Parsons Corporation (PSN) | The Buildout — AI Infrastructure

——Mkt cap — · 52-wk —–— · YTD — · delayed
Updated Aug 12, 2026Q2 FY2026 reviewed
Parsons delivers integrated national-security and critical-infrastructure solutions, with AI exposure through federal defense systems and indirect Middle East data-center infrastructure.
Book-to-bill 1.2x
Q2 contract awards $1.9B, up 24% y/y.
FS bookings +51%
Federal Solutions Q2 bookings up 51% y/y.
Backlog $9.3B
Funded backlog $6.6B, 71% of total.
FY26 guide cut
Revenue midpoint cut $300M to $6.2–$6.5B.
The Buildout Takeaway
The reset is about portfolio composition and funding timing, not demand: bookings and backlog remain strong even after management absorbed $118M of charges and cut full-year guidance. The open question is whether H2 conversion and clean divestitures can restore the credibility the April reaffirmation spent.
Analyst coverage
17 analysts·11 Buy4 Hold2 Sell
Coverage is thin — only 3 price estimates, so no target is shown
Management guidance
Fiscal 2026: revenue $6.2–$6.5 billion · adjusted EBITDA $500–$560 million · operating cash flow $430–$490 million · free cash conversion above 100%.
Important: The Buildout is a data analytics platform. Content is generated by algorithms and AI agents using public filings, earnings transcripts, and market data. This is not personalized investment advice.
Our View

The Verdict

Parsons provides integrated national-security and critical-infrastructure services. Its Federal Solutions segment builds mission-critical technology for U.S. defense and intelligence customers, including cyber operations, space and missile defense, counter-UAS, electronic warfare, and biometrics. Critical Infrastructure manages complex physical and digital infrastructure programs globally. AI is embedded in its products and large federal contracts rather than sold as a standalone line, making Parsons a downstream beneficiary of federal AI-enabled defense demand with a smaller indirect exposure to Middle East data-center infrastructure.

Market Cap—
Revenue (TTM)$6.3B
Revenue Growth−5.8%
EBITDA Margin (TTM)6.9%
Net Debt$1.4B
Earnings Beats5 of 7
P/E (TTM)—
EV/EBITDA (TTM)—

What We Like

  • Q2 contract awards rose 24% y/y to $1.9B, with enterprise book-to-bill of 1.2x.
  • Federal Solutions bookings rose 51% y/y in Q2; 10 of the last 13 contracts over $100M involved advanced AI.
  • JCHK is described as a sole-source agentic-AI threat-hunt kit with a ceiling intended to rise from $500M to $750M; 12 LRIP units delivered.
  • Critical Infrastructure posted 11.9% adjusted EBITDA margin in Q2, up 140 bps y/y, and 23rd consecutive quarter book-to-bill at or above 1.0x.
  • Management cites a $54B pipeline and 60% win rate, with $11B in contract awards not yet booked.

What We’re Watching

  • Q3 2026 remote Federal Solutions divestiture close; signed LOI in place, expected close subject to novation approval.
  • Federal Solutions H2 margin target of 9.4% after Q2 normalized margin of 8.2%.
  • Full-year free cash conversion above 100% versus TTM 74%; plan depends on $350M H2 collections plus $50M federal milestones.
  • JCHK formal ceiling modification to $750M and production plan of 62 units in 2026.
Bottom Line

The underlying demand thesis is intact but the execution and communication record weakened in Q2. Bookings and backlog stayed strong even as management took $118M of charges, cut full-year guidance, disclosed a canceled confidential contract, and faced analyst pushback on disclosure. The open question is whether the Q3 divestiture close, H2 cash collection, and Federal Solutions margin recovery restore the credibility spent when guidance was cut only months after being reaffirmed.

