Abstract

Science Applications International Corporation will report fiscal second-quarter 2027 results on August 31, 2026, Pre-Mkt, with the market looking for modest year-over-year revenue contraction alongside resilient profitability as management maintains full-year guidance and focuses on contract execution, cost discipline, and backlog conversion.

Market Forecast

Consensus points to fiscal second-quarter revenue of 1.77 billion US dollars, down 5.20% year over year, with adjusted EPS of 2.31, up 3.20% year over year, and EBIT of 146.63 million US dollars, up 4.69% year over year. Management’s full-year revenue outlook of 7.00–7.20 billion US dollars implies a quarterly run rate broadly consistent with the forecast range; no formal guidance on gross margin or net margin was provided for the quarter. The core book of Department of Defense and federal civilian programs is anchored by sizable awards and task orders, and the company’s backlog and recent recompete wins help frame a steady near-term pipeline for delivery and revenue mix. The intelligence-focused solutions portfolio appears positioned as a primary growth lever, supported by recent contract momentum and last quarter’s segment-level revenue of 0.88 billion US dollars; segment-level year-over-year growth was not disclosed.

Last Quarter Review

Science Applications reported fiscal first-quarter 2027 revenue of 1.91 billion US dollars (up 1.55% year over year), a gross profit margin of 13.06%, GAAP net income attributable to shareholders of 115.00 million US dollars, a net profit margin of 6.03%, and adjusted EPS of 3.23 (up 68.23% year over year). A notable highlight was profitability outperformance, with adjusted EPS exceeding consensus by approximately 0.95, supported by higher-than-anticipated operating leverage and disciplined expense control. By revenue mix, Department of Defense programs contributed 0.98 billion US dollars, intelligence and other federal agencies delivered 0.88 billion US dollars, and commercial, state and local, and international accounted for 49.00 million US dollars, while total company revenue advanced 1.55% year over year.

Current Quarter Outlook

Main business: Defense and federal services delivery

This quarter’s setup for the core defense and federal services book is centered on execution of awarded work amid a modest quarter-to-quarter cadence in task order timing. The revenue forecast of 1.77 billion US dollars, down 5.20% year over year, reflects anticipated program ramp-downs and contract completions that were already visible exiting fiscal 2026, offset in part by new program starts and mission support expansions. Within this construct, management’s deliberate cost management and mix optimization remain key levers to protect margins, consistent with last quarter’s 13.06% gross margin and 6.03% net margin performance baseline. Contract activity underpins near-term delivery. Recent awards include a leading position on the U.S. Air Force’s ABMS Digital Infrastructure Network Developer program, which offers multi-environment delivery opportunities across fixed, mobile, and edge domains. The pipeline of recompetes and task orders, together with a reported total backlog in early 2026 exceeding 22 billion US dollars, suggests solid coverage for fiscal 2027, even as quarterly revenue tracks lower year over year due to timing effects. The operating plan emphasizes translating funded backlog into billable milestones and sustaining program-level productivity—a theme that supported last quarter’s EPS beat and remains central to the company’s quarterly playbook. Margin resilience is the watch item. While a formal gross margin or net margin outlook is not provided for the quarter, the market’s expectation for EBIT to grow 4.69% year over year despite lower revenue points to continued efficiency gains and a favorable cost structure on active programs. The combination of disciplined SG&A, prudent subcontract and labor management, and targeted investments in higher-value solutions is likely to be the main factor enabling EPS to grow 3.20% year over year on lower sales. Execution on this plan is the key determinant of whether adjusted earnings hold up against potential headwinds from program transitions and funding timing.

Most promising business: Intelligence, cyber, and systems engineering

The intelligence and cyber portfolio stands out as the company’s near-term growth catalyst. Recent momentum includes a 400.00 million US dollars recompete award supporting a U.S. intelligence agency, covering advanced systems engineering, technical integration, and mission services—capabilities that typically carry attractive margin profiles and reinforce customer intimacy. In tandem with targeted acquisitions and program synergies, this footprint offers a path to higher-value delivery, even as the total company revenue outlook for the quarter is lower year over year. Last quarter, the intelligence and other federal agencies segment generated 0.88 billion US dollars of revenue, forming a material share of the mix. Though segment-level year-over-year growth was not provided, operational indicators are constructive: recurring recompete success, multi-year task order structures, and stepped-up demand for integrated mission solutions. These factors, combined with disciplined pricing and delivery efficiencies, should support EBIT growth and margin stability relative to consolidated performance. The emphasis for this quarter is on program continuity and ramping newer task orders to offset known roll-offs. The revenue contribution from intelligence programs typically benefits from rapid tasking and steady demand, which can dampen quarterly volatility relative to larger platform transitions. The potential upside case hinges on faster-than-anticipated onboarding of contract staff and accelerated milestone achievement, which would translate more of the backlog into current-period revenue and improve operating leverage. Conversely, any delays in clearances, subcontract alignments, or customer acceptance milestones could defer revenue recognition into later quarters, positioning this segment as both the most promising and the most timing-sensitive within the portfolio.

