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Introduction & Market Context
Booz Allen Hamilton (NYSE:BAH) reported strong fourth-quarter and full-year fiscal 2025 results on May 23, 2025, but shares tumbled over 10% in premarket trading as investors reacted to cautious guidance for the upcoming fiscal year. The government consulting and technology firm delivered double-digit growth across key metrics for FY25, exceeding its multi-year financial targets, but projected significantly slower growth for fiscal 2026.
The company’s stock was trading at $116 in premarket, down 10.17% from its previous close of $129.13, reflecting investor concerns about the growth outlook despite the strong historical performance.
Quarterly Performance Highlights
Booz Allen reported solid fourth-quarter results with revenue reaching $2.97 billion, a 7.3% increase compared to $2.77 billion in the same period last year. Organic growth for the quarter was approximately 6%, driven by strong performance in Defense and Intelligence markets, while the Civil market remained flat.
"We saw efficient operations driving strong margins in the fourth quarter," noted CEO Horacio Rozanski during the earnings call. The company achieved a quarterly book-to-bill ratio of 0.71x, while maintaining a robust last-twelve-months (LTM) book-to-bill of 1.39x.
As shown in the following chart of Q4 financial performance:
Adjusted EBITDA for Q4 FY25 increased 10.5% to $316 million compared to $286 million in Q4 FY24, while adjusted diluted earnings per share jumped 21.1% to $1.61 from $1.33 in the prior-year quarter. Net income surged 50.8% to $193 million, and free cash flow increased significantly to $194 million from $128 million in Q4 FY24.
Fiscal Year 2025 Performance
For the full fiscal year 2025, Booz Allen delivered exceptional results that exceeded the company’s initial investment thesis targets set for the FY23-FY25 period.
The following slide highlights the company’s key financial achievements for fiscal 2025:
Revenue grew 12.4% to $12.0 billion, while adjusted EBITDA increased 11.9% to $1.315 billion. Adjusted diluted EPS rose 15.5% to $6.35, and the company maintained a stable adjusted EBITDA margin of 11.0%. Backlog increased 15.3% year-over-year to $37.0 billion, providing strong visibility into future revenue.
The company’s performance against its multi-year investment thesis targets was particularly impressive:
Booz Allen achieved an average organic growth rate of 11.7% over the investment thesis period, significantly outpacing the initial target of 5-8%. While the adjusted EBITDA margin of 11.0% fell short of the mid-10’s target, the company still delivered $1.315 billion in adjusted EBITDA for FY25, exceeding the upper end of its $1.2-1.3 billion target range.
Capital Allocation Strategy
The company continued to execute a balanced capital allocation strategy in fiscal 2025, returning significant value to shareholders while making strategic investments.
As illustrated in the following capital deployment breakdown:
Booz Allen paid $268 million in dividends during FY25 and deployed $764 million for share repurchases, including $310 million in accelerated buybacks. The company repurchased 4.3% of outstanding shares since the beginning of the fiscal year. The Board approved a quarterly dividend of $0.55 per share, continuing the company’s track record of dividend growth since 2013.
On the strategic investment front, Booz Allen made its largest strategic investment to date in Shield AI, reflecting the company’s focus on technology-centric investments to maintain its leading technological advantage in the government sector.
Forward Guidance
Despite the strong performance in FY25, Booz Allen’s guidance for fiscal 2026 signaled a significant slowdown in growth, which appears to be the primary driver behind the negative market reaction.
The company’s FY26 outlook is detailed in the following slide:
For fiscal 2026, Booz Allen projects revenue of $12.0-$12.5 billion, representing year-over-year growth of just 0-4.0%, a substantial deceleration from the 12.4% growth achieved in FY25. Adjusted EBITDA is expected to range from $1,315 million to $1,370 million, maintaining a margin of approximately 11%. Adjusted diluted EPS guidance of $6.20-$6.55 suggests relatively flat earnings growth compared to FY25’s $6.35.
The company also forecasts free cash flow of $700-$800 million for FY26, down from the $911 million generated in FY25. Key assumptions include an adjusted effective tax rate of 23-25%, average diluted share count of 123-125 million, capital expenditures of $110 million, and cash taxes related to Section 174 of $80 million.
Market Reaction & Analysis
The sharp decline in Booz Allen’s stock price in premarket trading suggests investors are focusing on the cautious FY26 guidance rather than the strong FY25 performance. The projected growth slowdown to 0-4.0% represents a significant deceleration from the double-digit growth rates the company has delivered in recent years.
Several factors may be contributing to the more conservative outlook, including potential procurement slowdowns during the presidential transition, changing agency priorities, and broader macroeconomic uncertainties. In the Q3 earnings call, management had noted concerns about the impact of recent executive orders on contracts, though they indicated the effects were minimal at that time.
The company’s key takeaways slide provides additional context for the changing landscape:
Booz Allen emphasized that it is "resetting business in a changing landscape" while remaining "strategically aligned with new administration" and continuing to invest in its advanced technology ecosystem. The company also highlighted its commitment to deploying significant capital to deliver shareholder value.
Despite the near-term growth concerns, Booz Allen’s strong backlog of $37 billion (+15.3% year-over-year) and book-to-bill ratio of 1.39x for the last twelve months suggest the company has a solid foundation for future growth once it navigates through the current transitional period.
Full presentation:
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