Science Applications International Corporation (SAIC): 5 FORCES Analysis [Nov-2025 Updated]

You're looking at a company, Science Applications International Corporation, whose entire profit story is written by the U.S. government, and honestly, that creates a unique pressure cooker for its margins. We see the near-monopsony customer flexing its muscle against a backdrop where your cost of revenues hit 87.8% of revenue in Q3 FY2025, driven heavily by scarce, highly-cleared technical talent acting as powerful suppliers. Still, that $21.9 billion total backlog gives you a solid runway, but with FY2025 organic growth at just 3.1% and a book-to-bill of 0.9, the rivalry with peers like Leidos and Booz Allen Hamilton is fierce for every new contract. Dive in below to see exactly how the power of suppliers, the threat of substitutes, and those high entry barriers shape the real profit potential for Science Applications International Corporation right now.

Science Applications International Corporation (SAIC) - Porter's Five Forces: Bargaining power of suppliers

You're looking at the supplier side of Science Applications International Corporation (SAIC)'s business, and honestly, it's dominated by two main forces: the people who do the work and the tech giants who provide the platforms. For a company like Science Applications International Corporation (SAIC), which is deeply embedded in government IT and engineering services, the power held by its key suppliers is significant and warrants close attention.

Highly-cleared technical talent holds significant power due to scarcity and high demand. This isn't just about hiring; it's about securing personnel with the necessary security clearances-Secret, Top Secret, or higher-to work on sensitive federal contracts. When demand outstrips supply for these specific skills, Science Applications International Corporation (SAIC) faces intense wage pressure. This labor supply risk directly impacts profitability, as seen in the high cost structure.

Specialized technology partners (e.g., cloud providers) can demand higher prices for mission-critical integration. Science Applications International Corporation (SAIC) relies on major hyperscalers for cloud services underpinning many of its digital transformation contracts for the Department of Defense and intelligence agencies. Switching costs are high once a mission architecture is built on a specific platform, giving those providers leverage in renewal negotiations and pricing.

Science Applications International Corporation (SAIC)'s cost of revenues was approximately 87.8% of revenue in Q3 FY2025, showing high reliance on inputs. Here's the quick math: Q3 FY2025 Cost of Revenues was $1,739 million against total revenues of $1.98 billion (or $1,980 million), resulting in that 87.8% figure. This high ratio confirms that the cost of delivering services-primarily labor-is the single largest factor determining Science Applications International Corporation (SAIC)'s gross margin performance.

Labor costs are a major component, making salary inflation a direct supplier risk. The company itself noted that over 70% of its cost structure is labor-related and variable. This means that even small shifts in prevailing market wages for cleared personnel can materially compress margins if not immediately passed through to the customer, which is often difficult in fixed-price government work. The resulting Adjusted EBITDA Margin for Q3 FY2025 was 10.0%.

We can map out the key financial context for this supplier pressure:

To manage this, Science Applications International Corporation (SAIC) needs to focus on contract mix and talent retention. The power of these suppliers translates into specific risks you need to track:

• Wage escalation outpacing contract escalation clauses.
• Inability to staff new, high-value contracts quickly enough.
• Increased negotiation leverage by key subcontractors for specialized tech.
• Higher overhead costs for maintaining security clearance infrastructure.

If onboarding takes 14+ days, churn risk rises, especially for in-demand cleared roles. Finance: draft 13-week cash view by Friday, focusing on labor accruals against the updated FY2025 revenue guidance of $7.425 billion to $7.475 billion.

Science Applications International Corporation (SAIC) - Porter's Five Forces: Bargaining power of customers

You're analyzing Science Applications International Corporation (SAIC), and the customer side of the ledger is dominated by one entity. Honestly, when you look at the revenue stream, it's clear who holds the cards.

The U.S. government is the near-monopsony customer, exerting extreme price pressure. For fiscal year 2025, 98% of Science Applications International Corporation (SAIC)'s revenues came directly from U.S. government agencies or subcontracts supporting them. That concentration means pricing negotiations are tough, and the government's ability to dictate terms is very high. They are always looking for the best value, which translates directly into margin compression for Science Applications International Corporation (SAIC) on many contracts.

Still, customer power is mitigated by the sheer volume of committed work, creating long-term revenue visibility. As of the end of fiscal year 2025, Science Applications International Corporation (SAIC)'s total backlog stood at $21.9 billion. That number is substantial, giving you a solid view of future revenue, even if the immediate pricing is tight. To be fair, only a portion of that is immediately available cash flow, with the funded backlog being much smaller.

