Shutdown Ends, but Federal Contractors Face a Slow Return to Normal

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Procurement delays and civilian-market freezes strain advisory-led FSIs, but mission-centric contractors leverage defense and intelligence demand to offset shutdown-related headwinds heading into FFY26

The 43-day U.S. federal government shutdown, the longest in history, came to a welcome end on Nov. 13, 2025, but for some federal systems integrators (FSIs), the shutdown’s impact could linger well into federal fiscal year 2026 (FFY26). According to the Professional Services Council, the national trade association for federal technology and professional services contractors, it will take three to five days for agency functions to return to normal for each day of the shutdown, implying that operations at some agencies may not return to normal until March 2026.

The impact on the FSIs during CY4Q25 varied by vendor, though most contractors reported little to no impact on programs deemed mission-essential (mostly defense, intelligence and law enforcement programs) or those not funded by discretionary budgets. In recent earnings commentaries, interviews and podcasts, FSIs also described procurement delays, slower customer adjudications on bids under review, and slower project starts for programs launching in CY4Q25. The civilian market was hit especially hard, and TBR believes that new civil IT programs will be scarce through at least the first half of FFY26 (CY1Q26) with minimal scope expansions or even cuts to existing engagements.

Not surprisingly, advisory-focused FSIs like Accenture Federal Services (AFS) and Booz Allen Hamilton (BAH) suffered moderate to significant growth headwinds, primarily in their respective civilian units, exacerbating the impact of cancellations and cuts to consulting engagements considered expendable by the Department of Government Efficiency (DOGE) earlier in 2025. BAH lowered its FY26 (ending March 31, 2026) guidance for revenue and top-line growth for a second straight quarter in its FY2Q26 (CY3Q25) earnings call. BAH also estimated that in FY26 the stoppage would cause a $30 million loss in revenue and $15 million loss in operating profit.

CACI’s performance in CY3Q25 (the company’s FY1Q26) and its outlook for FY26 (ending June 30) stand in stark contrast to the results tendered by AFS and BAH as well as BAH’s FY26 sales growth forecast (AFS does not provide guidance). CACI posted double-digit top-line growth for the ninth straight quarter in CY3Q25 and maintained its outlook for mid- to high-single-digit overall sales growth in FY26. The company also expects stronger operating cash flows and margin performance in FY26 compared to FY25. BAH anticipates a midsingle-digit decline in revenue in FY26, its first sales contraction since FY15.

TBR attributes CACI’s continued resilient performance and expected sales growth in FY26 to the company’s strong footprint in mission-critical areas of the Department of Defense, Intelligence Community and civilian sector (i.e., NASA, the Department of Justice and the Department of Homeland Security), which CACI will be able to leverage to fill any shutdown-related revenue gaps. CACI may suffer some delays in receivables collections in FY26, but not enough to derail its overall performance.

Like CACI, Leidos also tendered good results in CY3Q25 on the back of accelerating growth in its defense and intelligence operations and increasing traction in its digital transformation business. Leidos did not elevate its revenue guidance for FY25 (ending Dec. 31) but did raise its margin outlook and expects record profitability, despite the shutdown.

In TBR’s 3Q25 Leidos report we wrote, “By leaving its sales and growth outlook unchanged, the company is acknowledging the possibility of a negative impact from the federal shutdown, although TBR does not anticipate a significant disruption. Any shutdown-related headwinds in 4Q25 will be more than offset by robust growth in Leidos’ Defense Systems and National Security & Digital units, where large-scale wins in the unclassified and classified spaces are ramping up, inorganic revenue is accruing, and lingering DOGE-related headwinds on digital modernization programs are easing.” We do not anticipate any surprises when Leidos tenders its CY4Q25 and FY25 fiscal results in early February 2026. In fact, as the shutdown ended in November, we project Leidos’ FY25 sales and growth will be closer to the top of its guidance and may even surpass the high-end of its projected revenue range as momentum continues building in Leidos’ defense unit.