Next upThe next hard catalyst is the expected Q3 2026 close of the two remote Federal Solutions divestitures; a clean close tests whether the portfolio reset is one-and-done. After that, JCHK full-rate production in fall 2026 tests the delivery plan of 62 units in 2026.
Last Quarter — Q2 FY2026

Earnings Beat

Q2 FY2026 revenue was $1,575.9M, down from $1,584.3M a year earlier; gross margin was 16.9%, and net loss was $15.2M. Contract awards rose 24% y/y to $1.9B, with enterprise book-to-bill of 1.2x, and management's normalized adjusted EBITDA was $161M, up 8% y/y.

MetricQ2 FY2026Q1 FY2026Q2 FY2025YoY
Revenue$1.6B$1.5B$1.6B−0.5%
Gross margin16.9%24.0%22.0%-510bps
EBITDA$38M$128M$125M−69.7%
EPS$-0.14$0.49$0.50−127.9%
Enterprise book-to-bill1.2x1.4xn/a—
As I look ahead, my confidence has never been higher.— Carey Smith, Chief Executive Officer, July 29, 2026

Management tone: Management's tone shifted from Q1's resilience and momentum framing to Q2's portfolio reset and normalization. In Q2, management argued repeatedly that demand remains strong and that the issues are composition and timing, while an analyst directly challenged the communication and disclosure record; the CEO committed to hold an Investor Day sometime next year.

Management Guidance

Management cut fiscal 2026 guidance on July 29, 2026: revenue to $6.2–$6.5B from $6.5–$6.8B, adjusted EBITDA to $500–$560M from $615–$675M, and operating cash flow to $430–$490M from $470–$530M. The revenue bridge cited $85M from planned divestitures, $125M from Critical Infrastructure timing and pass-throughs, and $90M from Federal Solutions timing, including a roughly $20M protest delay. Free cash conversion above 100% was reaffirmed.

Business Trajectory

Trajectory

Reported revenue is sequentially accelerating — Q2 rose 5.7% from Q1 to $1,575.9M — but margins compressed sharply, with gross margin down 530 bps y/y to 16.9% and EBITDA margin down 540 bps y/y to 2.4%. The gap between strong bookings and softer reported results comes from funding delays, lower pass-through revenue, portfolio charges, and divestitures rather than an order-book decline.

Revenue & Margin Trajectory
RevenueGross margin$0$1.0B$734M$738M$729M$816M$755M$901M$976M$929M$904M$990M$1.0B$1.0B$971M$980M$1.0B$964M$875M$879M$956M$951M$949M$1.0B$1.1B$1.1B$1.2B$1.4B$1.4B$1.5B$1.5B$1.7B$1.8B$1.7B$1.6B$1.6B$1.6B$1.6B$1.5B$1.6B0%17%Q1'17Q2Q3Q4Q1'18Q2Q3Q4Q1'19Q2Q3Q4Q1'20Q2Q3Q4Q1'21Q2Q3Q4Q1'22Q2Q3Q4Q1'23Q2Q3Q4Q1'24Q2Q3Q4Q1'25Q2Q3Q4Q1'26Q2
RevenueGross margin$0$1.0B$734M$738M$729M$816M$755M$901M$976M$929M$904M$990M$1.0B$1.0B$971M$980M$1.0B$964M$875M$879M$956M$951M$949M$1.0B$1.1B$1.1B$1.2B$1.4B$1.4B$1.5B$1.5B$1.7B$1.8B$1.7B$1.6B$1.6B$1.6B$1.6B$1.5B$1.6B0%17%Q1'17Q2Q3Q4Q1'18Q2Q3Q4Q1'19Q2Q3Q4Q1'20Q2Q3Q4Q1'21Q2Q3Q4Q1'22Q2Q3Q4Q1'23Q2Q3Q4Q1'24Q2Q3Q4Q1'25Q2Q3Q4Q1'26Q2
Gross margin as reported.
Share Price — 12 Months
$25$50$75$052-wk high $87Aug '25NovFeb '26MayAug '26
52-week range $40–$87.
Share Price — 12 Months
$25$50$75$052-wk high $87Aug '25NovFeb '26MayAug '26
52-week range $40–$87.
The Numbers

The Model

The model projects FY+1 revenue of $6,700M and EBITDA of $610M (9.1% margin), rising to FY+2 revenue of $7,500M and EBITDA of $712M (9.5% margin). Near-term results are anchored by the revised fiscal 2026 guide of $6.2–$6.5B and the expected H2 conversion; FY+2 reflects continued Federal Solutions product ramp, including JCHK, plus Critical Infrastructure margin stability.

