Science Applications International Corporation’s third quarter was marked by a significant positive market reaction, as management’s focus on operational efficiency and cost containment stood out. Interim CEO Jim Reagan credited improved program execution and the successful integration of SilverEdge, an AI-focused acquisition, with helping to offset ongoing challenges in government spending. Reagan highlighted that, despite a year-over-year revenue decline, the company’s margins benefited from internal restructuring, stating, “We are implementing efficiencies... and will redeploy savings to fuel growth and improve profitability.”
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SAIC (SAIC) Q3 CY2025 Highlights:
- Revenue: $1.87 billion vs analyst estimates of $1.87 billion (5.6% year-on-year decline, in line)
- Adjusted EPS: $2.58 vs analyst estimates of $2.15 (20.2% beat)
- Adjusted EBITDA: $185 million vs analyst estimates of $176.2 million (9.9% margin, 5% beat)
- The company slightly lifted its revenue guidance for the full year to $7.3 billion at the midpoint from $7.29 billion
- Management raised its full-year Adjusted EPS guidance to $9.90 at the midpoint, a 4.2% increase
- EBITDA guidance for the full year is $695 million at the midpoint, above analyst estimates of $683.1 million
- Operating Margin: 6.9%, down from 8.1% in the same quarter last year
- Backlog: $23.79 billion at quarter end
- Market Capitalization: $4.54 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 SAIC’s Q3 Earnings Call
- Gautam Khanna (TD Securities) asked about the pace of government procurement post-shutdown. CFO Prabhu Natarajan responded that submission activity slowed temporarily but is expected to normalize, with no notable pricing pressure seen in new bids.
- Sheila Kahyaoglu (Jefferies) inquired about SilverEdge’s integration and the civil segment’s revenue trajectory. Interim CEO Jim Reagan expects SilverEdge to be accretive and drive differentiation, while the civil business should stabilize with improved margins.
- Jonathan Siegman (Stifel) questioned how SAIC is adapting to Department of Defense procurement reforms and why the company is shifting direction now. Reagan stated SAIC is positioned to support faster procurement and is prioritizing near-term execution.
- Seth Seifman (JPMorgan) asked how much of the $100 million in savings will be reinvested versus flowing to margins. Reagan said a substantial portion will go to resources that support business development while also contributing to margin gains.
- Tobey Sommer (Truist) probed expectations for federal civilian budget pressure and portfolio shaping. Reagan and Natarajan acknowledged continued civil budget constraints, with ongoing portfolio review focused on transformability and alignment with growth areas.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team is watching (1) the pace and effectiveness of cost efficiency initiatives and their impact on margins, (2) the integration and revenue contribution from SilverEdge and other potential tuck-in acquisitions, and (3) the outcome of major contract recompetes, particularly in the defense segment. Execution in realigning the portfolio and maintaining business development momentum will also be critical to track.
SAIC currently trades at $100.70, up from $87.53 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free for active Edge members).
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