Booz Allen Hamilton sells technology, cybersecurity, engineering, and advisory work to government agencies and businesses. In its second quarter of fiscal 2027, ended September 30, 2026, revenue fell 3.9% as weaker civil and commercial sales outweighed modest national security growth. Meanwhile, acquisitions and strategic investments consumed $1.089 billion in the first half, requiring both new borrowing and existing cash. The company is building a broader technology business while its established customer work is still recovering from delayed government purchases.
Analysis period: July–September 2026, with April–September comparisons where stated. Research cutoff: October 25, 2026, New York time; the latest company disclosures used are dated October 23.
Source: Booz Allen fiscal 2027 second-quarter Form 10-Q, consolidated statements, pp. 2 and 4; Note 3; management’s discussion, pp. 18–21.
1. Civil customers still account for the revenue decline
National security sales held up, but they did not replace the work lost elsewhere. Civil and commercial revenue fell by $125 million in the quarter. National security revenue rose by $13 million. Those two movements explain the entire $112 million decline in consolidated revenue.
Management traces the weakness mainly to slower government purchasing in the previous year. Programs consequently started more slowly this year, particularly for civil customers. Booz Allen then needed fewer employees and bought fewer services and materials to perform that work. The resulting loss of work continued to weigh on sales after the initial purchasing delays.
The same pattern appears across the first half, so it is not confined to one quarter.
| Consolidated revenue, $ millions | July–Sept. 2025 | July–Sept. 2026 | April–Sept. 2025 | April–Sept. 2026 |
|---|---|---|---|---|
| National security customers | 2,063 | 2,076 | 4,064 | 4,104 |
| Civil and commercial customers | 827 | 702 | 1,750 | 1,474 |
| Total reported revenue | 2,890 | 2,778 | 5,814 | 5,578 |
| Revenue excluding billable expenses, non-GAAP | 1,972 | 1,957 | 4,015 | 3,922 |
Source: Second-quarter 10-Q, Note 3, p. 8; revenue discussion, p. 18; non-GAAP reconciliation, p. 20. Customer categories are revenue groupings within one reporting segment, not separate profit segments.
The last row helps explain the size of the slowdown. Customers reimburse Booz Allen for subcontractors, travel, and other contract expenses. These amounts generally carry lower margins. Removing them leaves quarterly revenue down 0.8%, compared with the reported decline of 3.9%. Of the $112 million reported decline, $97 million came from lower billable expenses. The remaining business was more stable, although it still contracted and includes acquired operations.
National security revenue excluding billable expenses grew 5.9% in the quarter, management reported. That supports the case for stronger underlying activity, although it is a sales measure rather than a measure of profit.
Source: October 23 earnings presentation, slide 5; second-quarter 10-Q, pp. 19–20, definition of revenue excluding billable expenses.
The longer history shows a reversal from expansion. Annual revenue rose from $10.662 billion in fiscal 2024 to $11.980 billion in fiscal 2025, then fell to $11.217 billion in fiscal 2026. The current first-half decline of 4.1% extends that contraction, although it is smaller than the preceding full-year decline of 6.4%.
Source: Fiscal 2026 Form 10-K, consolidated statements of operations; second-quarter 10-Q, p. 2. Annual and first-half growth rates are separate like-period comparisons.
The wider market provides useful counterevidence to an industry-wide slump. CACI’s revenue for the same July–September 2026 period increased from $2.288 billion to $2.475 billion, or 8.2%; its disclosed growth excluding acquisitions was 2.1%. Its customer mix differs, so this is not a market-share calculation. It does show that government technology demand can grow while Booz Allen’s civil portfolio remains weak. Booz Allen needs the right funded programs, not simply higher overall government technology spending.
Source: CACI fiscal 2027 first-quarter results, October 21, 2026, “First Quarter Results” and accompanying revenue explanation. Both companies’ quarters ended September 30, 2026.
