After years of instability and declining performance, Atos enters 2025 with new leadership, improved liquidity and early signs of commercial momentum, positioning the company for gradual recovery and long-term stabilization

Over the past several years, constant organizational changes have challenged Atos’ operations, weighed on the cost structure, and created uncertainty among clients, partners and employees around the company’s viability. Additionally, numerous changes made to its go-to-market approach and CEO team since 2019 — when Thierry Breton, Atos’ CEO for 11 years, left the company — have pressured Atos’ financial performance. On Feb. 1, Philippe Salle became Atos’ chairman and CEO. With a new CEO in place and a completed financial restructuring plan, Atos is working on gradually accelerating commercial activities and stabilizing its financial performance.

During 1Q25 Atos remained in an unfavorable position compared to its peers as the company’s revenue continued to decline year-to-year due to contract completions and terminations, lower business volume, and a reduction in scope of low-margin contracts. Revenue growth remained negative for the eighth consecutive quarter; however, Atos’ commercial activity began to improve with growth in order entry and an increase in the company’s book-to-bill ratio.

After completing its financial restructuring plan in December and limiting cash expenditures in 1Q25, Atos has strengthened its liquidity profile, which will allow for more investment flexibility and assist in stabilizing the company’s financial performance over the midterm. Although it will take time for new deals to convert into revenue, the positive trends in commercial activities indicate Atos is starting to regain clients’ confidence. TBR continues to expect 2025 will be a transformative year for Atos as the company solidifies client, partner and shareholder confidence; accelerates commercial activities; and rightsizes its cost structure to normalize profitability levels.

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Increased defense and infrastructure spending in the EU provides revenue expansion opportunities for Atos and its competitors

Recent legislative changes in the European Union (EU) emphasizing digital transformation, cybersecurity and technological sovereignty are influencing public sector IT spending trends, including increased defense and infrastructure spending. For example, the Artificial Intelligence Act from August 2024 introduced a risk-based regulatory framework for AI systems in the EU. According to the Act, public sector organizations that deploy AI must comply with strict requirements related to high-risk applications and AI systems, leading to higher spending in areas such as compliance, infrastructure modernization, AI-related training, and monitoring and incident reporting.

Atos is expanding activities with clients in the public sector utilizing its established expertise

The public sector is an established industry for Atos that accounts for more than 25% of the company’s total revenue annually, in TBR’s estimates, but over the past several quarters, Atos completed several contracts and saw a reduction in business volume in the vertical. These changes pressured the company’s revenue growth in the segment, notably in the U.K. & Ireland, which is a leading geography for Atos’ public sector activities, as well as in France and Germany. For example, in 2024, the Tech Foundations business line completed its business process outsourcing (BPO) contracts in the public sector in the U.K. & Ireland, which is part of Atos’ strategy to reduce underperforming activities in BPO. During the same period, Eviden’s Digital business line also completed contracts and experienced a decline in business volume in the public sector in the U.K. & Ireland and in Central Europe.

Atos will continue to reorganize its public sector business to improve performance while leaning on its established name to attract new clients. In March Atos won a five-year, £150 million (or $197 million) deal with U.K.’s Department for Environment, Food and Rural Affairs (DEFRA) to transform its service desk and provide end-user services for 34,000 employees. In April the Eviden business line won a €50 million ($57 million) deal with Serbia’s Office for IT and eGovernment to deploy a National AI Factory that consists of an AI Center of Excellence (CoE) and an AI-dedicated supercomputing platform. Atos will utilize its expertise in digital workplace services along with capabilities in AI, machine learning, analytics and automation.

Also in March, Eviden won a deal with Tisséo, the public transport authority of Toulouse, France. In January Atos extended its deal with the U.K. state-owned National Savings and Investments (NS&I) bank to provide core banking, payment, reporting and B2B services through March 2028.

Capgemini draws on client proximity, delivery resources and partner ecosystem to build momentum in public sector

Although Atos has an opportunity to expand activities with public sector clients, especially in its core geography of Europe, the company’s competitors are also actively pursuing opportunities in the sector. Capgemini has well-developed public sector capabilities and continues to gain momentum in the industry, notably in Europe, utilizing its established brand, client proximity, combination of onshore and nearshore service delivery resources, and collaboration with the partner ecosystem.