Revenue & EBITDA Projections
REVENUE$6.4B$6.7B$7.5BFY25FY+1 (E)FY+2 (E)EBITDA & MARGIN$528M$610M$712M9.5%FY25FY+1 (E)FY+2 (E)
REVENUE$6.4B$6.7B$7.5BFY25FY+1 (E)FY+2 (E)EBITDA & MARGIN$528M$610M$712M9.5%FY25FY+1 (E)FY+2 (E)
Solid bars are reported actuals; outlined bars are model projections — not company guidance.
MetricFY2025Next FY (E)Following FY (E)
Revenue$6.4B$6.7B$7.5B
YoY Growth—+5.3%+11.9%
EBITDA$528M$610M$712M
EBITDA Margin8.3%9.1%9.5%

Projections are the median of 5 independent model runs. The model’s revenue sits 5.1% above analyst consensus.

Management cut fiscal 2026 guidance on July 29, 2026: revenue to $6.2–$6.5B from $6.5–$6.8B, adjusted EBITDA to $500–$560M from $615–$675M, and operating cash flow to $430–$490M from $470–$530M. The revenue bridge cited $85M from planned divestitures, $125M from Critical Infrastructure timing and pass-throughs, and $90M from Federal Solutions timing, including a roughly $20M protest delay. Free cash conversion above 100% was reaffirmed.

What Could Go Right — and Wrong

What good looks like
  • JCHK ceiling formally raised to $750M and full-rate production delivers 62 units in 2026.
  • Product revenue grows 30–40% next year as management expects, lifting Federal Solutions margin toward 9.4% and beyond.
  • The two $400M OTAs and Navy ICOP fund in H2, converting awarded-not-booked work into revenue.
  • Q3 2026 remote Federal Solutions divestiture closes as planned, subject to novation approval.
  • Full-year free cash conversion exceeds 100% as H2 collections and inventory conversion land.
What could go wrong
  • Federal Solutions H2 margin stays near 8.2% instead of recovering to 9.4%, signaling structural mix pressure.
  • The weather-affected Critical Infrastructure JV program misses its expected 90% completion by end of 2026, producing further cost-to-complete charges.
  • Federal funding and protest delays keep the $11B awarded-not-booked from converting, pushing revenue into 2027.
  • Middle East conditions deteriorate from no-impact to project delays or payment problems; no Middle East program represents more than 1.6% of revenue.
  • TTM free cash conversion of 74% misses the full-year above-100% target on weak H2 collections.
What’s Next

Looking Ahead

The next 12 months turn on conversion and execution: a Q3 2026 divestiture close, JCHK full-rate production in fall 2026, and H2 federal task-order funding must turn the $11B awarded-not-booked into reported results. Federal reconciliation funding remains a swing factor, and management has committed to an Investor Day sometime next year. Key watchpoints are Federal Solutions H2 margin near 9.4%, full-year cash conversion above 100%, and a formal JCHK ceiling modification.

