DOGE Federal IT Vendor Impact Series: Booz Allen Hamilton

The Trump administration and its Department of Government Efficiency (DOGE) have generated massive upheaval across the board in federal operations, including in the federal IT segment. As of May 2025, thousands of contracts described by DOGE as “non-mission critical” have been canceled, including some across the federal IT and professional services landscape. TBR’s DOGE Federal IT Vendor Impact Series explores vendor-specific DOGE-related developments and impacts on earnings performance. Click here to receive upcoming series blogs in your inbox as soon as they’ve published.

 

BAH finished strong in FY25, but DOGE will create a significant headwind to overall sales growth in FY26

Booz Allen Hamilton (BAH) CEO Horatio Rozanski said during BAH’s 1Q25 and FY25 earnings review on May 23, “All presidential transitions create some degree of near-term disruption followed by opportunity.” Evidence of near-term disruption from DOGE was apparent in BAH’s 1Q25 fiscal results, despite the company’s record revenue, strong profitability, and robust book of business to end FY25 and close out the company’s VoLT (Velocity, Leadership and Technology) growth strategy.
 
VoLT has been an unprecedented success for BAH, driving three consecutive years of double-digit top-line growth; steadily improving profitability; and expanding backlog, which rose from $28 billion to begin FY23 (VoLT’s first year) to $37 billion to end FY25. BAH must now leverage the strong fiscal and operational foundation created by VoLT to successfully navigate a fast-changing federal IT landscape, mitigate the impacts of DOGE’s program cancellations on its business, and position itself to capture the longer-term opportunities that will eventually arise due to the Trump administration’s pledge to lean heavily on digital technologies to increase efficiencies across the federal government and digitally reimagine agency missions.

DOGE will upend BAH’s civilian business in FY26

In FY26, which began April 1, BAH will have to contend with budget cuts, funding delays and organizational restructuring (including significant headcount reductions) by its customers, particularly its civilian agency clients, where business development, procurement and project delivery cycles have slowed. The company has also seen the volume of award activity in the civilian market decline sharply in 1Q25, with further deceleration expected throughout FY1H26.
 
According to TBR’s 1Q25 Booz Allen Hamilton Earnings Response, “the volume of disclosed deal activity plummeted in 4Q24 and 1Q25, a harbinger of tough times ahead for federal IT’s most venerable advisory-led firm.” BAH’s civilian unit also disclosed only a single award in 4Q24 and 1Q25. BAH’s executives indicated that several of its largest civilian IT engagements have been reviewed by DOGE , and the company does not anticipate any cancellations, drawdowns or disruptions to project delivery. However, BAH also noted that five ongoing, large-scale IT programs in the civilian sector have been scaled back due to DOGE’s actions to curb certain agencies’ spending, including a major recompete lost at the Department of Veterans Affairs (VA).
 
Year-to-year top-line growth in BAH’s Civil group has decelerated following 13 consecutive quarters of double-digit growth from 3Q21 through 3Q24. Sales expansion in the firm’s Civil unit fell from 16.1% in 3Q24 to 7.8% in 4Q24, with a further decline, in TBR estimates, to -0.1% in 1Q25. BAH expects a low double-digit contraction in Civil revenue in FY26, with the bulk of the contraction transpiring in FY1H26 (2Q25 and 3Q25). BAH’s Civil unit posted FY25 sales of $4.17 billion, up 5.7% year-to-year from $3.83 billion in FY24. A year-to-year decline between 10% and 12% in FY26 implies Civil sales between $3.57 billion and $3.67 billion, or down between $400 million and $500 million.
 
BAH indicated volume reductions on the five civilian IT programs most directly affected by DOGE would constitute a 300-basis-point headwind to total corporate growth in FY26, with an additional 300 basis points of decline owing to the lost renewal with the VA. BAH expects companywide sales growth in FY26 will be flat to up 4%, implying FY26 revenue between $12 billion and $12.6 billion, with FY26 growth deriving exclusively from the firm’s Department of Defense (DOD) and Intelligence Community (IC) operations. The additional implication here is that BAH’s FY26 full-year revenue would have been between $12.7 billion and $13.2 billion had DOGE not caused the crash in FY26 civilian revenue.
 
