SAIC Q3 Revenue Dips, Net Income Falls Amid Increased Debt Load

Ticker: SAIC · Form: 10-Q · Filed: 2025-12-04T00:00:00.000Z

Sentiment: bearish

Topics: Government Contracting, IT Services, Defense Sector, Financial Performance, Debt Management, Shareholder Returns, Acquisitions, Revenue Decline, Net Income Drop

Related Tickers: SAIC, LDOS, BAH

TL;DR

**SAIC's Q3 revenue and profit drop, coupled with rising debt, makes it a risky bet despite strategic acquisitions and buybacks.**

AI Summary

Science Applications International Corporation (SAIC) reported a decline in revenue and net income for the three months ended October 31, 2025, with revenues decreasing by $110 million to $1,866 million from $1,976 million in the prior year, and net income falling by $28 million to $78 million from $106 million. Diluted EPS also decreased significantly to $1.69 from $2.13. For the nine months ended October 31, 2025, revenues were $5,512 million, down from $5,641 million, but net income increased to $273 million from $264 million, driven by a lower income tax expense of $15 million compared to $57 million in the prior year. The company's operating income for the quarter decreased to $128 million from $160 million. SAIC's cash and cash equivalents decreased to $45 million from $56 million at January 31, 2025, while total debt increased substantially from $2,220 million to $2,487 million. The company spent $203 million on acquisitions and $347 million on stock repurchases during the nine-month period, indicating continued strategic investments and shareholder returns despite revenue pressures.

Why It Matters

SAIC's revenue decline in Q3 2025, coupled with a significant increase in debt, signals potential headwinds for investors. While net income for the nine-month period saw a slight increase due to lower tax expenses, the core business performance, as indicated by operating income, is under pressure. This could impact SAIC's ability to compete for new government contracts against rivals like Leidos and Booz Allen Hamilton, potentially affecting future growth and profitability. Employees might face uncertainty if cost-cutting measures become necessary, and customers could see shifts in service delivery as SAIC navigates its financial landscape. The broader market for government IT services may see increased competition as companies vie for a potentially shrinking pool of high-margin contracts.

Risk Assessment

Risk Level: medium — The company's revenues decreased by $110 million for the three months ended October 31, 2025, and total debt increased significantly from $2,220 million at January 31, 2025, to $2,487 million at October 31, 2025. This increased leverage, combined with declining revenue, could strain financial flexibility and profitability.

Analyst Insight

Investors should closely monitor SAIC's upcoming contract wins and margin trends, as the current revenue decline and increased debt pose concerns. Consider holding or reducing exposure until there's clear evidence of revenue stabilization and debt reduction, or a significant new contract win that could offset current pressures.

Financial Highlights

debt To Equity
1.64
revenue
$1,866 million
operating Margin
6.9%
total Assets
$5,423 million
total Debt
$2,487 million
net Income
$78 million
eps
$1.69
gross Margin
11.1%
cash Position
$45 million
revenue Growth
-5.6%

Revenue Breakdown

SegmentRevenueGrowth
Total Revenues$1,866 million-5.6%

Key Numbers

Key Players & Entities

FAQ

What were Science Applications International Corp's revenues for the three months ended October 31, 2025?

Science Applications International Corp reported revenues of $1,866 million for the three months ended October 31, 2025. This represents a decrease from $1,976 million in the same period of the prior year.

How did SAIC's net income change for the nine months ended October 31, 2025?

For the nine months ended October 31, 2025, SAIC's net income increased to $273 million, up from $264 million in the comparable period of the prior year. This increase was primarily due to a lower income tax expense.

What is SAIC's current debt level as of October 31, 2025?

As of October 31, 2025, SAIC's total debt (current portion plus net of current portion) was $2,487 million. This is an increase from $2,220 million reported at January 31, 2025.

What strategic actions did SAIC take regarding acquisitions and share repurchases?

During the nine months ended October 31, 2025, SAIC spent $203 million on cash paid for acquisitions, net of cash acquired. The company also repurchased $347 million in stock during the same period.

What is the primary business of Science Applications International Corporation?

Science Applications International Corporation is a leading provider of technical, engineering, and enterprise information technology (IT) services, primarily to the U.S. government. They focus on integrating emerging technology into mission-critical operations.

How many shares of common stock did SAIC have outstanding as of November 21, 2025?

As of November 21, 2025, Science Applications International Corporation had 45,127,414 shares of common stock outstanding.

What are the two reportable segments for SAIC?

SAIC's two reportable segments are the Defense and Intelligence segment, which serves the Department of War and Intelligence Community, and the Civilian segment, which provides solutions to federal, state, and local governments.

What was SAIC's operating income for the three months ended October 31, 2025?

SAIC's operating income for the three months ended October 31, 2025, was $128 million. This is a decrease from $160 million reported for the three months ended November 1, 2024.

What accounting standard updates did SAIC recently adopt or evaluate?

SAIC adopted ASU No. 2023-07, Segment Reporting, for interim disclosures in fiscal 2026. They are evaluating ASU No. 2023-09, Income Taxes, for prospective adoption in fiscal 2026, and ASU No. 2024-03, Expense Disaggregation Disclosures, and ASU No. 2025-06, Internal-Use Software, for future periods.

What was the net cash provided by operating activities for SAIC for the nine months ended October 31, 2025?

For the nine months ended October 31, 2025, SAIC's net cash provided by operating activities was $351 million. This is a decrease from $379 million in the prior nine-month period.

