Breaking Down Science Applications International Corporation (SAIC) Financial Health: Key Insights for Investors

You're looking at Science Applications International Corporation (SAIC) as a core government services play, but the recent financial picture presents a classic tension between near-term execution and long-term contract stability. The company closed its fiscal year 2025 with a solid foundation, reporting annual revenue of $7.479 billion and a net income attributable to common stockholders of $362 million, which is the kind of anchor you want in a defense technology integrator whose business is 98% tied to the U.S. government. However, the immediate challenge is clear: their most recent quarterly report showed revenue of $1.77 billion, marking a 2.7% year-over-year decline, which led to a stock drop despite a significant earnings per share (EPS) beat. The opportunity, though, is undeniable, resting on a massive estimated total backlog of $23.2 billion as of Q2 fiscal year 2026, meaning the future demand is defintely there; the real question is how management, even with the recent executive changes, plans to bridge that gap and translate those future awards into accelerating, profitable growth today.

Revenue Analysis

You need a clear picture of where Science Applications International Corporation (SAIC) makes its money, and the takeaway is simple: it's a government contractor, full stop. For fiscal year 2025, SAIC pulled in $7,479 million in total revenue, with nearly all of it coming from U.S. government contracts. That concentration is a strength, but it's also the single biggest risk factor you need to monitor.

Honestly, the U.S. government is the only customer that matters here.

Understanding SAIC's Primary Revenue Streams

SAIC's business model is built on providing high-end technology integration and professional services, not selling consumer products. The primary revenue source is overwhelmingly the U.S. federal market. In fiscal year 2025, a stunning 98% of the company's total revenues were derived from contracts directly with the U.S. government or subcontracts for government work. This means the company's financial health is defintely tied directly to the federal budget cycle and defense spending priorities.

The company's offerings span a robust portfolio of secure, high-end solutions, including mission IT, enterprise IT, engineering services, and professional services, all aimed at driving digital transformation for its government clients. You can see their core focus in their Mission Statement, Vision, & Core Values of Science Applications International Corporation (SAIC).

Segment Contribution and Customer Concentration

SAIC reports its business across two main reportable segments: Defense and Intelligence and Civilian. The Defense and Intelligence segment is the powerhouse, encompassing work for the Department of Defense (DoD) and the Intelligence Community. The Civilian segment covers federal, state, and local governments, focusing on areas like border security and veteran support.

The concentration within the largest segment is stark. In fiscal year 2025, the Department of Defense alone accounted for approximately 52% of SAIC's total revenues. Here's the quick math on how the major segments contributed to the $7,479 million top line:

Growth Rate and Significant Changes

Looking at the raw numbers, SAIC's revenue growth for fiscal year 2025 was a marginal 0.47% year-over-year, increasing by $35 million from the prior year. But that number is a bit misleading. The more telling metric is the organic growth (which is growth from existing operations, excluding acquisitions or divestitures), which stood at approximately 3.1% for the full year.

The difference is due to a significant change in the revenue stream: the divestiture (sale) of the Supply Chain Business in the prior fiscal year. This sale created a headwind against the top-line number, meaning the core business-the technology integration and services-is growing at a healthier clip than the total revenue suggests. The growth of 3.1% was primarily driven by the ramp-up in volume on existing and new contracts, which is a good sign for contract execution and new business wins, like the $1.8 billion System Software Lifecycle Engineering program award.

Next Step: Portfolio Manager: Assess the risk exposure of the 52% DoD concentration against the latest Congressional budget proposals for FY2026 by the end of next week.

Profitability Metrics

You want to know if Science Applications International Corporation (SAIC) is making money efficiently, and the quick answer is that its profitability is stable but operates on the thin margins typical of a major government services contractor. For fiscal year 2025, SAIC delivered a net income of $362 million on $7.48 billion in revenue, translating to a net profit margin of 4.84%. That's a low-margin, high-volume business model.

The core of SAIC's financial health lies in its cost structure and operational efficiency, which you can see clearly in its gross, operating, and net margins. The margins for FY2025 show the squeeze that comes from being a technology integrator in a highly competitive, government-regulated environment.