2. More funded work supports recovery, but unexercised options dominate backlog
Funded backlog grew about 5%, giving Booz Allen more authorized work to deliver. This is the strongest direct support for a sales recovery. It is more useful for judging near-term demand than treating every dollar of the much larger total backlog as a firm customer purchase.
| Backlog, $ millions | Sept. 30, 2025 | Sept. 30, 2026 |
|---|---|---|
| Work with funding authorized | 5,440 | 5,711 |
| Existing orders awaiting funding | 10,668 | 10,409 |
| Priced options customers may exercise | 24,080 | 24,813 |
| Total backlog | 40,188 | 40,933 |
Source: Second-quarter 10-Q, “Contract Backlog,” pp. 16–17. The acquisition of Ultra Mission Solutions brought approximately $164 million of backlog at its acquisition date; its subsequent contribution is not separately reconciled.
About 61% of total backlog consists of options customers have not exercised. Those customers must decide to proceed, obtain funding, and schedule the work before Booz Allen can earn the associated revenue. Even existing orders may await government funding. The filing explicitly says slower procurement and reductions in contract value have impeded conversion of backlog into sales.
A narrower accounting measure covers contracted work whose options have already been exercised: remaining performance obligations. That balance reached $11.8 billion, up from $10.7 billion at March 31. Management expects about 65%, or a calculated $7.67 billion, to become revenue over the following 12 months. This measure still includes work awaiting funding and overlaps with backlog; the two balances must not be added together.
The funding pipeline has also been steadier than the total backlog headline might suggest. Additions to funded backlog over the preceding 12 months were $11.3 billion, versus $11.4 billion a year earlier. Turning this opportunity into revenue requires faster program starts and delivery.
Source: Second-quarter 10-Q, Note 3, “Performance Obligations,” p. 8; backlog definitions, funding additions, and conversion risks, pp. 16–17.
3. Lower taxes lifted quarterly net income while operating profit fell
The quarter’s profit increase came from below the operating-profit line. Booz Allen earned less from delivering its work after operating expenses. A lower tax charge more than offset the decline in pretax profit.
| Consolidated reported results, $ millions except EPS and margins | July–Sept. 2025 | July–Sept. 2026 | April–Sept. 2025 | April–Sept. 2026 |
|---|---|---|---|---|
| Operating profit | 283 | 245 | 540 | 524 |
| Operating margin | 9.79% | 8.82% | 9.29% | 9.39% |
| Profit before income taxes | 233 | 199 | 449 | 450 |
| Income tax expense | 58 | 18 | 3 | 71 |
| Net income | 175 | 181 | 446 | 379 |
| Net income margin | 6.06% | 6.52% | 7.67% | 6.79% |
| Diluted earnings per share, dollars | 1.42 | 1.50 | 3.58 | 3.13 |
Source: Second-quarter 10-Q, consolidated statements of operations, p. 2; Notes 4 and 9. Margins divide the specified reported profit by revenue.
The quarterly operating-profit decline is fully explained by the income statement. Revenue fell $112 million. Contract delivery costs and billable expenses fell by a combined $104 million, but administrative expenses increased $20 million and depreciation and amortization increased $10 million. Operating profit therefore fell $38 million. Management identifies acquisition-related professional fees and amortization of purchased assets as important cost pressures.
Below operating profit, net interest expense increased $4 million, while other income improved $8 million. Management mainly links the interest increase to lower interest earned on smaller cash balances. Other income included an additional $10 million gain tied to contracts previously sold, partly offset by other movements. Pretax profit consequently fell $34 million. Tax expense then fell $40 million, leaving net income $6 million higher. Management attributes the quarterly tax-rate reduction, from 24.9% to 9.0%, to planning that increased deductions for eligible foreign-derived income.
The first-half comparison has the opposite tax distortion. Last year included an $86 million reduction in reserves for uncertain tax positions following IRS examination procedures. That benefit did not repeat. First-half pretax profit was almost unchanged, but net income declined 15.0% because tax expense increased sharply. Last year also included $30 million of severance and related costs within cost of revenue that were absent this year, helping the current operating comparison.
Source: Second-quarter 10-Q, Note 9, p. 12; cost, other-income, and tax explanations, pp. 18–19.