Risk Factors

Industry Context

SAIC operates in the highly competitive government services and IT solutions sector, primarily serving U.S. federal agencies. The industry is characterized by long-term contracts, complex procurement processes, and a constant need for technological innovation. Key trends include digital transformation, cybersecurity, cloud migration, and the increasing demand for AI and data analytics capabilities.

Regulatory Implications

As a major government contractor, SAIC faces significant regulatory scrutiny. Compliance with federal acquisition regulations, cybersecurity standards, and data privacy laws is critical. Any lapses can lead to severe penalties, contract disputes, and reputational damage, impacting future business opportunities.

What Investors Should Do

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Key Dates

Glossary

Operating income
Profitability from a company's core business operations before interest and taxes. (Decreased to $128 million for Q3 2025 from $160 million in the prior year, indicating pressure on core business profitability.)
Diluted EPS
Earnings per share calculated after accounting for all potential dilutive securities, such as stock options and convertible bonds. (Fell to $1.69 for Q3 2025 from $2.13 in the prior year, reflecting lower net income and potentially a higher number of shares outstanding.)
Accumulated other comprehensive income (loss)
A component of equity that includes unrealized gains and losses on certain investments and foreign currency translations that have not yet been realized. (Showed a net loss of $4 million for the nine months ended October 31, 2025, impacting total equity.)
Goodwill
An intangible asset that arises when a company acquires another company for a price greater than the fair value of its net assets. (Increased to $2,960 million from $2,851 million, suggesting recent acquisitions or revaluations.)
Debt, net of current portion
The total amount of long-term debt a company owes, excluding the portion due within the next year. (Significantly increased to $2,475 million from $1,907 million, indicating substantial new long-term borrowing.)

Year-Over-Year Comparison

Compared to the prior year's comparable periods, SAIC experienced a revenue decline of 5.6% for the third quarter ($1,866M vs $1,976M) and a smaller decline for the nine months ($5,512M vs $5,641M). While Q3 net income and EPS decreased significantly, year-to-date net income saw a modest increase ($273M vs $264M), largely driven by a substantial reduction in income tax expense ($15M vs $57M). Operating income also declined in Q3. Key balance sheet changes include a notable increase in total debt and a decrease in cash and cash equivalents.

Filing Stats: 4,604 words · 18 min read · ~15 pages · Grade level 17.2 · Accepted 2025-12-04 12:25:08

Filing Documents

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 9 Note 3—Revenues 9 Note 4—Acquisitions 12 Note 5 —Goodwill and Intangible Assets 13 Note 6 —Income Taxes 14 Note 7 —Debt Obligations 14 Note 8 —Derivative Instruments Designated as Cash Flow Hedges 16 Note 9 —Changes in Accumulated Other Comprehensive Income (Loss) by Component 17 Note 10 —Sales of Receivables 18 Note 1 1 —Business Segments Information 18 Note 1 2 —Legal Proceedings and Other Commitments and Contingencies 20 Note 13—Subsequent Events 21

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 22

Quantitative and Qualitative Disclosures About Market Risk

Item 3 Quantitative and Qualitative Disclosures About Market Risk 32

Controls and Procedures

Item 4 Controls and Procedures 32

Other Information

Part II Other Information 33

Legal Proceedings

Item 1 Legal Proceedings 33

Risk Factors

Item 1A Risk Factors 33

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 33

Defaults Upon Senior Securities

Item 3 Defaults Upon Senior Securities 34

Mine Safety Disclosures

Item 4 Mine Safety Disclosures 34

Other Information

Item 5 Other Information 34

Exhibits

Item 6 Exhibits 35

Signatures

Signatures 36 -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 Nine Months Ended October 31, 2025 November 1, 2024 October 31, 2025 November 1, 2024 (in millions, except per share amounts) Revenues $ 1,866 $ 1,976 $ 5,512 $ 5,641 Cost of revenues 1,639 1,739 4,861 4,981 Selling, general and administrative expenses 101 83 265 245 Other operating (income) expense ( 2 ) ( 6 ) ( 2 ) ( 10 ) Operating income 128 160 388 425 Interest expense, net 33 32 94 97 Other (income) expense, net 1 2 6 7 Income before income taxes 94 126 288 321 Income tax (expense) benefit ( 16 ) ( 20 ) ( 15 ) ( 57 ) Net income $ 78 $ 106 $ 273 $ 264 Earnings per share: Basic $ 1.70 $ 2.15 $ 5.85 $ 5.22 Diluted $ 1.69 $ 2.13 $ 5.82 $ 5.17 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 Nine Months Ended October 31, 2025 November 1, 2024 October 31, 2025 November 1, 2024 (in millions) Net income $ 78 $ 106 $ 273 $ 264 Other comprehensive (loss) income, net of tax: Net unrealized (loss) gain on derivative instruments ( 1 ) ( 1 ) ( 4 ) ( 6 ) Total other comprehensive (loss) income, net of tax ( 1 ) ( 1 ) ( 4 ) ( 6 ) Comprehensive income $ 77 $ 105 $ 269 $ 258 See accompanying notes to condensed consolidated financial statements. -2- Table of Conten ts SCIENCE APPLICATIONS INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) October 31, 2025 January 31, 2025 (in millions) ASSETS Current assets: Cash and cash equivalents $ 45 $ 56 Receivables, net 1,045 1,000 Prepaid expenses 145 78 Other current assets 22 20 Total current assets 1,257 1,154 Goodwill 2,960 2,851 Intangible assets, net 779 779 Property, plant, and equipment (net of accumulated depr

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