Booz Allen shares surge on EPS beat, FY guidance raise
Management consulting firm exceeds profit expectations by 37%, raises full-year outlook despite revenue shortfall
Booz Allen Hamilton posted a significant earnings beat in its fiscal third quarter, delivering adjusted earnings per share of $1.77 that substantially outperformed analyst estimates of roughly $1.29. The McLean, Virginia-based management and technology consulting firm also raised its full-year fiscal 2026 guidance, sending its stock higher in Friday morning trading.
The quarterly performance, announced before the market open on January 23, 2026, came despite a revenue shortfall of $2.6 billion against a consensus range of $2.73 billion to $2.76 billion. The miss reflected the impact of a government shutdown in the prior quarter, though Congress approved final appropriations bills on January 22, 2026, funding the government through September and mitigating further disruption.
Free cash flow climbed 85% year-over-year to $248 million, while total backlog reached a record $38 billion, signaling robust demand for the company's cybersecurity, analytics, and engineering services. The backlog figure represents a substantial book of business that provides visibility into future revenue streams for the government-focused contractor.
Management raised its fiscal 2026 earnings per share guidance to a range of $5.95 to $6.15, up from the previous $5.45 to $5.65 outlook, positioning the midpoint roughly in line with analyst consensus of $6.07. However, the company's revenue guidance of $11.30 billion to $11.40 billion falls short of the $11.67 billion consensus estimate, suggesting some lingering challenges in revenue recognition and project timing.
The strong profitability improvement and guidance raise overshadowed the revenue disappointment, highlighting Booz Allen's operational discipline and margin expansion capabilities. The company's focus on higher-margin digital transformation and cybersecurity work appears to be paying dividends even as some traditional government services face budgetary pressures.
Ahead of the earnings report, analysts maintained a consensus "Hold" rating with an average 12-month price target of $109.46. Citigroup had upgraded its stance on January 13, raising its price target from $93 to $109 while maintaining a "Neutral" rating, while Jefferies cut its target from $100 to $95 on December 18 with a "Hold" rating.
The stock closed at $95.74 on Thursday, January 22, and showed strength in pre-market trading following the announcement. With a market capitalization of approximately $11.8 billion, Booz Allen trades at a price-to-earnings ratio of roughly 14.6 times trailing earnings, suggesting reasonable valuation relative to its growth prospects in the government consulting sector.
The government contracting landscape has faced headwinds from changing budget priorities and political uncertainty, but Booz Allen's diversified portfolio across defense, intelligence, and civilian agencies provides resilience. The company's expanding commercial business, focused on cybersecurity and digital transformation, offers additional growth opportunities beyond its traditional government contracting base.
Looking ahead, investors will focus on Booz Allen's ability to maintain margin expansion while addressing the revenue shortfall. The record backlog provides confidence in future revenue conversion, though execution on large-scale government projects remains key to sustaining momentum. The avoidance of a prolonged government shutdown removes a significant near-term risk, clearing the path for improved operational performance in the fourth quarter.