Booz Allen Hamilton NYSE: BAH reported first-quarter fiscal 2027 revenue of $2.8 billion, down 4.2% from a year earlier, as growth in its national security portfolio was offset by continued weakness in civil work. The government-services company said profitability and cash flow exceeded its expectations and reaffirmed its full-year guidance.
Adjusted EBITDA rose to $334 million, producing an adjusted EBITDA margin of 11.9%, up 130 basis points year over year. Adjusted diluted earnings per share increased 22% to $1.81. Chief Financial Officer Troy Lahr said earnings benefited from profit growth, a lower tax rate, fewer shares outstanding and a $19 million pretax unrealized gain on a venture investment.
Free cash flow was $261 million in the quarter, supported by strong collections and favorable timing, according to Lahr. Days sales outstanding increased by seven days year over year to 80 days, which the company attributed to revenue-recognition treatment related to its Defy business. Booz Allen expects DSO to remain above its historical level.
National Security Growth Offsets Civil Pressure
National security revenue grew 1% year over year in the first quarter, while civil revenue declined 16%. Lahr said the company expects national security revenue to grow at a mid-single-digit rate for the full fiscal year, with stronger growth in the second half as new work ramps up.
Civil revenue continued to face pressure from the roll-off of larger contracts, prior contract reductions, Treasury-related impacts and fewer new program starts after a slower award environment last year. The company also said some recompete awards are transitioning to follow-on contracts with smaller scopes and shorter performance periods.
Booz Allen expects another sequential double-digit decline in civil revenue in the second quarter as additional contracts end, though management expects those pressures to ease gradually in the second half. President and COO Kristine Martin Anderson said the company still expects civil revenue to decline by a high-single-digit percentage for the year, an improvement from the prior year.
“Demand is strengthening, and we are winning work,” Anderson said of the civil portfolio, pointing to an expanding pipeline and efforts to bring the company’s cyber and defense technology solutions into civil agencies.
Funding trends improved during the quarter. Chairman and CEO Horacio Rozanski said funding was up 17% year over year, while Anderson said funding rose about 18% in both civil and national security. Funded backlog increased 15% to $4.7 billion, while total backlog rose 3% to more than $39 billion. The company’s book-to-bill ratio was 1.5 times in the quarter and 1.1 times on a trailing 12-month basis.
National security funded backlog increased 23%, and management said it is accelerating hiring to support anticipated growth. Anderson noted that the company is facing some supply constraints in recruiting personnel with security clearances.
Government Contracting Changes and Funding Uncertainty
Management said the market remains uneven despite improving funding. Rozanski cited the midterm election year, potential continuing resolutions, the National Defense Authorization Act, possible reconciliation legislation and potential supplemental funding as factors that could affect the government funding environment later in the year.
The company is also preparing for a government push toward fixed-price and outcomes-based contracts. Anderson said recent guidance directs agencies to use firm fixed-price contracting as the default for new contracts unless an exception is approved. Booz Allen welcomed the shift, saying it could improve alignment between costs, accountability and mission results while offering more flexibility in delivery.
“Early indications are positive,” Rozanski said, while adding that the transition will take time because existing contracts do not convert immediately. Lahr said the company’s first-quarter profitability benefited in part from early shifts toward outcomes-based fixed-price contracting.
Anderson also said Booz Allen’s pipeline of other transaction authority opportunities increased 18% year over year. The company has been placing technology offerings on government marketplaces including Tradewind, Aeris and Platform One, which management said can provide faster procurement channels.
Cyber, Defense Technology and Ultra Acquisition
Rozanski highlighted cyber and defense technology as the company’s primary growth vectors. He said agentic artificial intelligence is changing the cyber threat environment by enabling more autonomous attacks and that Booz Allen is expanding Vellox, its suite of agentic cyber products. He cited the company’s zero-trust capabilities and its Ranger product, which is designed to help organizations identify and remediate vulnerabilities at AI speed.
In defense technology, the company is focusing on command-and-control software, edge computing, resilient communications and autonomy. Booz Allen expects to close its acquisition of Ultra I&C Mission Solutions during the second quarter. The business brings products spanning command-and-control software, ruggedized edge computing and encryption management.
Lahr said Ultra is expected to deliver strong double-digit revenue growth for the next several years and EBITDA margins above 20%, though he did not provide a revenue run rate. Booz Allen plans to update guidance after the transaction closes.
The company deployed $447 million during the quarter, including $324 million for the Defy acquisition and venture investments, along with $123 million for dividends and share repurchases. It ended the quarter with $540 million in cash, $2 billion in total liquidity and net leverage of 2.7 times trailing-12-month adjusted EBITDA.
Booz Allen said it will continue pursuing a balanced capital-allocation strategy, including shareholder returns, venture investments and acquisitions that can accelerate its cyber and defense technology businesses.
About Booz Allen Hamilton (NYSE:BAH)
Booz Allen Hamilton Holding Corporation is a publicly traded management and technology consulting firm headquartered in McLean, Virginia. The company provides a wide range of professional services and solutions in strategy, analytics, digital transformation, engineering and cyber security. Its expertise spans from supporting federal civilian agencies to defense, intelligence and homeland security organizations, as well as select commercial industries.
Key offerings include data analytics and artificial intelligence applications, software development and modernization, systems integration, and cyber risk management.
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