Science Applications International (SAIC) Financials

Science Applications International (NASDAQ: SAIC) delivered mixed but generally resilient results in Q2 fiscal 2027. Revenue was $1.88 billion, down 1.4% from Q1 but up approximately 6.3% from the restated Q2 fiscal 2026. Net income declined to $102 million from $115 million in the prior quarter, while diluted EPS fell to $2.38 from $2.61. Over the broader period, quarterly revenue has remained below the $2.03 billion peak reported in Q1 fiscal 2024, although profitability has held up comparatively well.

Margins improved sequentially from the weaker Q4 fiscal 2026 quarter. Gross profit was $239 million, representing a gross margin of approximately 12.7%, while operating income was $152 million, or 8.1% of revenue. Operating margin improved from 7.6% in Q4 but was below Q1 fiscal 2027's 9.4%. Interest expense remained significant at $33 million, limiting the conversion of operating income into net earnings.

Cash generation remains one of SAIC's strongest financial characteristics. Operating cash flow increased to $146 million in Q2 from $127 million in Q1, and capital expenditures were $15 million, implying approximate quarterly free cash flow of $131 million. The company used $98 million for share repurchases and paid $16 million in dividends, while still ending the quarter with $126 million of cash, up from $109 million at the end of Q1.

The balance sheet is more leveraged than it was in earlier periods. SAIC had approximately $2.49 billion of total debt at the end of Q2, compared with $2.29 billion in Q2 fiscal 2026, against $126 million of cash. Current assets of $1.28 billion exceeded current liabilities of $1.06 billion, but goodwill and intangible assets totaled approximately $3.64 billion, or roughly two-thirds of total assets. Investors should therefore monitor debt reduction, interest costs and the carrying value of acquisition-related assets.

• Revenue recovered year over year: Q2 fiscal 2027 revenue of $1.88 billion was approximately 6.3% above the restated year-ago quarter, reversing some of the weakness seen after the fiscal 2024 revenue peak.
• Operating profitability remains solid: The latest 8.1% operating margin improved from Q4 fiscal 2026 and remains above several earlier quarters in the data set.
• Consistent positive cash generation: Operating cash flow was $146 million and estimated free cash flow was approximately $131 million in Q2, providing funding for capital returns and debt service.
• Share count has declined substantially: Weighted average diluted shares fell to 41.9 million from 51.2 million in Q1 fiscal 2025 and 47.7 million in Q4 fiscal 2025, reflecting sustained repurchases that can support per-share results.
• Cash reserves improved sequentially: Cash and equivalents increased from $45 million in Q3 fiscal 2026 to $126 million in Q2 fiscal 2027 despite continued buybacks and dividends.
• Liquidity is adequate but not excessive: Current assets exceeded current liabilities by $217 million, producing a current ratio of approximately 1.2, while accounts receivable remained high at $996 million.
• Capital returns remain a priority: SAIC returned $114 million through repurchases and dividends in Q2, a shareholder-friendly policy that also consumes cash that could otherwise reduce debt.
• Quarterly earnings momentum weakened: Net income fell 11.3% sequentially and diluted EPS declined from $2.61 to $2.38, even though revenue decreased only modestly.
• Interest expense continues to pressure earnings: Quarterly interest expense has generally remained around $30 million to $34 million, including $33 million in Q2, reflecting the company's substantial debt load.
• Leverage and intangible-asset concentration remain risks: Total debt of approximately $2.49 billion was nearly 1.8 times shareholders' equity, while goodwill and intangible assets represented approximately 67% of total assets, increasing sensitivity to refinancing conditions and potential impairment charges.