Management’s adjusted EBITDA removes taxes, net interest and other income, and selected corporate costs. It also removes depreciation and amortization—the gradual charging of equipment, software, and other asset costs against profit. On that basis, quarterly earnings fell 3.4% to $313 million, while first-half earnings rose 1.9% to $647 million. The complete bridge appears in the calculation notes. This presents a steadier first half, but still shows a weaker second quarter. It also removes acquisition expenses and the continuing accounting cost of acquired assets, so it should not be read as cash left over after investment.
Fewer shares helped reported quarterly EPS rise 5.6%, faster than net income’s 3.4% increase. Weighted-average diluted shares fell 2.7% to 119.6 million. Across the first half, the smaller share base softened the EPS decline to 12.6%, versus the 15.0% decline in net income. Repurchases changed how earnings were divided; they did not increase total operating profit.
Source: Second-quarter 10-Q, Note 4, p. 9; non-GAAP reconciliation, p. 20. Reported EPS also allocates a small amount of earnings to participating stock awards, as explained in the calculation notes.
4. Acquisitions add products and sales channels before their benefits are proven
Booz Allen is buying capabilities that fit its technology strategy, with substantial cash and integration costs arriving first. Ultra Mission Solutions adds defense software, encryption, and computing used near military operations. Management intends to combine those products with Booz Allen’s existing defense technology and customer relationships. Defy Security adds cybersecurity customers, vendor relationships, and a sales network that can distribute products such as Booz Allen’s Vellox cyber tools.
Sources: Ultra acquisition completion announcement, August 24, 2026; Booz Allen’s Defy acquisition announcement, April 7, 2026.
The financial commitment is already visible. The 10-Q records approximately $729 million for Ultra, acquired August 24, and $235 million for Defy, acquired April 6. Ultra therefore contributed for only part of the second quarter. A full period of ownership should add more acquired activity to future comparisons, but the filing does not separately quantify either acquisition’s revenue and profit contribution. The reported growth rates therefore include acquired activity without showing its separate contribution.
| Assets affected by expansion, $ millions | March 31, 2026 | Sept. 30, 2026 |
|---|---|---|
| Goodwill | 2,399 | 3,028 |
| Identifiable intangible assets, net | 509 | 855 |
| Investments in funds and other businesses | 344 | 519 |
| Other long-term assets, including those investments | 637 | 898 |
Source: Second-quarter 10-Q, balance sheet, p. 1; Notes 5 and 10. Investments are included within other long-term assets and are not an additional asset category to add to that row. Purchase accounting remains provisional to the extent described in Note 5.
The acquisitions explain all $629 million of new goodwill—the amount paid above the identified net assets of the purchased businesses. They also brought $372 million of identifiable intangible assets, primarily customer relationships and technology. Goodwill and net intangible assets together now represent about 47% of total assets. Their economic value depends on future customer work and product earnings; they cannot pay wages or repay debt today.
The expansion also fits a change in how federal customers want to buy. The April 30 executive order directs agencies toward fixed-price contracts, subject to exceptions. Under these arrangements, Booz Allen can keep more of the benefit from delivering an agreed result efficiently. It also bears more of the cost when delivery takes longer or costs more than expected.
First-half fixed-price revenue rose 6.6% to $1.137 billion, reaching about 20% of sales, while cost-reimbursable and time-and-materials revenue fell. This is evidence of a changing contract mix, not a disclosed measure of product profitability. Because profit on long projects depends on estimates of total delivery costs, poor estimates can reduce earnings before the final bill is paid.
Sources: White House executive order, April 30, 2026, sections 2–3; second-quarter 10-Q, Note 3 and management’s discussion, p. 16; fiscal 2026 10-K, “Revenue Recognition and Cost Estimation.”
Booz Allen brings experience that new entrants may lack: approximately 77% of its employees held security clearances at March 31, based on voluntary reporting. But procurement reforms also make it easier for new suppliers to compete. Its advantage will depend on combining trusted access with products that deliver better results at an acceptable cost.
