0001571123-26-000029
SEC filingRevenue declined 3% to $7.26B due to contract completions and shutdown, but adjusted operating margin improved to 9.7%.
Science Applications International Corporation (SAIC) describes itself as a leading provider of technical, engineering, and mission and enterprise information technology (IT) services, primarily to the U.S. government. The Company serves all military forces and many federal agencies, including the Department of War (formerly DoD), NASA, the Department of State, the Department of Justice, the Department of Homeland Security, and members of the Intelligence Community. As of January 30, 2026, it had approximately 23,000 employees and roughly 1,700 active contracts.
Effective February 3, 2024, SAIC reorganized its business from two operating sectors into five customer-facing business groups. These five groups are aggregated into two reportable segments for financial reporting: the Defense and Intelligence segment, which provides national security solutions to the DoW and Intelligence Community; and the Civilian segment, which serves federal, state, and local civilian markets, focusing on citizen well-being, border security, and protecting lives. Effective January 31, 2026, the five business groups were consolidated into three, though this is not expected to change the reportable segments. No revenue share percentages are provided for the segments.
The Company's offerings are organized under six service categories: IT Modernization, Digital Engineering, Artificial Intelligence (AI), Mission Systems Support, Training and Simulation, and Ground Vehicles Support. These services span the full IT lifecycle. Additionally, SAIC highlights six national imperatives it supports: Undersea Dominance, Border of the Future, Citizen Experience, All Domain Warfighting, and Next Generation Space. The Innovation Factory supports these offerings by developing enterprise-class solutions in areas such as AI, application development, and cybersecurity.
SAIC's primary go-to-market strategy is direct contracting with the U.S. government. The Company generates revenue through a mix of contract types, including cost-reimbursement, time-and-materials (T&M), and firm-fixed price (FFP) contracts, as well as through indefinite delivery/indefinite quantity (IDIQ) contracts, GSA Schedules, and other transaction authority (OTA) agreements. In fiscal 2026, 98% of total revenues came from U.S. government contracts or related subcontracts. Approximately 52% of revenues came from the Department of War, 46% from Intelligence and other federal agencies, and the remainder from commercial, state/local government, and international customers. Substantially all revenues were earned in the United States.
Competition is intense. SAIC faces competitors from three primary categories: large defense contractors (e.g., General Dynamics, Lockheed Martin, Northrop Grumman, RTX), focused government IT services companies (e.g., Booz Allen Hamilton, CACI, Leidos, ManTech, Parsons, Peraton, Serco), and diversified commercial providers (e.g., Accenture, AECOM, Amentum, Deloitte, IBM). The filing notes that competition has intensified, leading to fewer sole-source awards and greater emphasis on cost competitiveness and affordability.
SAIC's stated strategic strengths include enduring customer relationships (some lasting 20+ years), full life cycle offerings, significant scale as a large pure-play technology services provider, a highly cleared workforce, and repeatable certified processes (ISO 9001, ISO/IEC 27001, AS9100D, CMMI-DEV Maturity Level 3). The acquisition of SilverEdge Government Solutions in October 2025 is an example of its strategy to advance mission-focused solutions and commercial products. The Company also focuses on talent development, with employees completing over 175,000 training hours in fiscal 2026.
As of January 30, 2026, SAIC employed approximately 23,000 people, of whom more than 5,800 (25%) are active military or veterans. The Company reported a voluntary attrition rate of just under 12% in fiscal 2026. It offers various talent development programs, including upskilling, rotational assignments, and leadership development, and had over 200 early career professionals in internships. The workforce holds many active security clearances, which are critical for its government contracts.
Fiscal 2026 revenues decreased 3% year-over-year to $7.26 billion, largely due to contract completions and ramp-downs on existing programs, including an estimated $26 million impact from the 43-day government shutdown in Q3. The acquisition of SilverEdge contributed $27 million, but organic revenue contracted approximately 3.3%. Cost of revenues declined in line with revenue, resulting in a gross margin of 88.0%, slightly improved from 88.1% in fiscal 2025. Operating income fell 7% to $521 million, and operating margin contracted 30 basis points to 7.2%, weighed by $16 million in executive transition costs, $7 million in tax audit settlement costs, and a $13 million prior-year benefit from the AAV contract termination, partially offset by a recovery from a patent infringement litigation. Net income was nearly flat at $358 million, while the effective tax rate dropped to 7.5% from 15.5% due to a $47 million benefit from an IRS audit settlement.
The Defense and Intelligence segment, representing 77% of total revenue, saw a 3% decline to $5.58 billion. Adjusted operating margin fell 30 basis points to 8.6%, primarily because the prior year included a $13 million favorable resolution on the AAV contract termination. Segment profitability was also affected by contract completions and volume mix. The Civilian segment posted a 4% revenue decline to $1.68 billion, but adjusted operating margin expanded 130 basis points to 13.6%, driven by improved profitability across the contract portfolio. Corporate adjusted operating loss improved significantly to $4 million from $20 million, reflecting the patent infringement recovery and lower general expenses.