Capgemini is working with more than 15 ministries of defense across the EU and greater Europe as well as international agencies and strengthening relationships with more than 20 defense manufacturing providers. The company is also combining capabilities around digital engineering, data and AI, cybersecurity, and digital transformation to enable activities in areas such as military transformation, supplier network improvement, production management delivery and quality standards assurance and working with defense organizations around integrating workforce management and data and AI technologies. At 15.2% of revenue in 2024, the public sector represented Capgemini’s third-largest revenue-generating industry, following manufacturing at 26.7% of revenue and financial services at 21.3% of revenue.

Accenture’s Health & Public Service industry group remained the fastest-growing sector for the 10th consecutive quarter

In April 2024 Accenture acquired Intellera Consulting in Italy, adding 1,400 employees to Accenture’s regional operations to support public administration and healthcare sector clients. In January 2024 Accenture acquired 6point6 in the U.K., which will support Accenture’s efforts to rotate U.K.-based skills in areas such as cloud, data and cybersecurity and create a conduit for new revenue opportunities with clients in the public and healthcare sectors seeking to modernize IT infrastructure.

TBR expects Accenture’s investments across Europe within the last 18 to 24 months, such as in the U.K. (for health and capital projects) and Italy (public services and capital projects), will help the company’s Health & Public Service industry group fuel steady growth. Further, investments in Industry X capabilities, as well as sovereign cloud offerings with partners like Amazon Web Services (AWS) and Google Cloud, will also bolster Accenture’s regional opportunities as EU countries look to increase spending on defense and infrastructure.

Measures taken by DOGE will challenge vendors’ performance in the U.S. federal sector

While IT services providers are seeing growth opportunities in the public sector in Europe, they are preparing for potential disruptions in public sector revenue performance in North America, specifically in the U.S. federal sector due to Department of Government Efficiency (DOGE) initiatives. Measures taken by DOGE have put federal contractors, including Accenture and IBM Consulting, on edge, given the companies’ extensive work supporting federal agencies. The initial DOGE push has primarily targeted consulting projects.

We estimate that Accenture’s overall business consulting revenue trends at about 14% of total revenues, which means that $750 million to $1 billion of Accenture Federal Services’ annual revenue is at risk of disruption. We believe Accenture’s holistic portfolio and long-term relationships with many government agencies could help the company maintain its incumbent position.

TBR expects IBM Consulting’s 2025 revenue in the U.S. federal sector, which accounts for less than 10% of the business’s revenue, or approximately $2 billion in annual revenue, to be negatively affected by DOGE initiatives, as IBM stated during its earnings call that two contracts were negatively impacted in 1Q25. With federal systems integrator competitors facing similar challenges, we expect some of them to try to contest awards IT services providers had previously won and overtake their position through more flexible pricing options or packaged service offerings. For example, Booz Allen Hamilton and Leidos have filed a protest with the Department of Energy to review a $3.5 billion contract for IT support that Accenture won in January 2025.

TBR’s DOGE Federal IT Impact Series includes analysis of Accenture Federal Services, General Dynamics Technologies, CACI, IBM, CGI, Leidos, ICF 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 been published.

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.
 

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 March 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.

Leidos suffered no DOGE-related material erosion to its sales, profitability or order book in 1Q25 and is holding to its FY25 outlook

By all accounts, Leidos was virtually unaffected by the Department of Government Efficiency (DOGE) in 1Q25. In its 1Q25 earnings release on May 6, Leidos announced that revenue rose 6.8% year-to-year, from $3.98 billion in 1Q24 to $4.25 billion in 1Q25. Additionally, margin performance remains robust: Gross margin was 17.8%, up from 15.9% in 4Q24; operating margin was 12.5%, up from 9.6% in 4Q24; and adjusted EBITDA margin (non-GAAP margin excluding taxes, interest, depreciation and amortization) was 14.2%, up from 11.6% in 4Q24. Backlog also hit an all-time high, rising 6.3% sequentially to $46.3 billion in 1Q25.
 
