Booz Allen Q1 2027: Margins Rise as Revenue Slips and Taxes Hit EPS

The goal here is to dig into Booz Allen Hamilton’s income statement and see what the latest quarter says about the direction of the business: revenue softened, margins improved, and taxes did most of the damage to reported earnings. Booz Allen is a major U.S. government consulting and technology contractor, serving defense, intelligence, civil agencies, and commercial customers in areas like cybersecurity, analytics, AI, engineering, and mission systems. Its latest 10-Q filing gives a useful snapshot of how that model is holding up in a choppy federal spending environment.

Revenue slipped, but the mix shifted toward National Security

For the quarter ended June 30, 2026, Booz Allen reported revenue of $2.8 billion, down 4% from $2.924 billion a year earlier. That headline decline was not evenly spread across the business.

The notable split was by customer type:

• National Security revenue: $2.028 billion, up from $2.001 billion
• Civil and Commercial revenue: $772 million, down from $923 million

That means National Security rose to 72% of total revenue, compared with 68% last year. Civil and Commercial fell to 28% from 32%. In plain terms, Booz Allen became more concentrated in defense, intelligence, and related mission work during the quarter.

By contract type, the company also saw a meaningful shift. Cost-reimbursable contracts — contracts where the customer reimburses allowable costs, often plus a fee — declined to $1.607 billion, or 57% of revenue, from $1.758 billion and 60% last year. Fixed-price work increased to $577 million, or 21% of revenue, from $528 million and 18%. Fixed-price contracts can offer better margin opportunities, but they also put more execution risk on the contractor if costs run above plan.

Margins improved despite lower sales

The most interesting part of the quarter is that Booz Allen produced higher operating income on lower revenue. Operating income rose 9% to $279 million, compared with $257 million a year ago. Operating margin improved to about 10.0%, up from roughly 8.8% last year.

Costs moved down faster than revenue:

• Cost of revenue: $1.336 billion, down 6%
• Billable expenses: $835 million, down 5%
• G&A expense: $305 million, down 6%
• Depreciation and amortization: $45 million, up 13%

That increase in depreciation and amortization likely reflects acquisition activity and investment in intangible assets, but it was more than offset by reductions elsewhere. Booz Allen also reported Adjusted EBITDA of $334 million, up from $311 million. EBITDA is earnings before interest, taxes, depreciation, and amortization; companies often use adjusted EBITDA to show operating profitability before financing and certain non-core items.

Net income fell because last year had a tax benefit

Despite better operating profit and higher pre-tax income, net income declined sharply. Booz Allen reported net income of $198 million, down 27% from $271 million last year. Diluted EPS fell to $1.63 from $2.16.

The key reason was taxes. This quarter included income tax expense of $53 million. The prior-year quarter included an income tax benefit of $55 million. That swing of more than $100 million explains why net income fell even though income before taxes rose 16% to $251 million.

Interest expense also increased modestly, to $48 million from $44 million, reflecting Booz Allen’s sizable debt load. Total debt was $3.936 billion at quarter-end, nearly unchanged from March 31.

Cash flow was stronger, while M&A consumed cash

Operating cash flow improved meaningfully to $281 million, up from $119 million a year ago. That is an important offset to the lower reported net income, suggesting the quarter’s earnings quality was not as weak as the bottom-line comparison implies.

Cash still declined from $728 million at March 31 to $540 million at June 30, mainly because investing activity used $328 million. That included $220 million for acquisitions and $88 million for strategic investments. The filing references the acquisition of Defy Security and an agreement to acquire Ultra I&C Mission Solutions. Recent coverage describes Ultra I&C Mission Solutions as bringing capabilities such as command-and-control software, ruggedized edge computing, and encryption management — areas that fit Booz Allen’s national security technology focus.

The company also returned capital to shareholders, paying $73 million in dividends and repurchasing $72 million of stock during the quarter. Diluted shares outstanding fell to about 120.2 million, down from 124.5 million a year earlier.

Backlog remains a stabilizer

Booz Allen’s backlog — contracted work expected to generate future revenue — increased to $39.5 billion, up from $38.3 billion a year earlier. Funded backlog rose to $4.664 billion from $4.047 billion, while priced options totaled $24.601 billion.

That backlog matters because government consulting businesses depend heavily on contract awards, renewals, and appropriations timing. The filing specifically notes uncertainty around federal funding and the risk that delays, disruptions, or a prolonged government shutdown could hurt results.

Bottom line

Booz Allen’s quarter was mixed but not weak in the way the net income decline might suggest. Revenue fell 4%, especially in Civil and Commercial, but operating income rose 9%, adjusted EBITDA improved, and operating cash flow more than doubled year over year. The biggest drag on reported earnings was the tax comparison, not operating deterioration.

The key question for investors is whether Booz Allen can keep improving margins while navigating a more concentrated National Security mix and ongoing federal budget uncertainty. Against competitors like Leidos, CACI, SAIC, and Accenture Federal Services, Booz Allen’s backlog and mission-tech positioning remain strengths — but the revenue decline shows that even well-entrenched government contractors are not immune to spending shifts and contract timing.