Here's a quick look at the backlog as of the end of fiscal 2025:

Contracts are often recompetes, forcing continuous price and performance optimization. This cycle means Science Applications International Corporation (SAIC) can never rest on past performance; you have to win it all over again. Management noted that within their business development pipeline, about one-third of the work is recompete. This constant competition keeps the pressure on operational efficiency.

We see this dynamic playing out in recent contract awards:

• Won a potential five-year, $123 million IT recompete with the Federal Aviation Administration.
• Anticipating a recompete for Transportation Security Administration's OT&E support services, with a solicitation expected in fiscal year 2027.

Finally, federal agencies can insource services, a defintely strong threat for commodity IT work. When the government decides a service is routine or can be managed internally more cheaply-especially with efficiency pushes from new administrations-Science Applications International Corporation (SAIC) can lose that revenue stream entirely. The focus on technology-enabled 'do more with less' strategies suggests this threat remains very real for less specialized, commodity IT tasks.

Finance: draft the FY26 cash flow projection incorporating the $7.6 billion to $7.75 billion revenue guidance by Friday.

Science Applications International Corporation (SAIC) - Porter's Five Forces: Competitive rivalry

You're analyzing the competitive landscape for Science Applications International Corporation (SAIC), and the rivalry force is definitely flashing red. This isn't a fragmented market; it's a heavyweight bout among a few very large, very well-capitalized defense and technology integrators. The key players you need to watch are Leidos, Booz Allen Hamilton, and CACI International. These firms all have deep pockets and established relationships across the defense, intelligence, and civilian sectors, meaning any contract win or loss is a zero-sum game for market share.

The pressure is amplified because the overall industry growth rate, while positive in some segments, feels slow when you look at Science Applications International Corporation's own results. For instance, Science Applications International Corporation's full Fiscal Year (FY) 2025 organic growth, which strips out the impact of divestitures, came in at 3.1%. When the market isn't expanding rapidly, the only way to grow faster is to take business directly from a competitor. That dynamic forces every bid to be highly scrutinized and often aggressively priced.

This pricing pressure is a direct result of the nature of the work. A significant portion of the contracts Science Applications International Corporation pursues involves providing largely non-differentiated professional services and IT support. Honestly, when the core offering looks similar across the top bidders-think standard enterprise IT, systems engineering, or mission support-the decision often defaults to the lowest compliant price. It's a tough spot for margin expansion, so you see companies constantly trying to pivot their portfolio toward higher-value, differentiated solutions.

The lagging book-to-bill ratio is the clearest statistical signal of this fierce competition for new work. For the full Fiscal Year 2025, Science Applications International Corporation reported a trailing twelve months book-to-bill ratio of 0.9. That means for every dollar of revenue recognized over the last year, the company only booked 90 cents in new work. This gap shows that bookings are trailing revenue, which is a classic sign of a highly competitive environment where securing the next large contract is a real challenge. To be fair, the Q3 FY2025 ratio was even lower at 0.7, though Q1 FY2025 had shown strength with a 1.4 ratio.

Here's a quick look at how Science Applications International Corporation's recent performance metrics reflect this competitive intensity:

The pressure from rivals is also evident when you look at the relative scale. For example, while analysts note that Booz Allen Hamilton has higher revenue and earnings than Science Applications International Corporation, Science Applications International Corporation trades at a lower price-to-earnings ratio, suggesting it might be viewed as the more affordable option at times. This constant comparison means Science Applications International Corporation must continuously manage its cost structure and bid discipline.

The competitive environment is characterized by several key dynamics that you must factor into your strategy:

• Rival firms like Leidos, Booz Allen Hamilton, and CACI are all large-cap government technology contractors.
• The need to win new work is critical, as evidenced by the TTM book-to-bill ratio of 0.9 for FY2025.
• The market demands high-quality digital experiences, with 75% of people expecting government digital services to match the best private sector organizations.
• Science Applications International Corporation is actively trying to shift its portfolio toward growth vectors like Integrated Solutions and Mission Advisory to improve its competitive positioning.
• The broader public sector software market is projected to grow, but Science Applications International Corporation's 3.1% organic growth suggests it is fighting hard for its slice of that pie.

Finance: draft 13-week cash view by Friday

Science Applications International Corporation (SAIC) - Porter's Five Forces: Threat of substitutes

You're looking at the pressure from alternatives that can do what Science Applications International Corporation (SAIC) does, but differently. For a company like Science Applications International Corporation, whose Fiscal Year 2025 revenue hit $7.48 billion, the threat isn't about a single competitor; it's about the government deciding to build, buy, or use something else entirely.

