SAIC's Q2 Net Income Jumps 57% Despite Revenue Dip

TL;DR

**SAIC's share buybacks and cost controls are juicing EPS, making it a solid bet despite flat revenue in a tough government contracting market.**

AI Summary

Science Applications International Corp (SAIC) reported a mixed financial performance for the three and six months ended August 1, 2025. For the three months, revenue decreased by 2.7% to $1,769 million from $1,818 million in the prior year, yet net income significantly increased by 56.8% to $127 million from $81 million. Diluted EPS also saw a substantial rise to $2.71 from $1.58. For the six months, revenue slightly declined by 0.5% to $3,646 million from $3,665 million, while net income grew by 23.4% to $195 million from $158 million. Diluted EPS for the six months increased to $4.12 from $3.06. The company repurchased approximately 2.1 million shares of common stock for $231 million during the six months ended August 1, 2025, contributing to the higher EPS. Operating income for the three months increased to $139 million from $134 million, but for the six months, it slightly decreased to $260 million from $265 million. Cash and cash equivalents decreased to $48 million as of August 1, 2025, from $56 million at January 31, 2025.

Why It Matters

SAIC's ability to significantly boost net income and EPS despite a slight revenue decline indicates strong cost management and efficiency, which is crucial for investors in the competitive government contracting space. The substantial share repurchases, totaling $231 million, demonstrate a commitment to returning capital to shareholders and can signal management's confidence in future performance, potentially driving up stock value. For employees, sustained profitability ensures job security and potential for growth within the company's focus areas like AI and IT modernization. Customers, primarily the U.S. government, benefit from SAIC's continued investment in innovation through its 'Innovation Factory,' enhancing its ability to deliver advanced solutions in defense and civilian sectors.

Risk Assessment

Risk Level: medium — While net income and EPS improved, SAIC experienced a revenue decline of 2.7% for the three months and 0.5% for the six months ended August 1, 2025, compared to the prior year. This indicates potential challenges in securing new contracts or maintaining existing ones, which could impact future growth. Additionally, cash and cash equivalents decreased from $56 million to $48 million, and net cash provided by operating activities decreased from $236 million to $222 million for the six months, suggesting a tightening liquidity position.

Analyst Insight

Investors should closely monitor SAIC's upcoming contract awards and backlog to assess future revenue growth potential, as current revenue trends are slightly negative. The aggressive share repurchase program is a positive for EPS, but sustained long-term value will require top-line expansion. Consider SAIC for its strong profitability and shareholder returns, but be aware of the competitive landscape and its impact on revenue.

Financial Highlights

debt To Equity

1.21

revenue

$1,769 million

operating Margin

7.86%

total Assets

$5,201 million

total Debt

$2,292 million

net Income

$127 million

eps

$2.71

gross Margin

12.15%

cash Position

$48 million

revenue Growth

-2.7%

Revenue Breakdown

Key Numbers

• $1,769 million — Revenue for three months ended August 1, 2025 (Decreased from $1,818 million in prior year)
• $127 million — Net income for three months ended August 1, 2025 (Increased from $81 million in prior year)
• $2.71 — Diluted EPS for three months ended August 1, 2025 (Increased from $1.58 in prior year)
• $3,646 million — Revenue for six months ended August 1, 2025 (Decreased from $3,665 million in prior year)
• $195 million — Net income for six months ended August 1, 2025 (Increased from $158 million in prior year)
• $4.12 — Diluted EPS for six months ended August 1, 2025 (Increased from $3.06 in prior year)
• $231 million — Value of common stock repurchased (During the six months ended August 1, 2025)
• 2.1 million — Shares of common stock repurchased (During the six months ended August 1, 2025)
• $48 million — Cash and cash equivalents (As of August 1, 2025, down from $56 million at January 31, 2025)

Key Players & Entities

• Science Applications International Corporation (company) — registrant
• U.S. government (regulator) — primary customer
• Department of Defense (regulator) — customer of Defense and Intelligence segment
• Innovation Factory (company) — internal development unit
• FASB (regulator) — Financial Accounting Standards Board
• Nasdaq Stock Market LLC (company) — exchange where SAIC common stock is registered