• Gross Profit Margin: The margin for FY2025 was 11.93%. This is the revenue left after paying for the direct costs of services (labor, materials).
• Operating Profit Margin: The margin was 7.53%. This is what remains after covering overhead like R&D and administrative costs (SG&A).
• Net Profit Margin: The final takeaway was 4.84%. This is the percentage of revenue kept after all expenses, including interest and taxes.

Trends in Profitability and Operational Efficiency

Looking at the trend over the past three years shows volatility, particularly in the operating and net margins. SAIC's gross margin has shown a slight, positive trend, moving from 11.53% in 2023 to 11.71% in 2024, and finally to 11.93% in 2025. This steady improvement suggests management is defintely getting better at cost management on its contracts, or perhaps shifting the contract mix toward higher-margin work.

However, the operating and net margins tell a more complex story. The operating margin dropped from a high of 9.95% in 2024 to 7.53% in 2025, and the net margin followed suit, falling from 6.41% to 4.84% over the same period. Here's the quick math: a drop like that, even with a rising gross margin, signals higher non-direct costs-things like increased administrative spending, higher interest expense, or one-time charges. You need to watch those SG&A line items closely; they are eating into the operational gains.

Industry Comparison: SAIC vs. Peers

When you compare SAIC's margins to the broader Aerospace & Defense sector, you see the clear distinction between a technology services company and a defense manufacturer. The industry average gross profit margin for Aerospace & Defense is around 28.8%, which is more than double SAIC's 11.93%. This is normal; SAIC's cost of goods sold (COGS) is primarily labor, which leaves a smaller gross profit compared to a company selling physical, high-value, manufactured goods like aircraft or missile systems.

Still, SAIC's net margin of 4.84% is slightly below the broader industry net average of 5.7%. More importantly, its operating margin of 7.53% is significantly lower than some pure-play U.S. Federal Services segments, which have reported operating margins as high as 15.3% in FY2025. This gap suggests SAIC may be operating with a less favorable mix of contract types-perhaps more cost-plus work (which typically yields net margins of 7-8%) than higher-risk, but higher-reward, fixed-price contracts (which can reach 10-13% net margins). To truly maximize returns, SAIC needs to continue its push into higher-value digital transformation and technology integration work, which typically carries better margins than traditional staff augmentation contracts. You can read more about the full picture in the Breaking Down Science Applications International Corporation (SAIC) Financial Health: Key Insights for Investors post.

Debt vs. Equity Structure

You're looking at Science Applications International Corporation (SAIC) and trying to figure out if their growth is on a solid foundation or if it's built on too much borrowed money. The direct takeaway is this: SAIC runs a significantly more leveraged balance sheet than its peers, relying heavily on debt to fund its operations and capital return programs, but its strong cash flow helps manage the risk.

As of fiscal year 2025 (FY2025), SAIC's total debt sits around $2.3 billion, against total shareholder equity of approximately $1.5 billion. That's a substantial figure, and it's why the company's Debt-to-Equity (D/E) ratio is a key metric to watch. For more on how this impacts shareholder value, you can read Exploring Science Applications International Corporation (SAIC) Investor Profile: Who's Buying and Why?

The Leverage Picture: Debt-to-Equity Ratio

The Debt-to-Equity ratio tells you how much debt a company uses to finance its assets relative to the value of shareholders' equity. For SAIC in FY2025, the D/E ratio is about 1.61 (or 161%). Here's the quick math: for every dollar of shareholder equity, the company has taken on $1.61 of debt. To be fair, this is a common strategy in the government services sector, where consistent, long-term contracts provide reliable cash flow, making debt servicing less risky.

Still, SAIC's ratio is high compared to the broader industry. The average D/E ratio for the Aerospace & Defense sector is often cited closer to 0.38 as of November 2025. SAIC's ratio is four times that benchmark. This tells you they are defintely using debt as a primary tool for capital structure optimization.

