Science Applications International NASDAQ: SAIC reported second-quarter fiscal 2027 revenue of $1.9 billion, up approximately 5% organically, as the company cited broad-based growth across its markets and stronger conversion of existing contract backlog into revenue.
Adjusted EBITDA totaled $193 million, producing a 10.3% margin. Adjusted diluted earnings per share were $3.01, down from the prior year because the previous-year period included a favorable legal settlement, partially offset by a lower share count. Free cash flow was $131 million, while net leverage declined to 3.0 times.
Chief Executive Officer Jim Reagan said the company’s performance exceeded its expectations, supported by program execution, operational efficiency and on-contract growth. “These results reflect our team’s focus on driving program performance and operational efficiency, resulting in organic growth, double-digit margins, and robust free cash flow,” Reagan said.
Guidance Raised Following First-Half Performance
SAIC increased its fiscal 2027 outlook for revenue, adjusted EBITDA and adjusted earnings per share. The company raised revenue guidance by 2% at the midpoint to $7.25 billion, reflecting an expected organic revenue change ranging from a 2% contraction to flat for the full year.
The forecast implies second-half revenue contraction, largely due to the RITS contract rolling off, which management said will create an approximately 350-basis-point headwind during the second half.
The company also increased its adjusted EBITDA outlook by 4% at the midpoint and now expects margins of 10.3% to 10.5%, 20 basis points above its previous outlook. SAIC expects free cash flow of at least $600 million, or $14 per share, for the year.
Chief Financial Officer Prabu Natarajan said the company expects second-half margins in the high-9% range as it makes targeted investments in high-priority areas. Those investments include capital expenditures, with approximately $25 million spent during the first half to support growth opportunities.
On-Contract Growth Offsets Uneven Award Environment
SAIC reported on-contract growth of 9% during the quarter, exceeding its plans. Natarajan said management is assuming on-contract growth of roughly 5% for the second half, compared with a prior expectation of 2% to 3%.
Approximately half of the company’s on-contract growth this year is expected to come from several programs won in fiscal 2025 and fiscal 2026 that ramped more slowly last year. Those programs generated about $350 million in revenue last year and are expected to produce approximately $500 million this year. SAIC reported about $240 million from those programs in the first half.
Management said federal customers have been moving money more quickly onto existing contracts, supporting revenue growth. However, the procurement environment remains uneven. SAIC reported a quarterly book-to-bill ratio of 0.6 and a trailing 12-month ratio of 0.8, though management said the quarterly ratio would have been closer to 1.0 without a delayed large recompete award that was booked two days after the quarter ended.
Natarajan said slower requests for proposals and award decisions have led to contract extensions and greater utilization of contract ceilings. The company expects it could finish the year near a 1.0 book-to-bill ratio as its business-development team increases submissions.
Reagan said SAIC’s recompete win rate exceeded 90% during the quarter, a level the company views as its standard for success. Management also expects new-business win rates of at least 30% as it concentrates bidding activity on opportunities where it believes it has a strong chance to win.
Intel Space Wins and Border Security Recompete
SAIC booked more than $1.6 billion in intelligence and space awards during the first half of fiscal 2027, ahead of recent trends, Reagan said. The work includes engineering programs supporting the space superiority market.
The company also won a recompete to support hardware, software integration and interoperability for the U.S. Army as it deploys new battlefield technologies. After the quarter ended, SAIC secured a significant recompete for a border-security program, extending its role in providing an integrated software and hardware solution. The win followed a successful Department of Homeland Security recompete in the prior quarter.
Reagan said the awards demonstrate the company’s role in integrating advanced technology and domain expertise across intelligence, defense and civilian markets.
Project ORBIT Targets $150 Million in Run-Rate Savings
SAIC is entering the implementation phase of Project ORBIT, or Optimizing Resources for a Better Impact Tomorrow, an initiative focused on operational efficiency, process improvements and capacity expansion. The company expects ORBIT to generate approximately $150 million in annual run-rate savings by the end of its three-year implementation period.
About two-thirds of the projected savings, or $100 million, is expected to be reinvested in the business through new initiatives, expanded capacity on existing contracts and improved competitiveness. The remaining savings are expected to support margin expansion.
Natarajan said the initiative was developed from approximately 3,500 employee-generated ideas, with efforts spanning procurement, recruiting, process simplification, automation and mission delivery. The company expects procurement changes, described as “buy smarter,” to represent the largest and longest-term opportunity.
Management said ORBIT supports a target of mid-10% margins next year and a path toward approximately 11% margins in fiscal 2030. Natarajan said the company would ideally improve margins by 20 to 30 basis points in fiscal 2029 before reaching the longer-term target, though he cautioned that the progression may not be linear.
SAIC also said it is conducting a portfolio and strategy review, including consideration of merger-and-acquisition opportunities. Reagan said the company does not anticipate a sharp change in its identity or business focus, but expects to provide a broader strategy and portfolio update during its December earnings call.
On contracting trends, Natarajan said fixed-price work represents roughly 15% to 18% of current sales, while about one-third of the company’s pipeline is fixed-price. He said the shift toward outcome-oriented and fixed-price work is gradual, with civilian customers further along than defense and intelligence customers. SAIC is training program managers and contract teams to prepare for a broader transition.
Management said it assumes the government will begin its next fiscal year under a continuing resolution and is not incorporating material improvement in the procurement environment into its outlook for the remainder of fiscal 2027.
About Science Applications International (NASDAQ:SAIC)
Science Applications International Corp. (SAIC) is a leading provider of technical, engineering, and enterprise IT services to the U.S. government, including the Department of Defense, the intelligence community, and civilian agencies. The company's core offerings encompass systems engineering and integration, mission support, cybersecurity, data analytics, and cloud solutions. SAIC's work spans the full program lifecycle, from research and development to deployment and sustainment, addressing complex defense, space, and national security challenges.
Founded in 1969 by J.
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