Abstract

Science Applications will release fiscal Q1 2026 results on June 01, 2026 Pre-Market.

Market Forecast

Consensus models for Science Applications indicate fiscal Q1 2026 revenue of 1.82 billion US dollars, down 2.44% year over year, EBIT of 147.13 million with 7.16% YoY growth, and EPS of 2.29 with 7.36% YoY growth; the company exited last quarter with a gross margin of 13.03%, a net margin of 4.86%, and adjusted EPS of 2.62, setting a baseline for incremental margin expansion this quarter. Management’s mix remains concentrated in U.S. federal services, with the Department of Defense and intelligence agencies driving most revenue; the outlook highlights ongoing program ramps and disciplined cost control. The most promising segment is the Department of Defense business at 3.78 billion US dollars revenue last quarter, where stable demand and recompete wins provide a foundation for mid‑single‑digit growth despite budget timing variability.

Last Quarter Review

Science Applications posted revenue of 1.75 billion US dollars, a gross margin of 13.03%, net income attributable to shareholders of 85.00 million, a net margin of 4.86%, and adjusted EPS of 2.62, with revenue down 4.79% year over year and adjusted EPS up 1.95%. A key highlight was EBIT of 179.00 million, beating consensus by 24.04% and demonstrating resilient project execution and overhead leverage. Main business highlights included sustained contributions from the Department of Defense at 3.78 billion US dollars revenue and Intelligence and other federal agencies at 3.30 billion, while Commercial, State, Local and International contributed 181.00 million; the mix underscores the franchise’s concentration in U.S. federal demand.

Current Quarter Outlook

Main federal services engine

Science Applications’ core federal services franchise anchors near‑term results. With fiscal Q1 2026 revenue modeled at 1.82 billion US dollars, guidance implies a modest year‑over‑year decline as the company laps a tougher prior‑year comp and navigates funding timing. Margin set‑up is supported by last quarter’s 13.03% gross margin and 4.86% net margin; incremental cost discipline, favorable labor utilization, and a richer mix of high‑value engineering and digital solutions could lift EBIT to the 147.13 million range, up 7.16% year over year. Execution around recompetes and on‑contract growth is the swing factor for revenue trajectory through the quarter.

Program cadence and backlog conversion remain central to revenue visibility. Contract ramps in cyber, IT modernization, and enterprise cloud support services typically carry better pricing mix than legacy staff augmentation, supporting the modeled EPS of 2.29, up 7.36% year over year. The quarter’s revenue decline of 2.44% year over year appears more a function of timing than end‑market demand, with sequential momentum helped by an 8.97% quarter‑on‑quarter improvement in net income exiting the prior period.

Department of Defense momentum

The Department of Defense business, at 3.78 billion US dollars last quarter, represents the largest and most durable growth platform. Recompete activity and contract expansions in mission engineering, digital integration, and classified programs help stabilize the base and can provide mid‑single‑digit growth if award timing tracks to plan. Given the scale and mission‑critical profile, DOD programs often support steadier labor utilization and better pass‑through dynamics, which align with the quarter’s margin expansion narrative.

Ramping task orders tied to modernization, zero trust architecture, and software‑defined solutions create opportunities for mix improvement. If award conversions proceed on schedule, EBIT growth of 7.16% and EPS growth of 7.36% year over year are attainable despite the modest top‑line dip. The main risk is slippage in starts or protests on key awards, which could defer revenue recognition and pressure operating leverage.

Intelligence and other federal agencies

The Intelligence and other federal agencies portfolio contributed 3.30 billion US dollars last quarter and remains a significant revenue pillar. These programs tend to feature multi‑year scope and sensitive mission sets, which can yield high renewal rates and pricing stability. With continued demand for analytics, AI‑supported decision tools, and secure cloud integration, this portfolio can provide consistent backlog burn through the quarter, buffering volatility elsewhere.

The sensitivity here lies in security‑clearance labor availability and the pace of task order issuance. Efficient staffing on classified programs is a key determinant of gross margin attainment near the recent 13.03% benchmark. Should staffing efficiency and awarded scope track to plan, the segment can support the forecast EPS outcome even if overall revenue is slightly lower year over year.

Commercial, state, local, and international

Commercial, state, local, and international activities accounted for 181.00 million US dollars last quarter, a comparatively small share of mix. While this portfolio offers diversification and potential for innovation pilots, it has limited impact on the quarter’s consolidated revenue. Where it can matter tactically is in margin mix: select digital modernization and data engineering projects can contribute favorable gross margin if milestones are met.

Given the smaller base, quarter‑to‑quarter variability is common and should not overshadow the broader federal engine. A handful of contract wins or milestone completions could still provide upside to EBIT if realized late in the quarter, though it is not embedded in the 147.13 million EBIT forecast.

Stock price drivers this quarter

For this print, three variables matter most for the stock: margin delivery versus the 13.03% gross and 4.86% net baselines, revenue timing versus the 1.82 billion US dollars model, and EPS quality around the 2.29 estimate. If EBIT tracks the 147.13 million projection and EPS lands near the 2.29 mark with clear commentary on backlog, investors may lean on expanding free cash conversion in subsequent quarters. Conversely, any signs that recompete timing is slipping or that utilization softened would raise questions about the durability of margin expansion.

Management’s color on the pace of modernization awards, staffing pipelines, and pricing on new task orders will inform whether the mild revenue contraction is temporary. A reiteration of full‑year trajectories alongside evidence of continued quarter‑on‑quarter improvement in profitability would likely be received favorably.

Analyst Opinions

The balance of recent institutional commentary leans bullish, centered on resilient margins and improving EPS despite a slight revenue decline; bullish views outnumber bearish ones by a clear margin based on the latest previews and rating updates. Analysts argue that steady DOD and intelligence demand, improved cost control, and a higher‑value solutions mix underpin the forecast EBIT of 147.13 million and EPS of 2.29, with a pathway to year‑over‑year EPS growth even as revenue contracts modestly. Several well‑followed firms have highlighted the quarter‑on‑quarter acceleration in profitability and the company’s track record of execution on complex federal programs as key supports for the near‑term setup.

The positive camp emphasizes that a 2.44% year‑over‑year revenue decline is manageable if offset by utilization gains and mix, leaving room for EBIT growth of 7.16% and EPS growth of 7.36% year over year. They point to a robust federal opportunity set across cyber, enterprise IT, and engineering integration as reasons to expect continued backlog conversion and modest margin expansion. In this framing, the majority view anticipates an in‑line to modest beat on profitability metrics, with investors looking for clarity on award timing and conversion to sustain momentum into the next quarter.