Leidos is standing by the fiscal year 2025 (FY25) outlook it tendered at the end of FY24 and still expects FY25 sales of between $16.9 billion and $17.3 billion, implying growth of between 1.4% and 3.8% over FY24 sales of $16.7 billion. The company is calling for a FY25 non-GAAP EBITDA margin in the mid- to upper-12% range, implying non-GAAP margin will most likely decrease from the FY24 record 12.9%. Leidos reaffirmed all other aspects of its FY25 guidance in 1Q25, underscoring the company’s confidence that it will experience minimal disruption from DOGE to its book of business on profit-and-loss (P&L) statement in FY25.

Leidos is keen to distinguish itself from consulting-focused peers

During Leidos’ 1Q25 earnings discussion, CEO Tom Bell emphasized the company’s chief differentiators while setting itself apart from its advisory-led federal systems integrators (FSIs). Bell opened the call by saying, “This administration’s clear preference [is] to work with firms that solve problems and get things done, not consultants that study problems and publish reports.” He also noted that DOGE’s impact on Leidos’ 1Q25 top line was essentially negligible, at only 1% of 1Q25 revenue, or roughly $40 million — a figure that essentially aligns with what TBR has observed on GX2’s DOGE-Terminated Contracts Tracker, which tracks DOGE-based developments in federal contracting, specifically contract terminations or drawdowns.
 
According to the GX2 website, Leidos has had a total of $56.5 million in contracts terminated by DOGE as of the publishing of this blog. The General Services Administration (GSA) continues to review the contracts held by Leidos and nine other companies* the Trump administration instructed DOGE to initially target in its effort to cut $65 billion in consulting fees the federal government is set to pay in federal fiscal year 2025 (FFY2025) and future years.
 
Bell also commented, “One of the things that we’ve taken a little bit of issue with is the fact that while we’ve been lumped into a consulting review, we’ve never used those words back the GSA. Less than 1% of our revenue could generously be considered consulting revenue.” Leidos’ strong 1Q25 results and willingness to reaffirm its full-year guidance after only one quarter — albeit a very turbulent one for many of Leidos’ competitors — support the notion that Leidos’ portfolio and book of business should remain relatively insulated from major DOGE-related disruptions in FY25.
 
Eleven ongoing contracts in Leidos’ order book were cancelled, the largest being a $25 million program with the Department of Housing and Urban Development for energy and water benchmarking services. Leidos also had five awards worth a total of $31.6 million with the Department of Health and Human Services terminated by DOGE, the largest being a $12 million award to develop models for cancer drug development while the remainder appeared to be mostly research focused. Leidos lost less than $2 million worth of engagements with the Department of Defense for service, mapping, integration and transport services on what appeared to be the $7.7 billion NGEN (Next Generation Enterprise Network) program with the U.S. Navy.
 
In contrast to Leidos’ award terminations, Accenture Federal Services has had over $193 million in cancellations, Deloitte Federal lost over $473 million worth of contracts and IBM has had over $40 million in awards sacked by DOGE.

Leidos’ go-to-market messaging in FY25 will underscore the tight alignment of its portfolio with DOGE’s agenda and the Trump administration’s IT priorities

In FY25 Leidos will tout its mission-critical solutions to enhance outcomes quickly, cost-effectively and at scale for federal agencies. Leidos will accelerate efforts to draw closer to its federal clients, emphasizing how they can more effectively utilize the company’s delivery scale and depth of mission expertise to comply with DOGE’s mandates, the overarching IT objectives of the Trump administration and the enduring need to modernize federal technology infrastructures.
 
Leidos is also very well positioned to continue capitalizing on accelerating demand for faster, more efficient IT-enabled healthcare services for veterans. Sales in the company’s Health & Civil unit rose 8% year-to-year and the segment’s non-GAAP operating income margin was 23.6% in 1Q25, owing to strong project volumes on managed health services contracts. Leidos also expects to win two large-scale, multibillion-dollar health IT contracts over the next one to two years: a follow-on award to the MHS Genesis electronic health record engagement on which Leidos recently achieved 100% deployment, and a subsequent five-year, $1 billion award to the Reserve Health Readiness program to provide commercial health services to all U.S. military reserves (set to conclude in 2026).
 
Finally, Leidos’ executives indicated during the earnings call that the Trump administration and DOGE became much more accessible to the federal IT contracting community during 1Q25 and have indicated a strong willingness to work with the industry in improving operating efficiencies across the federal government. Bell noted, “I’ve sought out and secured more meetings with cabinet members and key administration executives in the last month than I was able to secure during the whole of the last administration. And we’re seeing significant receptivity in those meetings to big ideas we are bringing forward.”
 
