Booz Allen Hamilton (BAH)

Government consulting firm Booz Allen Hamilton (NYSE:BAH) fell short of the market’s revenue expectations in Q3 CY2025, with sales falling 8.1% year on year to $2.89 billion. Its GAAP profit of $1.42 per share was in line with analysts’ consensus estimates.

Company Overview

With roots dating back to 1914 and deep ties to nearly all U.S. cabinet-level departments, Booz Allen Hamilton (NYSE:BAH) provides management consulting, technology services, and cybersecurity solutions primarily to U.S. government agencies and military branches.

The sector has historically benefitted from steady government spending on defense, infrastructure, and regulatory compliance, providing firms long-term contract stability. However, the Trump administration is showing more willingness than previous administrations to upend government spending and bloat. Whether or not defense budgets get cut, the rising demand for cybersecurity, AI-driven defense solutions, and sustainability consulting should benefit the sector for years, as agencies and enterprises seek expertise in navigating complex technology and regulations. Additionally, industrial automation and digital engineering are driving efficiency gains in infrastructure and technical consulting projects, which could help profit margins.

Booz Allen Hamilton competes with other government services contractors including Leidos (NYSE:LDOS), CACI International (NYSE:CACI), and Science Applications International Corporation (NYSE:SAIC), as well as technology consulting firms like Accenture Federal Services (NYSE:ACN) and Deloitte.

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.

With $11.71 billion in revenue over the past 12 months, Booz Allen Hamilton is one of the larger companies in the business services industry and benefits from a well-known brand that influences purchasing decisions.

As you can see below, Booz Allen Hamilton’s sales grew at a solid 8.5% compounded annual growth rate over the last five years. This is an encouraging starting point for our analysis because it shows Booz Allen Hamilton’s demand was higher than many business services companies.

Long-term growth is the most important, but within business services, a half-decade historical view may miss new innovations or demand cycles. Booz Allen Hamilton’s annualized revenue growth of 8% over the last two years aligns with its five-year trend, suggesting its demand was predictably strong.

This quarter, Booz Allen Hamilton missed Wall Street’s estimates and reported a rather uninspiring 8.1% year-on-year revenue decline, generating $2.89 billion of revenue.

Looking ahead, sell-side analysts expect revenue to grow 5.1% over the next 12 months, a slight deceleration versus the last two years. We still think its growth trajectory is satisfactory given its scale and suggests the market is baking in success for its products and services.

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after subtracting all core expenses, like marketing and R&D.

Booz Allen Hamilton’s operating margin might fluctuated slightly over the last 12 months but has remained more or less the same, averaging 8.8% over the last five years. This profitability was mediocre for a business services business and caused by its suboptimal cost structure.

Looking at the trend in its profitability, Booz Allen Hamilton’s operating margin might fluctuated slightly but has generally stayed the same over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, Booz Allen Hamilton generated an operating margin profit margin of 9.8%, down 7.6 percentage points year on year. This contraction shows it was less efficient because its expenses increased relative to its revenue.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Booz Allen Hamilton’s EPS grew at a remarkable 12.3% compounded annual growth rate over the last five years, higher than its 8.5% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its operating margin didn’t improve.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Booz Allen Hamilton, its two-year annual EPS growth of 71.3% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q3, Booz Allen Hamilton reported EPS of $1.42, down from $3.03 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street expects Booz Allen Hamilton’s full-year EPS of $6.59 to shrink by 3.5%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Booz Allen Hamilton has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 5.8% over the last five years, slightly better than the broader business services sector.

Booz Allen Hamilton’s free cash flow clocked in at $395 million in Q3, equivalent to a 13.7% margin. The company’s cash profitability regressed as it was 4.2 percentage points lower than in the same quarter last year, but it’s still above its five-year average. We wouldn’t put too much weight on this quarter’s decline because investment needs can be seasonal, causing short-term swings. Long-term trends are more important.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Booz Allen Hamilton’s five-year average ROIC was 19.7%, beating other business services companies by a wide margin. This illustrates its management team’s ability to invest in attractive growth opportunities and produce tangible results for shareholders.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Booz Allen Hamilton’s ROIC averaged 3.1 percentage point increases each year. This is a great sign when paired with its already strong returns. It could suggest its competitive advantage or profitable growth opportunities are expanding.

Booz Allen Hamilton reported $816 million of cash and $4.12 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $1.28 billion of EBITDA over the last 12 months, we view Booz Allen Hamilton’s 2.6× net-debt-to-EBITDA ratio as safe. We also see its $71.02 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We struggled to find many positives in these results. Overall, this was a weaker quarter. The stock traded down 8.5% to $91.81 immediately after reporting.

Updated: December 4, 2025 at 11:10 PM EST

Are you wondering whether to buy Booz Allen Hamilton or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

Booz Allen Hamilton is a fine business. To kick things off, its revenue growth was solid over the last five years. And while its projected EPS for the next year is lacking, its scale makes it a trusted partner with negotiating leverage. On top of that, its market-beating ROIC suggests it has been a well-managed company historically.

Booz Allen Hamilton’s P/E ratio based on the next 12 months is 14.9x. Looking at the business services space right now, Booz Allen Hamilton trades at a compelling valuation. If you’re a fan of the business and management team, now is a good time to scoop up some shares.

Wall Street analysts have a consensus one-year price target of $101.50 on the company (compared to the current share price of $88.00), implying they see 15.3% upside in buying Booz Allen Hamilton in the short term.