Booz Allen Stock Drops. This Is the Problem.

Investors have worried that federal costs cuts would hurt Booz Allen. (Kevin Dietsch/Getty ImagesGetty Images)

Key Points

• Booz Allen reports second-quarter earnings per share of $1.49 on sales of $2.9 billion, missing analysts’ estimates.
• The company cut its fiscal 2026 sales forecast to $11.3 billion-$11.5 billion. I
• Booz Allen’s stock fell 8.9% after the announcement.

Booz Allen Hamilton posted weak quarterly results and slashed its financial guidance amid what it calls a “funding slowdown.” Cost-cutting efforts by the government are hitting home, and shares took it on the chin Friday.

The technology integrator and solutions provider for government and business announced earnings per share of $1.49 from sales of $2.9 billion for its fiscal second quarter. Wall Street was looking for earnings of $1.51 a share and revenue of $3 billion.

“Top and bottom-line performance below forecast driven by continued funding slowdown,” the company said in a news release.

Sales declined 8.1% year over year. Earnings per share fell closer to 18%.

Looking ahead, Booz Allen now expects fiscal 2026 sales of between $11.3 billion and $11.5 billion, down from a prior range of $12 billion to $12.5 billion. Wall Street has been projecting $12.1 billion.

Per-share earnings are expected to be between $5.45 and $5.55, down from a prior range of $6.20 to $6.55. The consensus call on Wall Street is for $6.30 a share.

All that adds up to a weak quarter and outlook. Booz Allen stock on Friday fell 8.9% to $91.40, while the S&P 500 and Dow Jones Industrial Average gained 0.8% and 1%, respectively.

“Our second quarter results reflect a bifurcated market. We are winning work and demand is strong for our leading cyber, AI, and warfighting technologies,” said CEO Horacio Rozanski in a news release. “We remain focused on accelerating future growth while building advanced tech that keeps America safe and strong.”

One bright spot was orders, which exceeded sales by 1.7 times in the quarter.

It has been a tough year for the company. Coming into Friday trading, shares were down 22% year to date and 40% over the past 12 months. Investors have worried that cost-cutting efforts in the federal government will lead to slowing sales and earnings growth.

Now, those fears have come to fruition. Booz is now forecasting fiscal 2026 revenue will be in a range with a midpoint of about $11.4 billion. A year ago, Wall Street was projecting $12.8 billion.

“We note that we still find Booz Allen attractive as relative valuation to the group touches multi-year lows,” wrote Cantor Fitzgerald analyst Colin Canfield in a report on Friday. “But we think we need to get a sense of when we can see growth acceleration before keeping it as our Top Pick in [the government technology sector].”

He rates shares at a Buy and has a $160 price target on Booz Allen stock. Canfield calls CACI International his top pick.

CACI stock trades for about 20 times earnings expected over the next 12 months. Booz Allen trades for about 14 times.

Write to Al Root at allen.root@dowjones.com