Catalysts
  • Q3 2026Remote divestiture close — Tests novation approval and clean exit from two remote Federal Solutions programs.
  • Fall 2026JCHK full-rate production — Tests delivery pace toward 62 units in 2026.
  • H2 2026Two $400M OTAs ramp — Tests task-order funding and revenue conversion from awarded-not-booked.
  • H2 2026Federal reconciliation funding flow — Tests whether task orders accelerate despite protest and funding delays.
  • FY2026Full-year cash conversion — Tests above-100% free cash target on $350M H2 collections plus $50M federal milestones.
  • Sometime next yearInvestor Day — Tests management's promised communication reset and disclosure cadence.
Numbers

Financials

Annual Summary

MetricFY2024FY2025TTMYoY
Revenue$6.8B$6.4B$6.3B-5.7%
Gross Margin20.9%22.5%21.5%+165bps
EBITDA$527M$528M$3.2B+0.1%
EBITDA Margin7.8%8.3%6.9%+48bps
Net Income$235M$241M$157M+2.6%
Free Cash Flow$474M$410M$2.3B—
Net Cash————

Key Ratios (Trailing)

Valuation
  • P/E TTM—
  • EV/EBITDA TTM—
  • EV/Revenue TTM—
  • Price/FCF TTM—
Profitability
  • Gross Margin (TTM)21.5%
  • EBITDA Margin (TTM)6.9%
  • Net Margin (TTM)2.5%
  • ROIC6.0%
  • FCF Conversion71.0%
  • SBC / Revenue0.4%
Reference

The Company

Parsons is an 81-year-old provider of integrated solutions and services for national security and critical infrastructure. Its Federal Solutions segment builds advanced technology for the U.S. government, including cyber operations, space and missile defense, counter-UAS, electronic warfare, and biometrics; its Critical Infrastructure segment provides program management, planning, design, and engineering services for complex physical and digital infrastructure. AI is embedded in these lines rather than sold separately, with management citing AI involvement in 10 of the last 13 contracts over $100 million.

Parsons operates through two segments with heavy U.S. federal concentration — about 51% of FY2025 revenue — and a growing Middle East footprint where no program represents more than 1.6% of revenue and 20% of Middle East business is in backlog. The company discloses no owned manufacturing plants or data centers and relies on a contract mix that is about 55% fixed-price/time-and-materials and 45% reimbursable.

Business Segments

Federal Solutions
Advanced technology provider to the U.S. government; Q1 2026 revenue $758.3M
Mission-critical technology including cyber, space, missile defense, counter-UAS, electronic warfare, biometrics.
Growth driver: AI-enabled large contract wins; JCHK product ramp.
Critical Infrastructure
Program management, planning, design and engineering services; Q1 2026 revenue $732.8M
Complex physical and digital infrastructure programs, including iNET intelligent transportation.
Growth driver: Middle East data-center and infrastructure programs; 11.9% Q2 margin.

Competitive Landscape

The 10-K splits competitors into two groups: Federal Solutions peers are Booz Allen Hamilton, CACI International, Leidos Holdings, and Science Applications International Corporation; Critical Infrastructure peers are AECOM, Jacobs Solutions, Stantec, Tetra Tech, and WSP. Parsons differentiates through sole-source positions like JCHK, a four-decade MDA partnership, and moat-like remediation and munitions work, but the source does not describe it as a low-cost or dominant player.

  • Booz Allen Hamilton
    Named in the 10-K as a Federal Solutions peer; no further discussion supplied.
  • CACI International
    Named in the 10-K as a Federal Solutions peer; no further discussion supplied.
  • Leidos Holdings
    Named in the 10-K as a Federal Solutions peer; no further discussion supplied.
  • AECOM
    Named in the 10-K as a Critical Infrastructure peer; no further discussion supplied.
  • Jacobs Solutions
    Named in the 10-K as a Critical Infrastructure peer; no further discussion supplied.
Peer groups are from the FY2025 10-K.

Supply Chain

Parsons sits downstream of the AI hardware buildout, buying memory and storage for national-security products and selling mainly to the U.S. federal government.

Analysis updated Aug 12, 2026, reviewing Q2 FY2026. Prices delayed. Built with The Buildout’s published methodology. Not investment advice. No positions held. © The Buildout 2026.

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