Booz Allen Hamilton’s third quarter results were met with a significant negative reaction from the market, as the company’s revenue fell short of Wall Street’s expectations and operating margins declined sharply. Management attributed the underperformance primarily to the ongoing challenges in its civil business, which CEO Horacio Rozanski called “the most challenging market in a generation.” Rozanski noted, “We did not see the normalization of the procurement and funding environment that we originally assumed.” Despite these headwinds, the national security segment saw some strength, but not enough to offset the weakness in civil, prompting a company-wide reassessment of strategy and cost structure.
Is now the time to buy BAH? Find out in our full research report (it’s free for active Edge members).
Booz Allen Hamilton (BAH) Q3 CY2025 Highlights:
- Revenue: $2.89 billion vs analyst estimates of $2.97 billion (8.1% year-on-year decline, 2.8% miss)
- Adjusted EPS: $1.49 vs analyst expectations of $1.51 (1.5% miss)
- Adjusted EBITDA: $324 million vs analyst estimates of $319.1 million (11.2% margin, 1.5% beat)
- Operating Margin: 9.8%, down from 17.4% in the same quarter last year
- Organic Revenue fell 8.1% year on year vs analyst estimates of 4.5% declines (367.3 basis point miss)
- Market Capitalization: $10.05 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Booz Allen Hamilton’s Q3 Earnings Call
- Louie DiPalma (William Blair) asked about the bifurcation between civil and national security funding. CEO Horacio Rozanski responded that national security remains stronger but will ramp up more slowly, while the civil business faces ongoing stagnation.
- Sheila Kahyaoglu (Jefferies) questioned profitability differences between segments. CFO Matthew Calderone confirmed that civil typically carries higher margins due to fixed-price contracts, while defense and intelligence margins are lower and now comprise a larger mix.
- Colin Canfield (Cantor Fitzgerald) pressed on growth prospects for next year and the timeline for recovery. Calderone declined to provide specific projections but noted that easier year-over-year comparisons could help, and that growth will increasingly come from technology-enabled areas.
- Mariana Perez Mora (Bank of America) asked about backlog coverage and the likelihood of needing new wins to meet guidance. Calderone said current guidance does not depend on significant new wins but acknowledged volatility, while Rozanski highlighted productive conversations in national security growth vectors.
- Gavin Parsons (UBS) inquired whether backlog is still a good leading indicator. Rozanski said that while backlog is important, shorter funding increments make near-term growth less predictable than in prior years.
Catalysts in Upcoming Quarters
Looking forward, the StockStory team will be monitoring (1) the pace at which national security contract wins are funded and ramped, (2) evidence of stabilization or growth in the civil segment’s pipeline and procurement activity, and (3) the realization of targeted cost savings and operational efficiencies from restructuring. Additional focus will be on the impact of technology partnerships and outcome-based contracting on both growth and margins.
Booz Allen Hamilton currently trades at $82.51, down from $100.31 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free for active Edge members).
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