows a split in federal consulting: national security work is growing and civil agency work is shrinking. That split is the theme this article uses BAH to explain.
Key facts
- Oct. 23, 2026: BAH reported EPS of $1.76 versus an estimate of $1.48 (a difference of +$0.28, or 18.9%). Revenue was $2.78B versus an estimate of $2.81B (a difference of -$31.6M, or -1.1%).
- Quarter ended Sept. 30, 2026: Revenue was down 3.9% from the year-ago quarter ($2.89B). Net income was $181.0M, up 3.4% from $175.0M a year earlier.
- Quarter ended Sept. 30, 2026: Operating income was $245.0M, versus $283.0M a year earlier. GAAP diluted EPS (the official accounting figure) was $1.5, versus $1.42 a year earlier.
- Quarter ended Sept. 30, 2026: Free cash flow (cash from operations minus capital spending) was $263.0M, versus $395.0M a year earlier.
- Oct. 23, 2026: The stock closed at $78.32, down 0.32% on the day. Its 52-week range is $59.5 to $109.1.
What happened
The theme: one market, two directions. Booz Allen sells consulting, technology and cyber services to the U.S. government. Its customers fall into two groups. National security customers are defense and intelligence agencies. Civil customers are agencies such as those handling health and public services. Right now the two are moving apart.
On the earnings call, President and COO Kristine Martin Anderson said: "National security continued to grow, while civil remained in transition." The company said national security revenue grew 1% as reported and 6% once lower billable expenses are excluded. Civil revenue fell 15%. Billable expenses are costs passed through to the customer, such as subcontractors. Management said those were down 10.6% from a year earlier, and that drop explains much of the 3.9% headline revenue decline.
Why profit rose while sales fell. CFO Troy Lahr attributed the performance to "another quarter of strong contract execution," and said adjusted EBITDA margin (profit before interest, taxes and depreciation, as a share of sales) was 11.3%. Lahr said the 18% increase in adjusted EPS was driven by profit growth, a reduced share count and a lower tax rate, and that adjusted EPS "also benefited" from a $10 million earn-out from the DARPA divestiture. Fewer shares outstanding means each share claims a larger slice of profit, which helps per-share results even when total sales shrink.
Contract mix. By contract type, the quarter looked like this:
- Cost-reimbursable contracts, where the government repays costs plus a fee, brought in $1.64B, down from $1.71B a year earlier.
- Fixed-price contracts brought in $560.0M, up from $539.0M.
- Time-and-materials contracts brought in $580.0M, down from $638.0M.
The AI and cyber angle. CEO Horacio Rozanski said: "Agentic SI is fundamentally changing the cyber threat landscape as you see in the news every day." He said the company's Guile product reduced attack success rates by more than 95% in testing and is in private beta. He also cautioned that the promise of its Velox offering will "play out much more strongly over the next couple of years than over the next couple of quarters."
Why it matters for investors
The five-quarter trend. Operating margin has moved in a narrow band:
| Quarter ended | Revenue | Operating margin | Net income | Free cash flow | |---|---|---|---|---| | Sept. 30, 2025 | $2.89B | 9.8% | $175.0M | $395.0M | | Dec. 31, 2025 | $2.62B | 8.8% | $200.0M | $248.0M | | March 31, 2026 | $2.78B | 9.5% | $205.0M | $212.0M | | June 30, 2026 | $2.80B | 10.0% | $198.0M | $261.0M | | Sept. 30, 2026 | $2.78B | 8.8% | $181.0M | $263.0M |
Operating margin dipped back to 8.8%, the same level as the December 2025 quarter, after peaking at 10.0% in the June 2026 quarter. Net income was the lowest of the last four quarters but still above the year-ago level. Free cash flow has held near $260M for two quarters, though it is below the year-ago quarter, which was unusually strong. The company also bought back shares: $98.0M in the latest quarter, versus $214.0M a year earlier.