Some of those “big ideas” include the Golden Dome missile defense shield (a program with a potential worth of tens of billions of dollars, and that will draw fierce competition from Booz Allen Hamilton) and an upgrade to domestic air traffic systems. Leidos also believes its suite of defense solutions and R&D capabilities is well aligned to the FFY2026 defense budget, which could top $1 trillion.

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.

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 March 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.

Demand for digital accelerators grows despite federal IT market uncertainty

Although the Department of Government Efficiency (DOGE) claims to have canceled at least six of General Dynamics’ contracts during 1Q25 and the U.S. General Services Administration (GSA) has instructed agencies to scrutinize their work with General Dynamics Information Technology (GDIT) to determine whether it is truly essential, General Dynamics Technologies (GDT) posted better numbers than expected. When General Dynamics released its 1Q25 fiscal results on April 23, it revealed that GDT’s quarterly revenue was $3.4 billion, up 6.8% year-to-year and 5.9% sequentially.
 
GDIT drove this expansion, with its revenue of $2.36 billion surging 9.2% year-to-year and 7.2% sequentially. While the acquisition of Iron EagleX in 3Q24 provided mild inorganic revenue contributions, demand increased rapidly for its growing portfolio of digital accelerators: Comet 5G, Coral Software Factory, Cove AI Operations, Eclipse Defensive Cyber, Ember Digital Engineering, Everest Zero Trust, Hive Hybrid Multicloud, Luna AI and Tidal Post-Quantum Cryptography.
 
GDT’s operating margin also benefited from this uptick in volume for GDIT as well as General Dynamics Mission Systems offerings, improving 40 basis points year-to-year to 9.6% in 1Q25. However, GDT’s operating margin declined 20 basis points on a sequential basis as IT services are becoming a more prominent component of its portfolio mix, rather than high-margin defense electronics, as Mission Systems continues to reshuffle its portfolio mix.
 
While General Dynamics’ backlog decreased on a sequential and year-to-year basis, GDT’s backlog of $14.4 billion was actually up 6.7% year-to-year and 1.8% sequentially. GDT’s bookings were notably robust, with the segment achieving a book-to-bill ratio of 1.1:1, indicating that disruptions to its $120 billion pipeline of opportunities have been minimal despite the new headwinds. While GDT flagged its win and captures rate as being in the 80% range, its leadership highlighted that the solicitation, proposal and award process have been slowing down across the market as the Trump administration refines its long-term goals.

How GDT will navigate 2025

Since GDIT secured two wins in the federal health market worth approximately $3 billion in the second half of 2023, the segment has continued to ramp up its efforts to diversify its non-DOD (Department of Defense) revenue base. For example, GDIT secured a contract worth up to $286 million in 4Q24 to keep enhancing the Centers for Medicare & Medicaid Services’ (CMS) Benefits Coordination & Recovery Center by weaving in emerging technologies like AI to streamline the center’s operations.
 
GDIT formally established a Federal Health practice toward the end of 2024, signaling its intent to create deeper ties to agencies within the Department of Health and Human Services (HHS). Although GDT’s non-DOD revenue growth has gained momentum, expanding 8.8% year-to-year in 4Q24 and 5.3% year-to-year in 1Q25, DOGE’s actions may complicate things, given that the bulk of GDT’s canceled contracts thus far have been tied to HHS.
 
Additionally, GDIT’s consulting services have drawn the ire of the GSA. GDIT is one of the 10 vendors the GSA has identified as being set to receive more than $65 billion in 2025 and beyond. The GSA has requested that agencies go through their contracts with these vendors and outline which are mission critical and why. GDIT has been actively working with clients to identify ways to reduce costs and enable efficiencies through technology. Although consulting offers a lucrative avenue for GDIT to expand its margins and build upon its existing relationships with clients, the vendor still prioritizes delivering solutions and IT services in its go-to-market strategy.
 
GDT is not going to give up on the federal health market or on consulting, but TBR anticipates the vendor will increasingly prioritize defense opportunities in the interim, such as a recently awarded contract worth up to $5.6 billion to manage the DOD’s Mission Partner Environment. The DOD has historically been GDT’s largest client and was responsible for more than 58% of its revenue in 1Q25.
 