Sources: Fiscal 2026 10-K, “Competition” and “Our People and Culture”; second-quarter 10-Q, procurement-reform discussion, pp. 15–16.
5. Operations funded regular spending, but expansion reduced the cash cushion
Cash generation improved over the first half, yet investment spending exceeded the cash the business produced. Operating cash flow increased from $540 million to $575 million. After $51 million spent on property, equipment, and software, $524 million remained. This is free cash flow as defined here, before acquisitions, strategic investments, and financing payments.
| Cash sources and uses, $ millions | April–Sept. 2025 | April–Sept. 2026 |
|---|---|---|
| Cash generated by operations | 540 | 575 |
| Capital spending paid | 49 | 51 |
| Free cash flow, calculated | 491 | 524 |
| Cash dividends paid | 138 | 145 |
| Cash share repurchases | 395 | 170 |
| Cash remaining after those payments, calculated | -42 | 209 |
| Acquisition and disposition payments, net of acquired cash | 0 | 934 |
| Strategic investment payments | 12 | 155 |
Source: Second-quarter 10-Q, consolidated cash-flow statement, p. 4. Capital spending and other uses are shown as positive payments; each remainder subtracts the listed payments. Free cash flow is a non-GAAP calculation.
The company sharply reduced cash repurchases, leaving $209 million after capital spending, dividends, and buybacks. That provided more room for investment than a year earlier. It still fell well short of the $1.089 billion spent on acquisitions and strategic investments. Net cash raised from debt, after term-loan repayments, supplied $466 million. Share issuance supplied another $20 million. Cash reserves supplied the remaining $394 million, taking the cash balance from $728 million to $334 million.
The first-half increase also hides a weaker latest quarter: July–September operating cash flow fell from $421 million to $294 million. Management chiefly attributed the quarterly decline to lower revenue volume. The business has not yet returned to consistent cash-flow growth.
Source: October 23 earnings presentation, slides 12 and 16. These cash flows cover the quarter alone.
The first-half cash improvement also needs a timing explanation. Amounts owed to suppliers and other accrued expenses added $111 million to operating cash flow, versus $23 million last year. Other current and long-term liabilities contributed $6 million, compared with a $109 million use last year. These changes mean that less cash was absorbed by paying obligations relative to the expenses recorded.
Customers had the opposite effect: receivable movements used $46 million of cash this year, versus providing $54 million last year. Cash taxes paid fell from $41 million to $14 million. These payment and collection differences help explain why operating cash rose while net income fell. Their contribution depends on when the next customer receipts and supplier payments occur.
Source: Second-quarter 10-Q, cash-flow statement, p. 4; operating cash-flow explanation, p. 21.
The balance-sheet receivable increase is much larger than the operating cash-flow effect because Booz Allen purchased receivables along with Defy. Current receivables rose $285 million to $2.348 billion, while supplier and other accrued obligations rose $330 million to $1.239 billion. Defy brought $221 million of current receivables at acquisition. Defy also brought $89 million of long-term unbilled receivables and $297 million of current and long-term supplier and accrued obligations. These acquired balances explain much of the expansion on both sides of the balance sheet.
Unbilled receivables are work already recorded as revenue for which the customer has not yet been invoiced. Current unbilled amounts rose from $1.509 billion to $1.711 billion, and long-term amounts from $58 million to $142 million. The filing attributes most of the contract-asset increase to Defy. Treating all of it as slower collection by the existing business would therefore misread the acquisition.
Source: Second-quarter 10-Q, Notes 3 and 5, pp. 8–10. Acquired balances are acquisition-date amounts; they do not provide a complete roll-forward to September 30.
Physical property and equipment remained broadly steady at $167 million, versus $171 million at March 31. The larger investment story is acquisitions, software, and venture investments. The company discloses capital spending for computers, business systems, furniture, and leasehold improvements, but no maintenance-versus-growth split. The $51 million cash-spending figure also excludes $26 million of unpaid purchases reported at September 30.