Government agencies can substitute Science Applications International Corporation's custom services with Commercial Off-The-Shelf (COTS) software. This push is significant. A May 2025 executive order explicitly directed federal agencies to favor COTS when available, aiming to cut waste. Honestly, the potential scale of savings is massive; one report cited that the federal government could have saved $345 billion over the past 25 years by opting for COTS instead of custom builds where appropriate. Still, the Department of Homeland Security has flagged security risks associated with COTS, which might temper the rush for simple substitution.

The adoption of open-source and cloud-based platforms definitely reduces reliance on proprietary system integrators for certain tasks. We see this reflected in the broader federal IT landscape, where civilian IT budgets totaled approximately $75.1 billion in the Fiscal Year 2025 budget submission. The move toward hybrid cloud models is a clear indicator that agencies are diversifying their infrastructure away from monolithic, custom-integrated solutions. This trend puts pressure on Science Applications International Corporation to ensure its offerings are platform-agnostic or leverage these new environments effectively.

Internal government IT teams developing in-house capabilities for basic enterprise IT tasks is another layer of substitution. Agencies are actively trying to build internal tech talent. For instance, there was a requested $40 million for a "national AI talent surge" to increase recruitment and upskilling in key agencies. The VA, for example, is shifting investments internally to build capacity to integrate new technology like AI. However, this internal build-out is constrained; over 40% of federal IT professionals are now eligible for retirement, creating urgent succession gaps that external partners like Science Applications International Corporation are needed to fill.

To be fair, the high-end, mission-critical nature of Science Applications International Corporation's work limits simple substitution. Science Applications International Corporation is recognized as a leader in AI services in the IDC MarketScape: U.S. Defense and Intelligence Agencies AI Services 2025 Vendor Assessment. This focus on advanced areas like AI procurement enablement and tactical edge AI deployment means that for the most complex, tailored mission needs, COTS or basic in-house teams often fall short. Science Applications International Corporation's $7.48 billion in FY2025 revenue shows where the government is still relying on specialized, high-value expertise.

Here's a quick math comparison showing the scale of the substitution pressure versus Science Applications International Corporation's core business:

The threat landscape for Science Applications International Corporation involves a tug-of-war:

• COTS pressure targets lower-complexity, high-volume IT needs.
• Internal hiring aims to capture basic enterprise IT functions.
• Security concerns (like those flagged by DHS) create a necessary floor for custom work.
• Science Applications International Corporation's AI leadership anchors its high-end relevance.

If onboarding takes 14+ days, churn risk rises, but here, the risk is agencies deciding the product is good enough without the service wrapper.

Science Applications International Corporation (SAIC) - Porter's Five Forces: Threat of new entrants

Barriers are high due to the necessity of top-secret security clearances and specialized facilities.

Science Applications International Corporation (SAIC) maintained a workforce of approximately 24,000 employees as of January 31, 2025. A significant portion of this workforce requires high-level security clearances to execute contracts for defense, space, and intelligence markets.

Complex federal procurement rules and contract vehicles like IDIQs favor established integrators.

The federal government spends more than $760 billion annually on products and services. New entrants must navigate labyrinthine rules, including the Federal Acquisition Regulation (FAR). Established players like Science Applications International Corporation (SAIC) hold positions on large, multi-award Indefinite Delivery, Indefinite Quantity (IDIQ) vehicles. For example, the NASA SEWP contract vehicle has a ceiling value of $20 billion per contract. Furthermore, new contract vehicles, such as the Marketplace for the Acquisition of Professional Services (MAPS), are estimated at $50 billion. The successor to the CIO-CS contract also had a maximum dollar value of $20 Billion.

New entrants lack the scale and past performance history required for multi-billion dollar bids.

Science Applications International Corporation (SAIC)'s estimated backlog at the end of fiscal year 2025 was approximately $21.9 billion. Of this total backlog, approximately $3.4 billion was funded as of the end of fiscal year 2025. This scale of backlog and contract history is difficult for a new entrant to match for securing large, multi-year awards.

High capital is required to maintain a workforce of approximately 24,000 cleared employees.

The cost of maintaining a large, cleared workforce and navigating compliance represents a substantial capital hurdle. For the full fiscal year 2025, Science Applications International Corporation (SAIC) deployed $638 million of capital in total. This deployment included $36 million specifically for capital expenditures. Compliance costs for federal contractors can range from 3-5% of revenue, which places a disproportionate strain on smaller firms without the established financial base.

Here's the quick math on the scale of operations for Science Applications International Corporation (SAIC) versus the capital deployment:

You need deep pockets to compete for the prime spots.

The barriers to entry are further compounded by regulatory demands:

• Strict data protection standards and cybersecurity requirements.
• Mandates for sustainability guidelines and equity/inclusion.
• Complex proposal writing, which is more complicated than in the commercial world.