Booz Allen Hamilton Holding Corp. (NYSE:BAH) had a decent quarter on paper. The technology consulting company reported better-than-expected second-quarter fiscal 2027 earnings and raised its full-year profit outlook. But the stock fell Friday anyway, because revenue missed Wall Street estimates and the company's civil business showed real weakness.

Revenue declined 3.9% to $2.778 billion, missing the $2.809 billion analysts were looking for. The culprit? Slower government procurement in the prior year, which delayed program starts in the current year, particularly among civil customers. Those delays reduced staffing levels and billable expenses.

Earnings Beat, Revenue Miss

Booz Allen reported adjusted earnings of $1.76 per share, up 18.1% year over year and well above the $1.49 consensus estimate. Net income rose 3.4% to $181 million, while adjusted net income increased 15.3% to $211 million.

Adjusted EBITDA fell 3.4% to $313 million, though the adjusted EBITDA margin improved 10 basis points to 11.3%. Revenue excluding billable expenses declined 0.8% to $1.957 billion.

The company attributed the revenue decline primarily to slower government procurement in the prior year, which delayed program starts in the current year, particularly among civil customers. The delays reduced staffing levels and billable expenses.

Civil Business Weakness Weighs on Growth

National Security revenue edged higher to $2.076 billion from $2.063 billion a year earlier. But Civil and Commercial revenue dropped to $702 million from $827 million, offsetting gains in the national security business.

Total backlog increased 1.9% to $40.933 billion, including $5.711 billion in funded contracts. The company reported a quarterly book-to-bill ratio of 1.5 times, indicating that new bookings exceeded revenue during the period. The trailing 12-month ratio stood at 1.1 times.

Cash Flow Weakens As Debt Rises

Operating cash flow declined to $294 million from $421 million, while free cash flow fell to $263 million from $395 million.

Booz Allen ended the quarter with $334 million in cash and $4.410 billion in total debt. Its net leverage ratio stood at 3.3 times.

Lower income-tax expenses and an additional $10 million earnout gain tied to contracts sold in the fourth quarter of fiscal 2026 supported net income. However, lower revenue and higher acquisition-related amortization partly offset those benefits.

The company deployed $965 million during the quarter, including $795 million for acquisitions and strategic investments and $170 million returned to shareholders.

Booz Allen Raises Full-Year Profit Outlook

Booz Allen raised its fiscal 2027 adjusted earnings guidance to $6.50-$6.70 per share from $6.00-$6.35. The updated range has a midpoint of $6.60 per share.

The company also narrowed its annual revenue forecast to $11.3 billion-$11.6 billion from $11.2 billion-$11.7 billion. Wall Street expects $11.422 billion.

Booz Allen expects adjusted EBITDA of $1.26 billion-$1.29 billion and free cash flow of $850 million-$925 million.

The outlook assumes an effective tax rate of 16%-19%, diluted shares outstanding of 118 million-120 million and capital expenditures of approximately $200 million.

Despite the stronger earnings outlook, investors weighed declining revenue, weakness in the civil business and lower cash flow.

BAH Price Action: Booz Allen Hamilton shares fell 5.55% to $74.21 at the time of publication Friday, according to market data.