Source: Second-quarter 10-Q, balance sheet and cash-flow supplement, pp. 1 and 4; liquidity discussion, p. 21.
6. Refinancing pushed out repayment dates while increasing debt and fixed commitments
Booz Allen pushed back a major repayment, but now carries more debt against less cash. The company issued $1.2 billion of bonds and repaid the term loan previously due in September 2027. Part of the financing also supported Ultra’s acquisition.
Total principal outstanding rose from $3.964 billion to $4.441 billion. The balance-sheet carrying amount is slightly lower because it deducts unamortized financing costs and discounts. On that carrying-value basis, debt less cash rose from $3.212 billion to $4.076 billion in six months.
| Financing debt at Sept. 30, 2026 | Principal, $ millions | Stated annual interest rate | Final maturity |
|---|---|---|---|
| Term loan A-2 | 741 | 4.936% | February 2031 |
| Senior notes | 700 | 3.875% | September 2028 |
| Senior notes | 500 | 4.000% | July 2029 |
| Senior notes | 700 | 5.375% | January 2030 |
| Senior notes | 650 | 5.950% | August 2033 |
| Senior notes | 500 | 5.900% | January 2034 |
| Senior notes | 650 | 5.950% | April 2035 |
| Total principal | 4,441 | — | — |
Source: Second-quarter 10-Q, Notes 8 and 10, pp. 11–14. The term-loan rate is variable and shown at September 30. The loan requires scheduled repayments before its final maturity; $19 million of total financing debt is classified as current. Financing debt excludes operating leases and ordinary supplier obligations.
The six groups of bonds require a calculated $191.6 million of annual interest while their current principal remains outstanding. Applying the September term-loan rate to its balance adds approximately $36.6 million before hedging, fees, and amortization. This is a snapshot of contractual interest costs, not a forecast of net interest expense. The company also has agreements that convert interest on $200 million of variable-rate borrowing to fixed rates until June 2027.
Booz Allen had $1.5 billion of unused revolving credit alongside $334 million of cash. The revolver extends to February 2031. Access to it gives the company room to manage uneven customer payments and investment needs, though drawings would add debt and interest expense.
The credit agreement limits net debt relative to a defined earnings measure. Its normal ceiling is 4.0 times, with a conditional 0.5-times increase available after a qualifying acquisition. Booz Allen reported compliance at September 30. The legal calculation has its own definitions and acquisition provisions; an ordinary debt-to-profit calculation does not establish the remaining borrowing capacity under that covenant.
Sources: Second-quarter 10-Q, Notes 8 and 10; February 27, 2026 credit amendment, Exhibit A, section 7.1 and revolving-facility terms. Coupon and term-interest calculations appear in the notes below.
Office commitments increased as well. Total recognized operating lease liabilities rose from $182 million to $298 million, while the related right to use leased property rose from $147 million to $257 million. Newly recognized lease-use rights brought $122 million of lease obligations during the quarter. Its two 15-year Reston headquarters leases carry estimated undiscounted base payments of $240 million, with up to $61 million of tenant-improvement allowances. The planned move is in fall 2027, subject to completing improvements. The $240 million is future base rent over the lease terms, not another current debt balance to add to recognized lease liabilities.
Venture funds create another call on future cash. Their carrying value reached $313 million, and Booz Allen still had $187 million committed but not yet funded. These investments may provide access to useful technologies, but they leave less discretion over future cash than an entirely uncommitted investment budget.
Source: Second-quarter 10-Q, balance sheet; Notes 10–11, pp. 12–14. The two venture funds are disclosed as related parties.
7. Government audits and tax reviews leave meaningful amounts unsettled
Some recorded assets and obligations depend on government decisions that Booz Allen does not control. The company carried $182 million of long-term tax refund claims, up from $178 million at March 31. The claims await Joint Committee on Taxation review. They are receivables, not available cash. Separately, reserves for uncertain tax positions rose from $75 million to $85 million, mainly relating to research and development credits. Deferred tax assets declined from $294 million to $219 million; that accounting balance is also distinct from cash refunds expected from amended returns.