• Debt-to-Equity (FY2025): 1.61
• Industry Benchmark (Aerospace & Defense): 0.38
• Long-Term Debt (Q3 FY2025): $1.94 billion (net of current portion)

Recent Financing and Capital Allocation

SAIC is actively managing this debt load, not just letting it sit. In late 2025, the company was busy refinancing and adding capacity. A key move was closing a private offering of $500 million in senior notes due in 2033, with the net proceeds of roughly $493 million used to pay down its revolving credit facility. Plus, they amended their credit agreement to establish a new $1.1 billion senior secured term loan A facility, maturing in 2030. This kind of activity is about pushing out maturities and securing new capital at what they hope are favorable rates.

The company's capital allocation strategy shows a clear preference for debt-fueled shareholder returns over equity issuance. Their target net leverage ratio (Net Debt / Adjusted EBITDA) is approximately 3.0x, which is a level they are comfortable with given their durable business model. They are committed to returning capital, authorizing a $1.2 billion share repurchase program in December 2024, and targeting annual repurchases of $350 million to $400 million. This buyback strategy is the primary way they balance debt financing-they use debt to fund buybacks, reducing the equity base and boosting earnings per share, instead of issuing new stock.

Liquidity and Solvency

You're looking at Science Applications International Corporation (SAIC)'s ability to cover its short-term bills, and the quick takeaway is this: the company is a strong cash generator, but its balance sheet liquidity ratios are tight. This is a common structure for a government services contractor with highly predictable revenue and minimal inventory, but it still warrants a closer look.

For the fiscal year 2025, Science Applications International Corporation's liquidity positions-the Current Ratio and the Quick Ratio-both sit below the standard 1.0 benchmark. Specifically, the Current Ratio, which measures total current assets against total current liabilities, was 0.83. The Quick Ratio (or acid-test ratio), which strips out less-liquid assets like inventory, was even lower at 0.69.

Here's the quick math on what that means:

• Current Ratio of 0.83: Science Applications International Corporation had only 83 cents of current assets to cover every dollar of current liabilities.
• Quick Ratio of 0.69: They had only 69 cents of the most liquid assets (cash, receivables) to cover every dollar of current liabilities.

A ratio below 1.0 would be a major red flag for most manufacturing or retail companies. But for a premier technology integrator like Science Applications International Corporation, whose primary customer is the U.S. Federal Government, this isn't defintely a crisis. Their receivables are high-quality, and their cash conversion cycle is relatively fast, which is why they can operate with a negative working capital.

The working capital trend reflects this tight liquidity. Science Applications International Corporation operated with a negative working capital of -$243 million recently. This means current liabilities exceed current assets, a structural reality for many service firms that collect cash quickly (via government contracts) but have substantial accrued liabilities like payroll. Still, a shrinking or deeply negative working capital can limit operational flexibility if the payment cycle slows down.

To be fair, the company's cash flow statements tell a much stronger story, which is the real measure of their financial health. In fiscal year 2025, Science Applications International Corporation generated $494 million in cash flows from operating activities (CFO). This strong, predictable operating cash flow is what allows them to manage the tight balance sheet ratios.

The company's cash flow trends show a clear capital deployment strategy. While the CFO is strong, the cash is actively used. In Q2 of fiscal year 2025 alone, Science Applications International Corporation deployed $226 million of capital.

The key cash flow movements include:

• Operating Cash Flow (CFO): Strong at $494 million for FY2025, reflecting efficient billing and collection on government contracts.
• Investing Cash Flow: Minimal capital expenditures (CapEx), typical for a service firm, which contributes to a high Free Cash Flow (FCF) of $499 million for FY2025.
• Financing Cash Flow: Heavily focused on returning capital to shareholders. This includes significant share repurchases-$201 million in Q2 FY2025-and dividend payments. They are also managing their debt, with long-term debt decreasing from $1.907 billion to $1.84 billion in a recent quarter.

What this estimate hides is the reliance on their Master Accounts Receivable Purchase Agreement (MARPA Facility) to manage working capital, which can be seen in the higher cash used from this facility in recent periods. This is a form of off-balance sheet financing that helps bridge the gap created by the negative working capital.