FAQ

Risk Factors

• Cash and Cash Equivalents Decline [medium — financial]: Cash and cash equivalents decreased from $56 million at January 31, 2025, to $48 million as of August 1, 2025. This reduction, while not critically low, warrants monitoring for potential impacts on short-term liquidity and operational flexibility.
• Operating Income Fluctuation [medium — financial]: Operating income for the three months increased to $139 million from $134 million, indicating improved operational efficiency in the short term. However, for the six-month period, operating income slightly decreased to $260 million from $265 million, suggesting potential pressures or shifts in cost structures over a longer horizon.
• Debt Levels [medium — financial]: Total debt, net of current portion, stands at $1,844 million as of August 1, 2025, a decrease from $1,907 million at January 31, 2025. However, current debt obligations increased significantly to $448 million from $313 million, indicating a shift in debt maturity profile that could impact near-term cash flow.
• Intangible Asset Amortization [low — financial]: Intangible assets, net, decreased from $779 million at January 31, 2025, to $721 million at August 1, 2025, reflecting ongoing amortization. While this is a normal accounting process, significant write-downs in the future could impact profitability.
• Income Tax Benefit/Expense Volatility [medium — regulatory]: The company experienced a significant swing in income tax, from a benefit of $19 million in the prior year's three-month period to an expense of $19 million in the current period. For the six-month period, the tax expense decreased to $1 million from $37 million. This volatility can impact net income and requires careful management of tax strategies.

Industry Context

SAIC operates in the government services sector, a market heavily influenced by defense spending, technology modernization initiatives, and federal budget allocations. The industry is characterized by long-term contracts, complex procurement processes, and a need for specialized technical expertise. Trends include digital transformation, cybersecurity, cloud migration, and the increasing demand for AI and data analytics solutions within government agencies.

Regulatory Implications

As a government contractor, SAIC is subject to stringent regulatory oversight, including compliance with federal acquisition regulations (FAR) and cybersecurity standards. Changes in government spending priorities, contract award processes, or new compliance requirements can significantly impact revenue and profitability. Potential investigations or penalties related to contract compliance could also pose financial and reputational risks.

What Investors Should Do

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Key Dates

• 2025-08-01: End of Second Quarter and First Half of Fiscal Year 2025 — Reporting period for the condensed consolidated financial statements, showing revenue decline but significant net income and EPS growth.
• 2025-01-31: End of First Quarter of Fiscal Year 2025 — Prior period balance sheet date for comparison of cash and cash equivalents and debt levels.
• 2024-08-02: End of Second Quarter and First Half of Fiscal Year 2024 — Prior year comparable period for revenue, net income, EPS, and operating income.

Glossary

Diluted EPS

Earnings per share calculated by dividing net income by the weighted-average number of diluted common shares outstanding. It accounts for the potential dilution from stock options, convertible securities, and warrants. (Shows the profitability on a per-share basis, reflecting the impact of share repurchases and potential future dilution.)

Operating income

Profitability from a company's core business operations, calculated as revenue minus cost of revenues and operating expenses. (Indicates the efficiency and profitability of the company's primary business activities before considering interest and taxes.)

Accumulated other comprehensive income (loss)

A component of equity that includes unrealized gains and losses on certain investments, foreign currency translation adjustments, and pension adjustments that have not yet been realized in net income. (Reflects the impact of certain market fluctuations and accounting adjustments on the company's overall equity, separate from net income.)

Goodwill

An intangible asset that arises when a company acquires another company for a price greater than the fair value of its net identifiable assets. (Represents a significant portion of SAIC's assets ($2,851 million), indicating past acquisitions. It is subject to impairment testing.)

Intangible assets, net

Non-physical assets that have value, such as patents, trademarks, and customer lists, net of accumulated amortization. (These assets are being amortized over their useful lives, impacting operating expenses and net income.)

Year-Over-Year Comparison

Compared to the prior year's comparable periods, SAIC reported a 2.7% decrease in revenue for the three months ended August 1, 2025, and a 0.5% decrease for the six months. However, net income saw substantial increases, rising 56.8% for the three months and 23.4% for the six months, leading to significantly higher diluted EPS. Operating income showed a modest increase for the three-month period but a slight decrease for the six-month period. New risks are not explicitly detailed in the provided excerpt, but the financial statement changes suggest a focus on profitability enhancement and capital return through share repurchases, alongside a slight tightening of liquidity.