Government agencies can challenge whether costs charged to contracts were allowable. Booz Allen’s liability for estimated adjustments to those claimed costs was $249 million, compared with $248 million at March 31. It is already included in accounts payable and other accrued expenses. It should not be added again as a new funding obligation or confused with financing debt.
The filing also identifies pending investigations involving labor-time reporting, procurement integrity, and classified-information access. Management does not expect the currently known matters to materially harm financial condition or results, but acknowledges that outcomes could be materially adverse. It supplies no quantified additional reasonably possible loss range. The business exposure extends beyond a settlement: failure to protect information or comply with contracts could damage customer relationships. The filing also warns that the January 7 executive order could restrict dividends and buybacks if Booz Allen were designated an underperforming defense contractor.
Source: Second-quarter 10-Q, balance sheet; Notes 6, 9, and 11, pp. 10–14; executive-order discussion, p. 16. Tax reserves, refund receivables, deferred tax assets, and contract-cost liabilities have different purposes and are not netted here.
8. The full-year plan requires sales to recover in the second half
Management’s outlook requires a change from declining sales to growth. Its October update narrowed the revenue range, raised the lower end of adjusted EBITDA guidance, and reduced the assumed tax rate. The larger EPS increase therefore should not be treated as an equivalent improvement in operating demand.
| Fiscal 2027 management forecasts | July 24 outlook | October 23 outlook |
|---|---|---|
| Revenue, $ billions | 11.2–11.7 | 11.3–11.6 |
| Adjusted EBITDA, $ billions | 1.24–1.29 | 1.26–1.29 |
| Adjusted diluted EPS, dollars | 6.00–6.35 | 6.50–6.70 |
| Free cash flow, $ millions | 825–925 | 850–925 |
| Adjusted effective tax rate | 20%–23% | 16%–19% |
| Capital spending, $ millions | 220 | 200 |
Sources: July 24 earnings presentation, slide 7; October 23 earnings presentation, slide 7. These are management forecasts. Adjusted profit, EPS, tax rate, and free cash flow are non-GAAP measures; management did not provide forward GAAP profit reconciliations because specified inputs could not be reliably predicted.
The sales range requires approximately 5.9%–11.5% revenue growth in October–March compared with the same six months a year earlier. The calculation below uses actual prior-year sales and subtracts revenue already earned from the full-year forecast. More months of Ultra ownership and higher funded backlog support that possibility. Continued civil weakness remains the clearest obstacle.
Sources: Second-quarter 10-Q, first-half revenue and acquisition dates; fiscal 2026 10-K, annual revenue; October presentation, slide 7, forecast input.
The capital-spending plan also places more payments in the second half: $149 million remains against the $200 million full-year assumption. July’s plan included $105 million for the new headquarters, but the October update does not give a revised headquarters allocation. The headquarters remains a disclosed investment purpose, while its latest share of planned spending is unspecified.
Sources: Second-quarter 10-Q, p. 4, capital spending paid; July presentation, slide 7, headquarters allocation; October presentation, slide 7, updated total.
The filing says temporary federal funding runs through December 11, 2026. Delays in subsequent appropriations could slow program starts even where customers want the work. Separately, the company is combining intelligence and global-defense leadership under Tom Pfeifer, with the related leadership change effective November 2. That may help coordinate national security delivery, but no quantified savings or revenue benefit is disclosed.
Source: Second-quarter 10-Q, budgetary discussion, p. 16; Part II, Item 5, “Leadership Updates,” disclosed October 23. The coordination benefit is an inference, not management guidance.
9. The business has room to execute, but the recovery must come from delivered work
Booz Allen has a credible route to recovery, with less financial flexibility than six months ago. National security demand, more funded backlog, and acquired products support the strategy. The shift toward fixed-price outcomes can reward efficient delivery, and the company has extended debt maturities and retained an unused credit facility.
The test is whether those strengths produce enough additional work and profit to offset civil weakness and the costs of expansion. Lower taxes and fewer shares explain part of the reported earnings improvement, while payment timing helps explain cash generation. Neither substitutes for the sales recovery required by management’s forecast.