While the Trump administration is asking for a 23% reduction in nondefense discretionary funding in its FFY26 budget proposal, it wants to keep the DOD’s discretionary spending roughly on par with the $892.5 billion stopgap for FFY25. GDIT is well positioned to capitalize on the DOD becoming increasingly interested in emerging technologies, given its experience with fixed-price and outcome-based contracting. Additionally, GDIT can offer defense and intelligence clients its array of digital accelerators to help offset the disruptions in the federal civilian market.
 
These digital accelerators were responsible for more than $2 billion of the total contracts that GDIT won during 2023. In 2024 GDIT continued to build out its array of digital accelerators and generated nearly $7.5 billion in awards from them. GDIT’s go-to-market strategy is reliant on these digital accelerators.
 
To continue gaining traction with defense as well as civilian clients, GDIT will need to keep leveraging its partners to enhance these solutions and make inroads in these markets. GDIT suddenly began ramping up its alliance activity during 2H24 and has continued to do so. For example, GDIT is augmenting its Cove AI Ops Digital Accelerator with ServiceNow’s AI and machine learning platform to make agencies’ systems more efficient.

TBR’s outlook for GDT

At the end of 4Q24, GDT tendered full-year revenue guidance for 2025 sales of $13.5 billion, implying growth of approximately 2.8% over 2024 sales of $13.1 billion. As is tradition, General Dynamics did not update its guidance for GDT this early in the fiscal year.
 
TBR remains skeptical of GDT’s guidance, given the lack of synergy between GDIT and MS. The latter will continue to transition its portfolio mix from legacy programs to newer initiatives after starting this arduous process in 2024, and GDIT is tasked with driving revenue expansion during this process.
 
Although GDIT is leveraging the demand for AI and other emerging technologies, the uncertainty in the federal IT market and the segment’s own small-scale portfolio transition could impede the growth needed to offset Mission Systems’ performance. The impact of the Trump administration’s sudden and aggressive adoption of tariffs also increases the likelihood of supply chain bottlenecks and significant program delays.
 
For these reasons, TBR believes that GDT’s guidance for an operating margin of 9.2% could be too lofty, and we anticipate its operating margin could decline from 9.6% in 2024 to 8.9% in 2025. TBR conservatively believes that GDT’s revenue will expand approximately 2% over 2024 sales of $13.1 billion in 2025.

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.

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 March 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.

CACI spared from major DOGE disruptions: Growth and profitability on track for FY25 goals

CACI tendered its 1Q25 earnings on April 23, and TBR did not discern any material impact from DOGE on the company’s business during the quarter, the third fiscal quarter of CACI’s FY25 (ending June 30). The company posted sales of $2.17 billion in 1Q25, up 11.8% year-to-year on a statutory basis and up 5.6% on an organic basis. CACI’s gross margin of 33.8% in 1Q25 was up sequentially from 33.2% in 4Q24, while its operating margin of 9.1% in 1Q25 was up 50 basis points sequentially from 8.6% in 4Q24. The company’s adjusted EBITDA margin was 11.7% in 1Q25, up from 11.1% in 4Q24.
 
CACI believes demand will remain strong through the remainder of its FY25 and into its FY26 for technologies and capabilities at the core of the company’s portfolio: AI-enhanced and commercially honed software-defined solutions delivered with Agile development methodologies; signals intelligence (SIGINT) and electronic warfare (EW) technologies for warfighters, defense vehicles and platforms, and IC applications; and AI-infused financial management offerings.
 
Uninterrupted sales growth and consistent margin performance indicate CACI’s offerings remain well aligned to the Trump administration’s IT investment priorities, particularly as the new administration prepares to expand investment in cybersecurity, national security and national defense, and advanced space-based communications systems for defense, intelligence and civil applications. CACI executives also noted that the federal budget environment is slowly becoming more constructive and more transparent, a positive harbinger for CACI and its fellow federal IT contractors.

