Science Applications International Corporation (NASDAQ:SAIC) reported second-quarter fiscal 2027 revenue of $1.88 billion, up 6.3% year over year. Net bookings, however, were approximately $1.2 billion. That produced a quarterly book-to-bill ratio of 0.6, calculated as net bookings divided by revenue, while the trailing 12-month ratio was 0.8.
Total backlog stood at approximately $22.1 billion, including $3.8 billion of funded backlog. The remaining $18.3 billion consisted of negotiated unfunded backlog, which includes future revenue under negotiated contracts that has not been funded and unexercised priced options. The backlog provides visibility, but continued growth requires new awards to replace revenue as contracts are performed.
BULL CASE
The underlying revenue performance was stronger than the bookings figure suggests. Company-defined non-GAAP organic revenue growth, which excludes acquisitions and divestitures, was 5.3%. The SilverEdge acquisition contributed $20 million, while Defense and Intelligence revenue increased 5% and Civilian revenue grew 9%.
Cash generation also improved on a GAAP basis. Science Applications International Corporation produced $146 million of operating cash flow, up 20% from $122 million a year earlier. Management also increased fiscal 2027 revenue guidance to $7.2 billion to $7.3 billion from $7.0 billion to $7.2 billion.
The quarterly bookings figure excluded a five-year, approximately $740 million recompete award from the U.S. Department of Homeland Security received after the period ended. The task order covers operations and maintenance support for Customs and Border Protection systems. That award should strengthen the next quarter’s bookings profile.
BEAR CASE
The timing of one award does not erase the broader replenishment issue. A trailing book-to-bill ratio of 0.8 means Science Applications International Corporation booked about $0.80 of new work for every $1 of revenue recognized over the past year. Total backlog also declined from $22.6 billion at the end of fiscal 2026 to $22.1 billion six months later.
Only about 17% of the current backlog was funded. Government contractors regularly carry substantial unfunded backlog, but future revenue still depends on appropriations, option exercises, and continued program execution. The Homeland Security award is a recompete, meaning it protects existing work rather than representing entirely new demand.
Profit and cash-flow trends were mixed. Company-defined non-GAAP adjusted diluted EPS, which excludes intangible amortization and selected nonrecurring items, fell 17% to $3.01. The prior-year comparison benefited from a $47 million tax benefit related to the settlement of a federal tax audit. Company-defined non-GAAP free cash flow, calculated as operating cash flow minus capital expenditures and cash flows from the receivables-purchase facility, declined 13% to $131 million.
Company-defined non-GAAP adjusted EBITDA, calculated from net income before interest, losses on receivable sales, income taxes, depreciation and amortization and further adjusted for selected nonrecurring items, rose 4% to $193 million. However, adjusted EBITDA margin narrowed to 10.3% from 10.5%.
Hedge Fund Sentiment
The filings available so far reflect positions held before Science Applications International Corporation reported its second-quarter fiscal 2027 results. Insider Monkey’s database showed 20 hedge funds holding Science Applications International Corporation at the end of 2Q2026, down from 23 funds three months earlier.
CONCLUSION
The $22.1 billion backlog is enough to support near-term revenue visibility, and the subsequent Homeland Security award improves the bookings picture. Still, backlog declined during the first half, most of it remains unfunded, and the trailing book-to-bill ratio stayed below one.
Science Applications International Corporation has demonstrated that it can grow revenue while waiting for awards to convert. Sustaining that growth requires book-to-bill to recover toward or above one over time, funded backlog to expand, and adjusted earnings and cash-flow trends to stabilize.
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This article is originally published at Insider Monkey.
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