A stronger assessment would follow from funded programs starting on schedule, the civil decline easing, and acquired products contributing profit and cash after integration costs. Further purchasing delays or cost overruns would instead leave a larger debt balance and new lease commitments supported by a business that is still shrinking. That is the central operating trade-off behind this quarter’s results.
Calculation notes
Reporting basis: Booz Allen Hamilton Holding Corporation and its consolidated subsidiaries; unaudited U.S. GAAP interim accounts. Form 10-Q, SEC accession 0001628280-26-066973, filed October 23, 2026, for September 30, 2026. Fiscal 2027 ends March 31, 2027. Quarter comparisons cover July 1–September 30; first-half comparisons cover April 1–September 30. Balance-sheet comparisons use March 31 and September 30, 2026. Dollars are U.S. dollars. The separate issuer-and-guarantor summary on page 22 is excluded from consolidated calculations.
Source: SEC filing metadata; 10-Q cover, Note 2, and consolidated accounts. Key statement amounts were cross-checked with SEC company facts, selecting this accession, dollar units, and the actual period start and end dates. Fiscal-period labels alone were not used to select durations.
Calculation notes: The following bridge shows exactly what management removes from reported net income. Tax expense is added back in full; the remaining adjustments are before tax. “Net interest less other income” combines net interest expense with the removal of other income. Corporate adjustments mainly concern acquisitions this year; the prior first half included selected restructuring and transaction costs. Stock compensation remains an expense in this measure.
| Reported-to-adjusted bridge, $ millions | July–Sept. 2025 | July–Sept. 2026 | April–Sept. 2025 | April–Sept. 2026 |
|---|---|---|---|---|
| Reported net income | 175 | 181 | 446 | 379 |
| Add income tax expense | 58 | 18 | 3 | 71 |
| Add net interest less other income | 50 | 46 | 91 | 74 |
| Add depreciation and amortization | 41 | 51 | 81 | 96 |
| EBITDA, company definition | 324 | 296 | 621 | 620 |
| Add selected corporate expenses | 0 | 17 | 14 | 27 |
| Adjusted EBITDA | 324 | 313 | 635 | 647 |
Source: Second-quarter 10-Q, non-GAAP definitions and reconciliation, pp. 19–20. Adjusted EBITDA is neither GAAP operating profit nor free cash flow.
Calculation notes: Profit becomes operating cash after removing expenses and gains that did not themselves use or produce cash in the period, then accounting for when customers, suppliers, employees, and tax authorities were paid.
| Profit-to-cash reconciliation, $ millions | April–Sept. 2025 | April–Sept. 2026 |
|---|---|---|
| Net income | 446 | 379 |
| Depreciation, amortization, noncash lease cost, and stock compensation, less investment/disposition gains | 138 | 134 |
| Receivable movement | 54 | -46 |
| Deferred taxes and income taxes receivable/payable | 78 | 35 |
| Prepayments and other asset movements | -77 | -58 |
| Compensation and benefit obligations | -13 | 14 |
| Supplier and accrued-expense obligations | 23 | 111 |
| Other liability movements | -109 | 6 |
| Operating cash flow | 540 | 575 |
Source: Second-quarter 10-Q, p. 4. The grouped noncash amounts are 81 + 25 + 36 − 4 = 138 for 2025 and 96 + 22 + 44 − 28 = 134 for 2026. The tax row already participates in the reconciliation; lower cash taxes are not added again.
Calculation notes: The current first-half cash balance reconciles in $ millions as opening cash 728 + operating cash 575 − investing cash 1,140 + financing cash 171 = closing cash 334. Investing uses equal capital spending 51 + net acquisition/disposition payments 934 + strategic investments 155. Financing cash equals net debt-issuance proceeds 1,190 − term-loan repayments 724 + share-issuance proceeds 20 − cash repurchases 170 − cash dividends 145. The cash-flow statement reconciles cash and cash equivalents and presents no separate restricted-cash adjustment. Acquisition purchase consideration of 729 + 235 = 964 differs in scope from the 934 cash-flow line, which includes dispositions and is net of cash acquired; these are different measurements of the transactions.
