Earnings Recap — Q2 FY2027
CY Q3 2026 · Reported August 31, 2026 · Beat 5 of last 6 quarters
Science Applications International Corporation reported Q2 FY2027 revenue of $1.88B, a beat of 6.6% against consensus, and EPS of $3.01, a beat of 30.3%.
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SAIC's results reflect continued federal demand for mission-critical technology integration, including AI and quantum capabilities, which are central to the AI infrastructure buildout. The company's investments in Project Orbit and fixed-price contracting signal a shift toward more outcome-based, technology-enabled delivery, which could drive efficiency and margin expansion across the government services sector.
SAIC reported Q2 FY2027 revenue of $1.9B, up ~5% organically, with adjusted EBITDA of $193M (10.3% margin) and adjusted EPS of $3.01, beating consensus. On-contract growth of 9% was well ahead of plan, driven by an improving outlay environment. Book-to-bill was 0.6x for the quarter (0.8x TTM) due to delayed awards, but the company secured $1.6B in intel space awards in H1 and won a significant border security recompete after quarter close. Free cash flow was $131M, and net leverage fell to 3.0x. Management raised FY2027 guidance and provided details on Project Orbit, expecting ~$150M in annual savings over three years.
Management raised FY2027 guidance for revenue, EBITDA, and EPS, reflecting strong first-half performance. Revenue guidance midpoint raised to $7.25B (organic contraction of 2% to flat), with second-half contraction driven by the RITS contract roll-off (~350bps headwind). Adjusted EBITDA margin guidance raised to 10.3%–10.5%, with second-half margins expected to step down to high-9% range due to targeted investments. Free cash flow guidance maintained at ≥$600M. Project Orbit is expected to deliver ~$150M in annual run-rate savings by end of 3-year implementation, with ~2/3 reinvested in the business; management targets mid-10s margins next year and ~11% by FY2030. Book-to-bill expected to finish the year closer to 1.0x, with higher submissions expected to drive improvement. Portfolio and strategy review results to be shared on December call.
“We are responding to clear customer signals for the services we deliver. But we have seen some large opportunities slip to the right as procurement offices try to do more with less while implementing new guidelines including fixed price directives.”
on Award delays and procurement environment
“With Orbit, we expect to book some quick wins at the start to fuel the investment for bigger changes with momentum building over the 3-year time horizon.”
on Project Orbit implementation
“We are excited to do this while our customers are making fundamental changes to increase capacity, drive speed, and more effectively shepherd taxpayer dollars.”
on Customer transformation partnership
On-contract growth was well ahead of plan. What is assumed for the second half, and where did the upside come from?
Jim Reagan noted OCG is roughly double last year, broad-based across customers, and expected to continue. Prabu Natarajan added that second-half OCG is modeled at ~5%, up from prior 2-3%, with upside potential. He cited improving outlays, single-award IDIQ wins not fully in backlog, and the $500M ramp from FY25/FY26 wins.
What drove the origination of Project Orbit, and how do you drive $150M in savings in a labor-oriented business?
Jim Reagan explained that since the split, the company focused on organization and capabilities but not operations; Orbit crowdsourced ~3,500 ideas from employees. Prabu Natarajan noted internal aspirations are higher than $150M, with savings from procurement, automation, and process simplification, and that Orbit is as much about revenue maximization as cost reduction.
What is the shape of margin improvement over the next few years? Is it linear?
Prabu Natarajan said the path is from mid-10s next year to ~11% by FY2030, ideally 20-30bps higher in FY2029. He acknowledged life is not linear, with potential pressure from new business wins, but if Orbit progresses well, the timeline could accelerate. Jim Reagan added that Orbit is about being disruptive to themselves to invest in growth.