According to GX2’s DOGE-Terminated Contracts Tracker, BAH has had 23 contracts worth a total of $155.8 million terminated as of the publishing of this blog, the largest being a $30 million award to implement clinical trial reporting software for the Department of the Interior (DOI) and a $24 million award for data transparency services for the USAspending.gov portal managed by the Department of the Treasury.
 
The remaining cancellations were each worth $13 million or less in TCV and were with Health & Human Services, the Department of Labor, the Department of the Treasury, the Department of Commerce, the Department of Transportation, DOI, the Environmental Protection Agency, and NASA. The cancelled engagements included services related to training coordination and support, operational performance, compliance management, learning management, data visualization, organizational assessment consulting, business process improvement and strategic planning. Based on BAH’s outlook for its Civil business in FY26, TBR believes DOGE’s impact will be far more extensive than implied by the information available on the GX2 website.
 
BAH does expect Civil sales growth will rebound by FY27, and the firm indicated it is already discussing several strategic digital transformation engagements with civilian agencies, which will drive the expected rally. TBR anticipates BAH’s emerging capabilities in AI-assisted coding and agentic AI will factor heavily into these and other future civilian IT projects under the Trump administration.

BAH plans a comprehensive, segmentwide restructuring of its Civil unit beginning in 2Q25

The disruption that has very suddenly overtaken BAH’s civil business has prompted the firm to craft what Rozanski called a “one-time reset” of its civilian operations, including a 7% reduction in global headcount (about 2,500 employees) in 2Q25 that will disproportionately impact BAH’s civilian operations. The decline in civilian award activity has been so abrupt that BAH has not been able to sufficiently redeploy civilian project staff to DOD, IC or commercial sector programs, despite the firm’s expectations that growth will continue in its DOD and IC units in FY26.
 
BAH will cull its bench of civilian-focused consultants and technologists, likely draw down or cancel internship programs, reduce Civil segment management personnel, and realign other aspects of its Civil operations with rapidly eroding project volumes and declining demand from civilian agencies. BAH disclosed total headcount of 35,800 in 1Q25, down 100 sequentially, which the firm indicated was primarily nonclient-facing staff, further suggesting major Civil unit layoffs are on tap for 2Q25.

Growth opportunities will remain for BAH in FY26, though predominantly with the DOD and IC

BAH anticipates continued strong growth in its DOD and IC units in FY26. This is consistent with what TBR has observed in the recent earnings and outlooks tendered by CACI and Leidos, and all three companies, along with other defense- and intelligence-focused federal IT peers, appear to be well aligned with the Trump administration’s emerging defense and national security priorities. BAH is also optimistic that federal IT acquisition reforms will be implemented during Trump 2.0, including a marketwide shift to more fixed-price and outcome-based structuring of IT engagements, which the firm claims it has been advising its federal clients to adopt for several years.
 
The company is working with the General Services Administration to develop innovative ways to transform federal procurement using digital technologies, which could be parlayed by BAH into a multitude of new awards in FY26 and FY27. BAH also intimated it has been preparing for outcome-focused contracting to become more mainstream in federal IT for several years, but this assertion will be brought into question if BAH’s Civil unit suffers a prolonged downturn beyond FY27. BAH expects ample opportunities will remain across the federal space for the foreseeable future to modernize legacy IT systems and integrate emerging technologies to digitally enhance agency missions.

 

TBR’s DOGE Federal IT Impact Series will include analysis of Accenture Federal Services, General Dynamics Technologies, CACI, IBM, CGI, Leidos, IFC International, Maximus, Booz Allen Hamilton and SAIC. Click here to download a preview of our federal IT research and receive upcoming series blogs in your inbox as soon as they’ve published.