Science Applications International (SAIC) proved Thursday that sometimes you can do more with less, reporting fiscal third-quarter 2026 earnings that sent shares climbing despite a noticeable revenue decline.
The defense contractor's quarterly sales dropped 6% year-over-year to $1.87 billion, falling short of the $1.89 billion analysts had anticipated. But here's where it gets interesting: adjusted earnings per share came in at $2.58, blowing past the consensus estimate of $2.15 by a comfortable margin.
SAIC provides technical, engineering, and enterprise information technology services primarily for defense, space, civilian, and intelligence markets—the kind of mission-critical work that keeps government operations running.
Margins Hold Steady Despite Headwinds
Operating income for the quarter fell 20% to $128 million, with the operating margin declining 120 basis points to 6.9%. On an adjusted basis, operating income reached $183 million with a 9.8% margin.
Adjusted EBITDA decreased 6% to $185 million, yielding a 9.9% margin—down just 10 basis points from the prior year period.
The quarter delivered some encouraging operational metrics. Net bookings totaled approximately $2.2 billion, translating to a healthy book-to-bill ratio of 1.2. That suggests future revenue pipeline remains robust even as current sales face pressure.
Operating cash flow came in at $129 million for the quarter, while free cash flow was $135 million. The company's estimated backlog stood at approximately $23.8 billion, with $3.8 billion of that already funded.
As of October 31, 2025, SAIC held $45 million in cash and equivalents. The Board of Directors declared a quarterly cash dividend of $0.37 per share.
Interim CEO Jim Reagan noted that the quarterly results showed a 5.6% revenue contraction, slightly better than guidance after factoring in an estimated 1% headwind from the government shutdown. He highlighted strong margins driven by continued solid program execution.
Raised Guidance Tells the Real Story
Despite the revenue miss, Science Applications bumped up its fiscal 2026 revenue outlook to $7.275 billion-$7.325 billion from a prior range of $7.250 billion-$7.325 billion. That compares to the analyst consensus of $7.290 billion.
More notably, the company raised its annual adjusted EPS outlook to $9.80-$10.00, up from the previous forecast of $9.40-$9.60. That's comfortably above the consensus estimate of $9.55 and represents a meaningful upward revision.
SAIC also increased its fiscal year 2026 adjusted EBITDA outlook to $695 million from the previous range of $680 million-$690 million, while maintaining its free cash flow guidance of more than $550 million.
Shares responded positively to the earnings beat and guidance raise, climbing 5.68% to $92.50 in premarket trading Wednesday.