Balance sheet. FMP data show BAH ended the quarter with $334.0M in cash and short-term investments against $317.0M of total debt, for net debt of -$17.0M, and debt to equity of 0.25. Those figures should be read with care. During the quarter the company deployed $729M on the Ultra I&C Mission Solutions acquisition, and Lahr said the company's priorities include "deleveraging while we go through the integration of Ultra." That context means the low reported debt figure should not be taken to mean the company carries no meaningful leverage. Lahr also said total liquidity was $1.8 billion. Its Piotroski score, a 0-9 gauge of financial health, is 6, and its Altman Z score, a bankruptcy-risk gauge, is 3.29.
Valuation versus peers. On trailing 12-month figures, BAH trades at a P/E of 12.11, price-to-sales of 0.86 and EV/EBITDA of 7.63. Its net margin is 7.1% and its dividend yield is 3.0%. Peers in FMP's data:
| Company | Market cap | P/E | Net margin | |---|---|---|---| | BAH | $9.42B | 12.11 | 7.1% | | CACI | $14.01B | 25.87 | 5.5% | | FCN | $4.34B | 19.20 | 6.4% | | GLOB | $1.94B | 17.45 | 4.6% | | BBAI | $1.02B | -12.53 | -65.2% |
BAH has a lower P/E than each profitable peer listed and a higher net margin than all of them. A low multiple can reflect doubts about growth, and the civil decline is one such doubt.
Analyst view. Of 22 ratings, 11 are buy, 8 are hold and 3 are sell, for a consensus of "Buy." Price targets average $90.43, with a median of $80.00, a high of $140.00 and a low of $65.00. The latest close of $78.32 sits below the average and near the median. Truist Securities upgraded the stock from Hold to Buy on Oct. 8, 2026. Analysts expect EPS of 1.78 for the period ending June 30, 2028, on revenue of $3.05B.
Stock Expert AI MoonshotScore. BAH scores 87.9 (Exceptional) on our MoonshotScore V2. The sector-relative pillars are quality 94, valuation 82, momentum 69, growth 67 and safety 48. In plain terms, the data rates BAH's profitability and price as strengths, and growth and momentum as middling. Safety is the weakest pillar.
What to watch next
- Third and fourth quarters. Management expects civil revenue to be flat to slightly down from quarter to quarter in both. It also expects lower margins in the second half, citing lower civil volumes, investment timing and seasonality.
- Federal funding. Rozanski said the company is operating under a continuing resolution, a stopgap measure that keeps agencies funded at prior levels. He said he is watching the next quarter or two closely. Civil procurements are also shifting later, which makes new contract awards harder to predict.
- Backlog. Lahr said national security funded backlog rose 10%. Funded backlog is contracted work for which funding has been obligated; it does not mean the government has already paid for it.
- Cash collection. Days sales outstanding, the average time to collect payment, rose to 82 days. Management tied the elevated level to the Defy acquisition and said that excluding both Defy and Ultra, DSO was slightly down from a year earlier.
- Ultra integration. Booz Allen acquired Ultra I&C Mission Solutions in August for $729M, according to Lahr. Rozanski said it is "very early days" in the Ultra integration.
- Next report. BAH's next earnings date is Jan. 22, 2027. The estimates are EPS of 1.48 and revenue of $2.82B.
Frequently asked questions
Q: Did Booz Allen beat earnings estimates in its latest quarter?
On profit, yes. For the quarter ended Sept. 30, 2026, adjusted EPS was $1.76 versus an estimate of $1.48. Revenue of $2.78B was below the $2.81B estimate. Management credited contract execution, a lower share count and a lower tax rate for the profit result.
Q: Why did Booz Allen's revenue fall?
Revenue was down 3.9% from the year-ago quarter. The company said civil revenue fell 15% and that billable expenses, costs passed through to customers, were lower. National security revenue grew 1% as reported and 6% excluding those lower billable expenses.
Q: What is Booz Allen's guidance for fiscal 2027?
According to the earnings call, revenue is expected between $11.3 billion and $11.6 billion, adjusted EBITDA between $1.26 billion and $1.29 billion, adjusted EPS between $6.50 and $6.70, and free cash flow between $850 million and $925 million. Management said this implies a step down in margins in the second half. This article is not investment advice.
This is educational content, not investment advice. Past performance does not guarantee future results.