CACI’s order book was essentially immune to DOGE-related turmoil in the federal IT market

TBR did not observe any impact from DOGE activities on CACI’s book of business. CACI’s backlog fell 1.3% sequentially, from $31.8 billion to $31.4 billion in 1Q25, but his kind of decline is typical in the company’s third fiscal quarter. CACI’s trailing 12-month (TTM) book-to-bill ratio was 1.5 in 1Q25, down from 1.7 in 4Q24. However, a sequential decline from the second to third fiscal quarter is not unusual for the company. In 1Q25, both the TTM book-to-bill ratio of 1.5 and the quarterly ratio of 1.2 were consistent with figures from the same period last year.
 
Furthermore, CACI’s bookings of $2.2 billion in 4Q23 and $3.5 billion in 1Q24 came during a period of exceptionally robust Department of Defense and Intelligence Community-related award activity. CACI’s bookings were $2.75 billion in 1Q25, up from $1.2 billion in 4Q24, consistent with the seasonal, historical pattern of sequential bookings expansion in the company’s third and second fiscal quarters. CACI noted in its 1Q25 earnings discussion that DOGE examined seven contracts in the company’s order book, including one that had already been completed. The aggregate revenue impact of these awards being eliminated by DOGE would only be $3 million in TCV, though DOGE has only notified CACI that $1 million worth of this ongoing work is likely to be canceled.
 
The company acknowledged that its business development teams have experienced some deceleration in certain aspects of the sales cycle, such as invoice and funding approvals. CACI CFO Jeffrey MacLauchlan said during the earnings call that “things that used to take two or three days are taking four or five days.” CACI’s leadership expects the disruption, which according to the company has been “very manageable” to date, to wane during the second half of federal fiscal year 2025 (FFY25). If sales motions are being impeded by DOGE, TBR would expect to see this reflected in lower-than-expected margin performance by CACI, but we did not observe any DOGE-related margin erosion in CACI’s P&L in 1Q25.

Undeterred by the DOGE-disrupted environment, CACI elevates several elements of its FY25 guidance

CACI raised the low end of its FY25 sales guidance range in 1Q25 and is now calling for top-line revenue of between $8.55 billion and $8.65 billion, implying a growth range of between 11.6% and 12.9% over FY24 revenue of $7.66 billion. In 4Q24 the company forecasted $8.45 billion in revenue at the low end of its projected FY25 sales range, implying growth of 10.3% at the bottom of the range.
 
CACI also raised the low end of its guidance for FY25 adjusted net income* in 1Q25 and now expects at least $543 million in FY25, up from $537 million forecasted in 4Q24.
 
CACI elevated its outlook for non-GAAP adjusted diluted earnings per share (ADEPS) in 1Q25, and as of 1Q25 is projecting a range of between $24.24 and $24.87 per share for FY25, up from a previous ADEPS range of between $23.24 and $24.13 per share. Free cash flow guidance was also elevated from $450 million tendered in 4Q24 to $465 million in 1Q25.
 
TBR notes that CACI has twice raised guidance for FY25 sales, adjusted net income, ADEPS and free cash flow since initially tendering its FY25 outlook in 2Q24. CACI is still guiding for a FY25 EBITDA margin in the low 11% range, implying a potential improvement of 100 basis points over FY24’s EBITDA margin of 10.4%, but also suggesting CACI does not expect any DOGE-related margin headwinds through the remainder of FY25.

CACI will remain vigilant and maintain a constant dialogue with customers

During CACI’s 1Q25 earnings call, CEO John Mengucci described DOGE’s objectives as “peace through strength, secure borders, increased efficiency and technology modernization.” Mengucci and his executive team remain confident that CACI’s strategy and portfolio are and will remain in sync with DOGE’s goals and with the IT strategy of the Trump administration, a contention supported by the company’s 1Q25 fiscal results and its more optimistic FY25 outlook.
 
Irrespective, CACI recognizes that federal executives are under pressure to accelerate IT modernization, quickly achieve IT-driven operational efficiencies and curb spending according to DOGE directives. Procurement teams at federal agencies are struggling to keep bid review processes and proposal adjudications on schedule as the Trump administration executes large-scale furloughs across the federal workforce. As such, CACI will keep its executives, business line leaders and business development teams as close as possible to IT decision makers and procurement counterparts in federal agencies for as long as DOGE’s efficiency agenda is in effect.
 
*Adjusted net income: GAAP-compliant net income excluding intangible amortization expense and the related tax impact

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.