Filing Documents

• saic-20250801.htm (10-Q) — 1330KB
• saic0801202510-qexhibit311.htm (EX-31.1) — 10KB
• saic0801202510-qexhibit312.htm (EX-31.2) — 10KB
• saic0801202510-qexhibit321.htm (EX-32.1) — 5KB
• saic0801202510-qexhibit322.htm (EX-32.2) — 5KB
• 0001571123-25-000166.txt ( ) — 6653KB
• saic-20250801.xsd (EX-101.SCH) — 42KB
• saic-20250801_cal.xml (EX-101.CAL) — 67KB
• saic-20250801_def.xml (EX-101.DEF) — 120KB
• saic-20250801_lab.xml (EX-101.LAB) — 491KB
• saic-20250801_pre.xml (EX-101.PRE) — 323KB
• saic-20250801_htm.xml (XML) — 1183KB

Financial Information

Part I Financial Information

Financial Statements

Item 1 Financial Statements 1 Condensed Consolidated Statements of Income 1 Condensed Consolidated Statements of Comprehensive Income 2 Condensed Consolidated Balance Sheets 3 Condensed Consolidated Statements of Equity 4 Condensed Consolidated Statements of Cash Flows 5 Notes to Condensed Consolidated Financial Statements 6 Note 1—Business Overview and Summary of Significant Accounting Policies 6 Note 2—Earnings Per Share, Share Repurchases and Dividends 8 Note 3—Revenues 10 Note 4—Goodwill and Intangible Assets 12 Note 5—Income Taxes 13 Note 6—Debt Obligations 14 Note 7—Derivative Instruments Designated as Cash Flow Hedges 15 Note 8—Changes in Accumulated Other Comprehensive Income (Loss) by Component 16 Note 9—Sales of Receivables 17 Note 10—Business Segments Information 17 Note 11—Legal Proceedings and Other Commitments and Contingencies 19

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 21

Quantitative and Qualitative Disclosures About Market Risk

Item 3 Quantitative and Qualitative Disclosures About Market Risk 31

Controls and Procedures

Item 4 Controls and Procedures 31

Other Information

Part II Other Information 32

Legal Proceedings

Item 1 Legal Proceedings 32

Risk Factors

Item 1A Risk Factors 32

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 32

Defaults Upon Senior Securities

Item 3 Defaults Upon Senior Securities 33

Mine Safety Disclosures

Item 4 Mine Safety Disclosures 33

Other Information

Item 5 Other Information 33

Exhibits

Item 6 Exhibits 34

Signatures

Signatures 35 -i- Table of Contents

—FINANCIAL INFORMATION

PART I—FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements SCIENCE APPLICATIONS INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three Months Ended Six Months Ended August 1, 2025 August 2, 2024 August 1, 2025 August 2, 2024 (in millions, except per share amounts) Revenues $ 1,769 $ 1,818 $ 3,646 $ 3,665 Cost of revenues 1,554 1,608 3,222 3,242 Selling, general and administrative expenses 75 77 164 162 Other operating (income) expense 1 ( 1 ) — ( 4 ) Operating income 139 134 260 265 Interest expense, net 31 31 61 65 Other (income) expense, net — 3 5 5 Income before income taxes 108 100 194 195 Income tax (expense) benefit 19 ( 19 ) 1 ( 37 ) Net income $ 127 $ 81 $ 195 $ 158 Earnings per share: Basic $ 2.72 $ 1.59 $ 4.14 $ 3.08 Diluted $ 2.71 $ 1.58 $ 4.12 $ 3.06 See accompanying notes to condensed consolidated financial statements. -1- Table of Conten ts SCIENCE APPLICATIONS INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) Three Months Ended Six Months Ended August 1, 2025 August 2, 2024 August 1, 2025 August 2, 2024 (in millions) Net income $ 127 $ 81 $ 195 $ 158 Other comprehensive (loss) income, net of tax: Net unrealized (loss) gain on derivative instruments ( 2 ) ( 8 ) ( 3 ) ( 5 ) Total other comprehensive (loss) income, net of tax ( 2 ) ( 8 ) ( 3 ) ( 5 ) Comprehensive income $ 125 $ 73 $ 192 $ 153 See accompanying notes to condensed consolidated financial statements. -2- Table of Conten ts SCIENCE APPLICATIONS INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) August 1, 2025 January 31, 2025 (in millions) ASSETS Current assets: Cash and cash equivalents $ 48 $ 56 Receivables, net 951 1,000 Prepaid expenses 175 78 Other current assets 30 20 Total current assets 1,204 1,154 Goodwill 2,851 2,851 Intangible assets, net 721 779 Property, plant, and equipment (net of accumulated depreciation of $ 210 million and $ 200 mill