The core strength is the cash generation, but the near-term risk is the liquidity cushion. If you want to understand the long-term drivers of this cash flow, take a look at their Mission Statement, Vision, & Core Values of Science Applications International Corporation (SAIC).

Here is a summary of the key liquidity metrics:

Your action: Track the quarterly operating cash flow closely; any sustained dip will put immediate pressure on the current debt structure.

Valuation Analysis

The core question for Science Applications International Corporation (SAIC) right now is whether the market has overreacted to the near-term revenue slowdown, making the stock undervalued. Based on the latest fiscal year 2025 data and current market metrics, the stock appears to be trading at a discount compared to its historical averages and peers, suggesting it may be undervalued.

You've seen the stock price drop, and honestly, it's been a rough ride. SAIC's stock traded in a 52-week range between a low of $87.92 and a high of $133.00. As of mid-November 2025, the stock is hovering near its 52-week low at around $88.62, reflecting a sharp 28.15% decline over the last 12 months. This price action is largely a response to the company's projected organic revenue declines for the next fiscal year, which is a major shift for a government services contractor. Exploring Science Applications International Corporation (SAIC) Investor Profile: Who's Buying and Why?

Key Valuation Multiples (FY 2025)

When we look at the valuation multiples, the picture gets interesting. The market is pricing SAIC very conservatively. The Price-to-Earnings (P/E) ratio, which compares the stock price to its earnings per share (EPS), is currently around 11.0 on a trailing twelve-month (TTM) basis. This is low for a stable defense contractor and significantly below the broader market average. Here's the quick math on the key ratios, using the company's strong fiscal year 2025 adjusted diluted EPS of $9.13 and adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) of $710 million.

The low Price-to-Book (P/B) ratio of 2.64 also suggests the company's market value is not far above its accounting book value, which can signal undervaluation, especially for a company with a high return on equity (ROE) like SAIC.

• Price-to-Earnings (P/E): 11.0 (TTM)
• Price-to-Book (P/B): 2.64 (November 2025)
• EV/EBITDA: 9.17 (Enterprise Value to Adjusted EBITDA)

Dividend and Analyst Consensus

For income-focused investors, SAIC offers a modest but solid dividend. The company's annualized dividend is $1.48 per share, paid in quarterly installments of $0.37. This translates to a dividend yield of approximately 1.61% at the current stock price. Crucially, the dividend payout ratio is a very safe 17.8%, meaning SAIC is only using a small portion of its earnings to fund the dividend, leaving plenty of cash flow for debt reduction and share buybacks. This is defintely a sustainable dividend.

Wall Street analysts are cautious, which is understandable given the revenue outlook. The consensus rating from analysts covering the stock is a 'Hold.' However, the average 12-month price target is $115.10, which implies a significant upside from the current price. This gap between the current price and the target price is where the opportunity lies for a realist investor.

Risk Factors

You're looking at Science Applications International Corporation (SAIC), a major defense and government services contractor, and the near-term risks are centered on the pace of federal spending. Honestly, SAIC's biggest financial hurdle isn't a lack of contracts-their estimated backlog at the end of fiscal year 2025 was a solid $21.9 billion-but rather the government's speed in actually funding and executing those contracts.

The core external risk is the volatility within the federal contracting environment. We've seen agencies being slower to obligate funds against existing contracts, plus there are continued award delays and program cancellations. This isn't just a minor issue; it's what drove SAIC to lower its fiscal year 2026 revenue guidance to a range of $7.250 billion to $7.325 billion, down from the prior $7.60 billion to $7.75 billion range. That's a projected organic decline of 2% to 3%. That's a significant headwind to revenue growth that you need to factor into your model.

Beyond the top-line pressure, there are internal and financial risks to watch closely. The government services sector is intensely competitive, and maintaining a strong book-to-bill ratio-the ratio of new contract awards to revenue recognized-is critical. SAIC's net bookings for the full fiscal year 2025 resulted in a book-to-bill ratio of approximately 0.9, meaning they recognized more revenue than they booked in new contracts, which can pressure future revenue growth. Also, the current ratio, a key measure of short-term liquidity, stood at approximately 0.87 as of Q4 FY2025. A current ratio below 1.0 suggests the company may face defintely some challenges covering its short-term liabilities with its current assets, which is a liquidity metric to monitor.