Management highlighted a number of developments shaping the outlook. The federal budget environment is uncertain, with the Department of Homeland Security still unfunded into fiscal 2027, but a $325 billion budget reconciliation package signed in July 2025 includes new spending on defense and border security addressable by SAIC. The company also noted ongoing executive orders and agency reviews, though no material financial impact has occurred to date. The recent acquisition of SilverEdge and a business reorganization effective February 1, 2026 (consolidating five business groups into three) aim to simplify operations and drive growth. Net bookings were $7.8 billion for fiscal 2026, and total backlog stood at $22.6 billion. No specific financial guidance was provided, but the MD&A emphasizes the company's focus on long-term customer relationships, technical expertise, and cost competitiveness to navigate market pressures.
As of January 30, 2026, the Company held $182M in cash and cash equivalents, up from $56M at fiscal 2025 year-end. Total debt (net of issuance costs) stood at $2,487M, compared to $2,220M a year earlier, driven by the $1.1B Term Loan A issuance used to refinance the prior Term Loan A. The current portion of debt was $19M, reflecting minimal near-term maturities. Shareholders' equity was $1,500M, down from $1,577M due to share repurchases and dividends. Remaining performance obligations (RPO) totaled $6.2B, with 78% expected to be recognized within 12 months, indicating a robust backlog.
The Notes do not disclose separate purchase commitments; however, the RPO of $6.2B represents contracted but unrecognized revenue. Operating lease liabilities were $198M (current and non-current). The Company had no material inventory or capital expenditure commitments explicitly noted.
During fiscal 2026, the Company repurchased 4.0 million shares for $422M under its existing share repurchase plan, which was augmented by a $1.2B authorization in December 2024. Cumulative repurchases under the plan reached $2.5B. Dividends totaled $70M, with quarterly dividends maintained at $0.37 per share. Net debt increased by $267M, primarily from the $1.1B Term Loan A issuance (net of repayment) and a slight increase in Term Loan B3 balances. No capital expenditure figure was disclosed in the Notes, but depreciation and amortization was $149M.
Note 3 provides revenue disaggregation by segment: Defense and Intelligence generated $5,581M (76.9% of total) and Civilian contributed $1,681M (23.1%). Both segments saw revenue declines year-over-year (Defense -2.5%, Civilian -4.1%). Segment operating income was not reported in the Notes; thus, margin analysis is not available. Revenue by contract type: cost-reimbursement (62%), time-and-materials (22%), and firm-fixed-price (16%). The vast majority of revenue (99%) came from the U.S. federal government, with the Department of War being the largest customer at $3,778M.
SAIC's near-total reliance on U.S. government contracts (98% of revenues) exposes it to budget uncertainties, continuing resolutions, and shifting defense priorities. The DoW's new Acquisition Transformation Strategy may require increased R&D investment and reshape contract structures. Aggressive competition from both larger and more specialized firms, combined with multi-award contracts, intensifies pricing pressure and bid protest risks.
Organizational conflicts of interest (OCIs) could restrict bidding on future contracts. Ongoing DCAA audits and government investigations pose risks of retroactive cost adjustments, penalties, and even debarment. Recent executive orders and FAR reforms create compliance uncertainty, particularly around procurement simplification and DEI-related mandates. The One Big Beautiful Bill Act (2025) provided near-term tax benefits via R&D expense reversal and 100% depreciation, but future tax law changes remain a risk.
Key operational risks include failure to attract/retain cleared talent, integration challenges from M&A, and reliance on subcontractors. The company's use of AI solutions introduces vulnerability to cyberattacks, biased data, and regulatory scrutiny. Climate-related physical risks could disrupt operations at customer sites, and environmental regulations may impose new compliance costs. Pension obligations from the Engility acquisition remain volatile, with funding levels sensitive to interest rates and asset returns.
Cybersecurity threats, particularly from nation-state actors, are a major focus. SAIC maintains an incident response plan and complies with CMMC and NIST standards. While past incidents were not material, future breaches could damage reputation, cause contract losses, or lead to regulatory penalties.
Goodwill and intangible assets ($1.1B) are subject to impairment if reporting unit performance declines. A significant portion of cash is held in uninsured bank deposits, posing a risk if institutions fail. Net operating loss carryforwards ($656M) may be limited under Section 382.
The provided document content includes the table of contents and auditor's report but does not include the actual Consolidated Statements of Cash Flows (referenced as page F-8). Therefore, no cash flow figures (operating, investing, financing cash flows, capex, free cash flow, or capital returns) are available for analysis. Without explicit data, it is impossible to assess cash flow quality, trends, or anomalies. Further input with the cash flow statement is required to perform the analysis.