Booz Allen cuts more jobs, lowers outlook amid funding slowdowns

Booz Allen Hamilton is leaning on the word “bifurcation” to describe today’s government market, onto which the current shutdown has introduced an additional layer of stress and uncertainty on top of what is already there.

The civil market especially is where Booz Allen and the industry-at-large has experienced choppiness, given the Trump administration’s scrutiny on spending by those agencies. Booz Allen already announced a 7% workforce cut in May on the civil sector slowdown.

During Booz Allen’s fiscal second quarter earnings call with investors on Friday, chief executive Horacio Rozanski said the company has made the “difficult decision to reduce layers and numbers in our senior ranks” amid efforts to further cut $150 million in costs. No exact figure was provided on how many positions are being eliminated.

Booz Allen ended its second quarter with approximately 32,500 employees, a figure that reflects a 10% year-over-year decline in customer-facing staff and 3% lower from the first quarter.

“We see our civil business operating in the most challenging market in a generation,” Rozanski told analysts. “We saw essentially every procurement slide to the right in lockstep and that's not something I have ever seen before.”

In fact, Booz Allen saw no major civilian procurement actions to any extent during its second quarter that would have meaningfully impacted the business. That meant new large awards, nor ceiling boosts or reductions to contracts.

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The firm expects civil revenue to decline by low-20% for its fiscal year that ends March 31. From there, Chief Financial Officer Matt Caldrone told analysts the firm now expects the civil business’ return to growth “will require a few quarters.”

For the short term, Booz Allen is also doing a bit of homework ahead of when it expects the civilian contracting arena to pick up again.

A bulk of the firm’s fixed-price or outcome-based contracts are in that part of its business, and also look to be the Trump administration’s preferred way of doing the business of technology contracts going forward.

“We are having lots of productive conversations with the administration leaders on some new approaches to the core missions, where we're bringing commercial solutions and combining it with our (intellectual property) and (intellectual capital), their outcome-based commercial offerings that we're talking through,” Chief Operating Officer Kristine Martin Anderson told analysts. “It's just hard to predict exactly when those will launch, and so we’re just assuming the status where we are now continues through the rest of the year, but we do see growth over the medium term.”

The defense and intelligence portfolio appears much healthier by comparison and harkens back to the term “bifurcation,” a word defined as the division of something into two branches or parts.

Friction also exists in national security given the shutdown and Trump administration’s push for contract spending cuts, but Rozanski said multiple growth vectors are ongoing there from Booz Allen’s standpoint.

“The number of things we're talking about around cyber, around AI, around some of the tech that we're developing that is highly applicable to border security, to large event security, to the upcoming World Cup and so forth, we are looking for opportunities to leverage and grow in the parts of our civil business that are most aligned with the administration's priorities,” Rozanski said. “We will continue to do that pretty aggressively.”

Even still, Rozanski cautioned the “strength in our national-security portfolio cannot offset the current-year decline in our civil business” to meaningfully help the financial results and outlook.

Fiscal second quarter revenue of $2.9 billion was 8.1% down from prior year period, while profit of $324 million represented an 11% year-over-year decline in adjusted EBITDA (earnings before interest, taxes, depreciation and amortization).

Booz Allen lowered its fiscal year 2026 guidance on the top and bottom lines, with the new revenue outlook at $11.3 billion-to-$11.5 billion versus the prior $12 billion-to-$12.5 billion range. That suggests expectations of a 4%-to-6% decline compared to the previous growth outlook of flat-to-4% higher.

Both key adjusted EBITDA metrics in the guidance are also lower, with the new overall earnings outlook at $1.19 billion-to-$1.22 billion versus the prior $1.315 billion-to-$1.37 billion range. That suggests expectations of a 7%-to-9% decline compared to the previous profit outlook of flat-to-4% higher.

The firm’s revised guidance now sees adjusted EBITDA margin at mid-10% for FY 2026 versus 11%. The firm ended its FY 2025 on an 11% margin, which was roughly flat year-over-year.