Booz Allen Hamilton Holding Corp (NYSE:BAH) delivered strong financial results for fiscal year 2025, with a 12% revenue growth, nearly all organic.
The company exceeded its ambitious target range for adjusted EBITDA, reaching $1.315 billion, representing a 12% compounded EBITDA growth.
Booz Allen's AI business grew over 30% year-over-year to approximately $800 million, indicating strong demand and integration into mission workflows.
The company has a robust free cash flow of $911 million and deployed $1.2 billion of capital to generate shareholder value, including share repurchases.
Booz Allen is strategically positioned to lead in AI and commercial technology integration into defense and national security missions, with strong partnerships and investments in advanced technologies.
Negative Points
The Civil business is expected to decline in fiscal year 2026 due to reductions in government personnel and spending levels, impacting contract run rates.
There is a slowdown in the civil procurement and spending environment, with a reduction in run rate on five large civil technology projects, creating a 3% headwind to firm-wide revenue for fiscal year 2026.
Booz Allen anticipates a 7% reduction in staff in the first quarter, heavily concentrated in the Civil business, due to contract impacts and restructuring.
The company faces challenges in redeploying staff due to slower-than-normal procurement processes, impacting its ability to quickly move talent to new opportunities.
There is less visibility into the forces shaping the business environment, leading to a cautious fiscal year 2026 outlook with anticipated lower revenue and profit growth in the first half.
Q & A Highlights
Q: In this environment of unpredictable descoping and cancellations, how do you get comfortable that you've got your arms around the impact and there's not potentially more to come throughout the year? A: Horacio Rozanski, CEO, explained that Booz Allen is experiencing two overlapping dynamics: a reset in their Civil business and continued strength in Defense and Intelligence. The Civil business is undergoing a one-time reset due to deceleration and procurement freezes, while Defense and Intel are seeing strong growth. The company is taking significant restructuring actions in Civil to position for future growth and is well-aligned with key missions and technologies.
Q: Can you discuss the reset and your expectations for multiyear growth in Defense and Civil? What are you hearing from congressional folks? A: Horacio Rozanski noted that the budgetary environment aligns with their observations, with a significant increase for defense and a focus on reducing discretionary spending in civilian agencies. The Civil business has mostly completed its reviews, while Defense and Intel are focusing on priorities like Indo-Pacific and space. Booz Allen is well-positioned with strong technology and partnerships to capture opportunities.
Q: How do you think about the low double-digit decline for Civil in fiscal '26, and what are the catalysts for stability in the business? A: Kristine Anderson, COO, stated that most Civil programs have been reviewed positively, with a short-term slowdown in burn rates as agencies position for transformation. Booz Allen's tech and talent have been well-received, and they are focusing on extending capabilities and converting contracts to outcome-based models to accelerate mission areas.
Q: How do you invest in the right things to adapt to the government's push for commercial terms in defense? A: Horacio Rozanski highlighted Booz Allen's partnerships and investments with commercial tech firms, from hyperscalers to start-ups. The company is recognized for missionizing commercial solutions and co-creating with partners. This trend is seen as a net positive, aligning with Booz Allen's strategy to integrate commercial technology into defense solutions.
Q: With the scrutiny on AI programs, has there been any change in your optimism for your AI business, particularly with the Department of Defense? A: Horacio Rozanski expressed strong optimism for Booz Allen's AI business, noting that AI is now embedded in many programs. The focus has shifted to rapid implementation and ensuring commercial technology is secure for missions. Booz Allen is well-positioned in areas like Agentic AI and cyber defense, with significant upside potential.