Key stock-price drivers this quarter

Guidance trajectory and earnings quality are central to share performance into and after the print. The company reaffirmed a full-year fiscal 2027 revenue range of 7.00–7.20 billion US dollars and lifted adjusted EPS guidance to 9.90–10.10 earlier this fiscal year, which anchors investor expectations for steady profitability even amid flattish-to-down revenue. The degree to which management reiterates or tightens this guidance range, and whether the quarterly EPS surpasses or falls in line with expectations, will likely set the tone for post-report moves. Contract momentum and backlog utilization are the next set of catalysts. Announced awards such as the ABMS Digital Infrastructure program and intelligence-agency recompetes are already in the public domain; investors will focus on book-to-bill trends, new tasking under existing IDIQ vehicles, and whether the quarter’s intake keeps the company on pace to sustain backlog above 20.00 billion US dollars. A robust intake, even with modest quarterly revenue, would reinforce the durability of the revenue base and improve visibility into the second half of the fiscal year. Finally, mix and margin dynamics matter for valuation. With consensus expecting EBIT to rise 4.69% year over year on a 5.20% revenue decline, the market is implicitly underwriting continued cost discipline and higher-value mix. Any commentary pointing to incremental efficiencies, improved delivery margins in intelligence and cyber contracts, or progress on overhead optimization can bolster the earnings quality narrative. Conversely, if program ramp-downs are more pronounced or if near-term labor or subcontract costs pressure margins, EPS resilience could be tested despite healthy awards, shaping a more cautious share-price reaction.

Analyst Opinions

The prevailing institutional stance is neutral, with multiple well-known firms maintaining Hold ratings and price targets that cluster near the current trading range. J.P. Morgan reiterated a Hold with a 125.00 US dollars price target, citing balanced risk-reward as investors await confirmation that earnings leverage can offset year-over-year revenue headwinds. TD Cowen also kept a Hold with a 115.00 US dollars target, emphasizing the importance of execution on recompetes and program transitions to preserve margin structure through fiscal 2027. Truist raised its target to 110.00 US dollars while maintaining Hold, acknowledging operational improvements and upwardly revised adjusted EPS guidance, yet preferring to see sustained backlog conversion before adopting a more constructive stance. Across these views, the analytical throughline focuses on earnings durability over strict top-line growth. The consensus acknowledges that contract completions and program roll-offs remain a near-term headwind for revenue, which is consistent with the market’s forecast of a 5.20% year-over-year decline this quarter. However, the same consensus credits management’s cost control and disciplined execution for delivering a 68.23% year-over-year adjusted EPS increase last quarter and guiding to a higher full-year adjusted EPS range. This is the basis for the neutral posture: the path to EPS stability is credible, but investors seek evidence that the mix shift toward higher-value, intelligence-driven work will persistently offset revenue softness from legacy transitions. Within this framework, analysts will likely evaluate three checkpoints in the upcoming print. First, whether adjusted EPS tracks above the 2.31 estimate alongside EBIT growth of 4.69% year over year; beating both would signal that the margin and cost theses are intact. Second, whether quarterly book-to-bill and awarded backlog support the full-year revenue range of 7.00–7.20 billion US dollars, which would allay concerns about second-half visibility. Third, whether management commentary points to tangible ramp schedules for recent wins—such as the intelligence-agency recompete and ABMS DI awards—since on-time ramping is essential to sustaining mix-driven margin gains and moderating revenue declines. The neutral majority view also reflects valuation discipline. With shares recently moving on stronger-than-expected adjusted results last quarter, the bar for upside now rests on continued earnings beats and reaffirmed guidance. In the absence of clear upside catalysts on revenue growth, analysts prefer to anchor their stance in execution evidence, especially on contract transitions and cost structure. That positions the stock for a measured reaction: constructive if earnings again outrun expectations and guidance stays firm, more muted if results merely match forecasts, and cautious if program timing or margin commentary introduces uncertainty about the back half of the fiscal year.