The federal government contractor is laying off 7% of its workforce.
Shares of Booz Allen Hamilton (NYSE:BAH) were tanking on Friday, down about 14% after the government contractor missed on revenue expectations and posted a weaker-than-anticipated outlook.
One of the reasons for the selloff is related to the loss of several federal government contracts as well as government spending cutbacks.
For its fiscal 2025 fourth quarter ended March 31, Booz Allen Hamilton (BAH), reported revenue of $2.97 billion, up 7.3% year-over-year. However, it fell short of expectations, as the street called for $3.03 billion in revenue.
Net income soared 51% to $193 million, or $1.52 per share. Adjusted net income rose 17% to $203 million, or $1.61 per share, which was in line with estimates.
For the full fiscal year, revenue rose 12.5% to $11.98 billion. Net income increased 54% to $935 million, or $7.25 per share, while adjusted net income rose 13% to $815 million, or $6.35 per share.
“Booz Allen delivered excellent performance in Fiscal Year 2025,” Horacio Rozanski, Booz Allen Chairman, CEO and president, said. “We are using our leading positions in AI and the advanced technology ecosystem to accelerate the administration’s priorities. Our technology works, and we continue to provide value and outcomes that matter to our nation.”
Now the bad news.
Layoffs due to federal spendings cuts
Booz Allen Hamilton is a leading government contractor that provides technology, consulting, and other services and solutions for federal government agencies.
Its revenue falls into one of three buckets – defense contracts, civil contracts, and intelligence. Defense is the largest segment, as the firm generated $1.5 billion in revenue in the most recent quarter, a 14% year-over-year gain. Intelligence generated $458 million in the quarter, a 5% increase.
Civil revenue, which comes from government agencies outside of defense, was basically flat, falling just 0.3% to $898 million. Civil revenue suffered from federal spending cuts made by the Trump Administration’s DOGE (Department of Government Efficiency) reviews.
“Our largest contracts have been reviewed,” Rozanski explained on the earnings call. “We are proud that our solutions stood up well, and our contracts are mostly intact. The work is excellent, and the missions are critical. Having said that, the run rate on five large technology contracts has been reduced significantly in support of the administration’s desire to reduce spending overall. This slowdown coincided with the ending of a large technology contract at the VA.”
This has resulted in spending cuts at the company, including layoffs. The CEO said the company will reduce staff by 7% in the first quarter, so with the headcount at 35,800 as of March 31, a 7% reduction would mean about 2,500 layoffs.
Reduced revenue expected
The contract reductions likely caused the company to lower its revenue expectations for its fiscal 2026 and they fell short of analysts’ estimates.
The company expects $12 billion to $12.5 billion in revenue for the fiscal year, which would be flat to up 4%. That’s a far cry from the 12% revenue growth the previous year. Adjusted earnings are targeted at $6.20 to $6.55 per share, which would be roughly the same at the midpoint compared to last year.
“We believe that our defense and national security portfolio will continue to grow this year as we accelerate the injection of AI and commercial technology into missions. In contrast, we expect our civil business to decline this year,” Rozanski said.
Booz Allen Hamilton stock was down about 14% on the day and is down about the same YTD. Booz Allen Hamilton stock has been remarkably steady over the years, as a premiere government contractor, with only a few down years in the past 15 years. Over the past 10 years it has posted an average annualized return of about 16%.
The “reset” of the civil business, as Rozanski called it, may take time, but long-term, BAH is still a good solid stock.
