Booz Allen Hamilton Holding Corp. - 10-Q Summary (Q2 2026)
Business Context and Reporting Period
This filing covers the quarterly period ended September 30, 2025 (Fiscal Q2 2026) for Booz Allen Hamilton Holding Corp. The company is an advanced technology firm providing AI, cyber, and technology solutions primarily to U.S. federal government customers. As of the period end, the company employed approximately 32,500 people. The fiscal year ends March 31.
Key Financial Metrics
| Metric | Three Months Ended Sept 30, 2025 | Six Months Ended Sept 30, 2025 |
|---|---|---|
| Revenue | $2,890 million | $5,814 million |
| Operating Income | $283 million | $540 million |
| Net Income | $175 million | $446 million |
| Diluted EPS | $1.42 | $3.58 |
| Operating Margin | 9.8% | 9.3% |
| Cash from Operations (6mo) | $540 million | |
| Total Debt | $3,960 million | |
| Cash & Equivalents | $816 million | |
| Total Liquidity | $1.8 billion (includes $999M revolver availability) |
Material Changes vs. Prior Period
- Revenue Decline: Revenue decreased 8% year-over-year (YoY) for the quarter and 5% for the six-month period. Management attributes this to a slowed procurement environment, headcount reductions, and uncertainty in the U.S. government budgetary landscape.
- Profitability Compression: Operating income dropped 48% YoY for the quarter and 33% for the six-month period. Operating margins contracted from 17% to 10% (quarter) and 13% to 9% (six months).
- Expense Increases: General and administrative (G&A) expenses rose 37% YoY for the quarter. This increase was primarily driven by $115 million in insurance recoveries recorded in the prior year (Fiscal 2025) which are not present in the current period, alongside restructuring costs.
- Tax Rate Volatility: The effective tax rate for the six months ended September 30, 2025, was 0.7%, significantly lower than the 23.7% in the prior year. This was due to an $86 million reduction in uncertain tax position reserves following an IRS examination completion.
Outlook, Risks, and Unusual Items
- Government Shutdown: The filing notes a government shutdown as of the reporting date due to Congress failing to approve appropriations after September 30, 2025. Management expects a prolonged shutdown to negatively impact business and financial results.
- Cost Reduction Initiatives: In October 2025, the company began actions to reduce costs by approximately $150 million annually. Additionally, $36 million in severance and restructuring charges were recorded in Q1 2026 related to the Civil business.
- Backlog: Total backlog increased 3% to $40.2 billion. However, funded backlog decreased to $5.4 billion from $5.8 billion the prior year, reflecting a slowed conversion of unfunded backlog.
- Shareholder Returns: The company repurchased 3.3 million shares for $361 million in the first six months of the fiscal year. A quarterly dividend of $0.55 per share was declared on October 24, 2025.
- Legislative Impact: The "One Big Beautiful Bill Act" (OBBB) enacted in July 2025 includes provisions extending tax cuts and restoring R&D expensing, which the company has incorporated into its tax rate calculations.
Investor Verification Checklist
- Government Shutdown Duration: Assess the potential length of the government shutdown and its specific impact on contract funding and revenue recognition in Q3 and Q4.
- Cost Reduction Execution: Verify the timeline and effectiveness of the announced $150 million annual cost reduction initiative.
- Tax Reserve Resolution: Monitor the status of the Joint Committee on Taxation (JCT) review regarding the $174 million long-term tax receivable.
- Backlog Conversion: Track the ability to convert the $10.7 billion unfunded backlog into funded backlog given the current procurement delays.
- Debt Covenants: Confirm continued compliance with financial covenants, particularly if operating cash flows are pressured by the shutdown.