Here's a quick summary of the key risks and the company's response:

• External/Market Risk: Slow government funding and award delays.
• Operational Risk: Intense competition for large, complex contracts.
• Financial Risk: Liquidity pressure, signaled by the 0.87 current ratio.

To be fair, management is taking clear action to mitigate these risks. Operationally, they are focusing on driving efficiency and strategic cost management to maintain profitability, even with the lower revenue outlook. They raised their adjusted diluted EPS guidance for FY2026 to a range of $9.40 to $9.60, despite the revenue cut, which shows their focus on the bottom line. Strategically, they announced an organizational restructuring, consolidating five business groups into three (Army Navy; Air Force, Space and Intelligence; and Civilian) to simplify the structure and sharpen their focus on key customer segments, which will be effective January 31, 2026.

This organizational shift is a concrete next step to ensure they can better capitalize on opportunities, like the recent $1.4 billion task order under the COBRA program, which is a five-year contract focused on advanced defense technology. The long-term thesis remains intact, but the near-term is choppy. You can read more about the full financial picture in our detailed post: Breaking Down Science Applications International Corporation (SAIC) Financial Health: Key Insights for Investors.

Growth Opportunities

You're looking at Science Applications International Corporation (SAIC) and wondering where the next dollar of growth is coming from, especially with the government contracting market showing some choppiness. Honestly, the core takeaway is that SAIC is pivoting to higher-value, more resilient contracts, even if it means a slight near-term dip in the top line.

For the fiscal year 2025, SAIC reported total revenue of approximately $7.48 billion, with net income at $362 million, demonstrating a solid, albeit slightly reduced, base after divesting the Supply Chain Business in the prior year. The real story for future growth, however, lies in the $21.9 billion estimated total backlog, which is the pipeline of future work.

Here's the quick math: that backlog is a massive cushion, but the company's revised fiscal year 2026 revenue guidance is now between $7.25 billion and $7.325 billion. This signals a realistic expectation of a 2% to 3% organic decline, largely due to slower-than-anticipated contract awards and on-contract growth in the government sector. Still, the underlying strategy is sound.

The company's multi-year growth strategy, which they laid out at their 2024 Investor Day, is all about shifting the portfolio mix toward secure, high-end solutions. This is where the profit margins are defintely better, focusing on mission IT, enterprise IT, and engineering services. They are integrating emerging technology, like artificial intelligence (AI), rapidly into critical national operations.

• Product Innovations: Integrating emerging tech into mission-critical IT.
• Contract Wins: Securing large, long-term, R&D-focused programs.
• Capital Allocation: Returning capital to shareholders via buybacks.

A concrete example of this strategic pivot is the $928 million Hyper-Innovative Operational Prototype Engineering (HOPE 2.0) contract award from the U.S. Air Force. This five-year agreement, which started in July 2025, funds Research, Development, Test, and Evaluation (RDT&E) mission engineering services, which is exactly the kind of high-value work that drives future earnings growth.

SAIC is also looking outside its traditional US government customer base, which accounted for 98% of its FY2025 revenue. A key strategic initiative is their first major international move outside the US, exploring investments and partnerships in India's aviation sector. This is a smart, albeit early-stage, move to diversify their market exposure.

The company's competitive advantage is simple: they are a premier Fortune 500 technology integrator with a robust portfolio across the defense, space, civilian, and intelligence markets. That deep, embedded relationship with the U.S. government is a huge barrier to entry for competitors.

To give you a clearer picture of the financial projections, here is the revised guidance for the next fiscal year:

What this estimate hides is the potential for large, unanticipated contract awards-the nature of government work means bookings can be lumpy. They also deployed $638 million of capital in FY2025, with $527 million going toward share repurchases, which boosts your earnings per share (EPS) by reducing the share count. That's a clear commitment to shareholder value.

If you want to dig deeper into the valuation and risk profile, check out the full analysis: Breaking Down Science Applications International Corporation (SAIC) Financial Health: Key Insights for Investors.