Source: Second-quarter 10-Q, cash-flow statement and Note 5.
Calculation notes: Equity—the assets left after subtracting liabilities—increased by $139 million. Paid-in capital records share issues and awards; retained earnings accumulate profits after dividends. Treasury stock records the cost of shares bought back. Other comprehensive income records specified gains and losses outside net income. The table reconciles these components; the $144 million dividend entry and $160 million repurchase entry are equity-statement amounts, distinct from the $145 million and $170 million cash payments above. Cash issuance proceeds of $20 million also differ from the $18 million of issuance and option-exercise entries in equity. The filing does not fully bridge these cash-versus-equity differences.
| Equity reconciliation, $ millions | March 31, 2026 | Six-month change | Sept. 30, 2026 |
|---|---|---|---|
| Common stock | 2 | 0 | 2 |
| Additional paid-in capital | 1,155 | 62 | 1,217 |
| Retained earnings | 3,644 | 235 | 3,879 |
| Treasury stock, deducted from equity | -3,673 | -160 | -3,833 |
| Accumulated other comprehensive loss | -23 | 2 | -21 |
| Total equity | 1,105 | 139 | 1,244 |
Calculation notes: Paid-in capital increased by share issuance 14 + option exercises 4 + stock compensation 44 = 62. Retained earnings increased by net income 379 − equity-statement dividends 144 = 235. The $2 million improvement in accumulated other comprehensive loss comprises $1 million each from hedges and postretirement-plan adjustments. Assets reconcile as 8,308 = liabilities 7,064 + equity 1,244 at September 30, and 7,118 = 6,013 + 1,105 at March 31.
Shares issued increased by 866,023 while treasury shares increased by 2,110,375, leaving outstanding shares lower by 1,244,352 at 119,096,968. These are purchases held in treasury, not reported share retirements. Stock compensation was $44 million, versus $36 million a year earlier. Quarterly EPS uses $179 million allocated to common shares and 119.592 million diluted shares; first-half EPS uses $375 million and 119.887 million shares. These profit amounts are below consolidated net income because certain employee and other stock awards also receive a share of earnings.
Source: Second-quarter 10-Q, pp. 1, 3–5; Note 4. Treasury-stock additions include $149 million of program purchases and $11 million of associated tax-related amounts.
Calculation notes: Growth equals current-period amount divided by the matching prior-period amount, minus one. Margins equal the specified profit divided by revenue; changes in margins are percentage-point changes. The quarterly revenue bridge is national security +13 and civil/commercial −125 = total −112, all in $ millions. Second-half revenue last year equals fiscal 2026 revenue 11,217 − first-half revenue 5,814 = 5,403. Current guidance implies 11,300 to 11,600 − first-half revenue 5,578 = 5,722 to 6,022. Each endpoint is compared with 5,403 to obtain 5.9%–11.5% growth.
The annual bond-interest calculation, in $ millions, is 700 × 3.875% + 500 × 4.000% + 700 × 5.375% + 650 × 5.950% + 500 × 5.900% + 650 × 5.950% = 191.6. Term-loan interest at the September rate is 741 × 4.936% = 36.6 before hedges, fees, and principal changes. Debt carrying value equals principal 4,441 − unamortized issuance costs and discounts 31 = 4,410. Debt less cash equals 4,410 − 334 = 4,076, versus 3,940 − 728 = 3,212 at March 31.
Sources: Second-quarter 10-Q, statements and Notes 3, 8, and 10; fiscal 2026 10-K, annual revenue; October presentation, slide 7, revenue forecast. Calculations use published rounded figures, so small rounding differences are possible.
Reporting basis: The evidence cutoff is October 25, 2026, New York time. The latest company financial and governance evidence reviewed is the October 23 filing and earnings materials. This analysis incorporates the disclosed post-quarter developments above; it does not claim an exhaustive review of all events through the cutoff.
This analysis is for general information and is not investment advice.