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SAIC: SAIC's Q3 Earnings: A Mixed Bag with Promising Outlook

Science Applications International Corporation (SAIC) reported Q3 revenue of $1.87 billion, down 5.6% year-over-year, largely due to a one-point headwind from the government shutdown. Despite this, the company demonstrated strong program execution, with adjusted EBITDA of $185 million, or 9.9%. Adjusted diluted EPS was $2.58, beating estimates of $2.07. The company generated $135 million in free cash flow, a notable achievement considering the government shutdown's impact on collections.

SAIC

USD 100.61

-1.16%

A-Score: 4.8/10

Publication date: December 4, 2025

Full Report

Author: Analystock.ai

📋 Highlights
  • Q3 Revenue Decline: Revenue fell 5.6% YoY to $1.87B, impacted by a government shutdown headwind.
  • Adjusted EBITDA Growth: Increased to $185M (9.9% margin) despite revenue dip, driven by strong program execution.
  • Free Cash Flow Resilience: Generated $135M in free cash flow despite government shutdown disruptions.
  • SilverEdge Acquisition Impact: Expected to be accretive in 2027, boosting margins and EPS by $0.15–$0.20.
  • Share Buyback Plan: Committed $1B in share repurchases over 2026–2027 to enhance shareholder value.

Segment Performance

The civil business segment declined 7% year-over-year; however, the nine-month trend shows a flat performance with improved margins. SAIC attributes the decline to seasonality and lumpiness rather than a single program-related issue. The company expects the civil business to improve, driven by growth in agencies such as CBP, DHS, and FAA.

Growth Strategy and Outlook

SAIC's management team outlined priorities to drive growth, including sharpening focus on execution, efficiently deploying financial resources, and prioritizing yield and bid quality. The company has identified over $100 million in annual spend to reinvest into higher ROI areas and increase margins. For fiscal year 2026, SAIC increased its total revenue guidance and reaffirmed organic revenue growth guidance.

Acquisition and Synergies

The acquisition of SilverEdge, a provider of AI capabilities to the intelligence community, is expected to be accretive in the next year, with increased margins and EPS. SAIC's interim CEO, Jim Reagan, highlighted the opportunities presented by this acquisition, particularly in AI solutions.

Valuation and Returns

With a P/E Ratio of 12.66 and an EV/EBITDA of 7.17, SAIC's valuation appears reasonable. The company's ROE is 24.28%, indicating strong profitability. SAIC's leverage target remains around 3.0, and the company plans to repurchase approximately $500 million in shares in each of fiscal years 2026 and 2027, totaling $1 billion.

Future Prospects

SAIC expects to return to revenue growth in the coming quarters, driven by efficiency efforts and improved execution. The company is well-positioned to help implement the DOD's announced reforms aimed at increasing procurement speed. Analysts estimate next year's revenue growth at -2.2%, but SAIC's focus on delivering good performance and on-contract growth through blocking and tackling exercises is expected to drive future growth.

SAIC's A-Score