CACI International (CACI) Q4 2025 earnings review
CACI Caps Strong FY25 with 13% Growth; Guides to Massive $710M+ Free Cash Flow in FY26
CACI finished its fiscal year on a high note, delivering 13.0% YoY revenue growth in Q4, driven by a 19% surge in its Technology segment. For the full year, the company grew revenue 12.6% and secured a solid 1.1x book-to-bill ratio, bolstering its backlog. The main highlight is the powerful FY26 guidance, which calls for a massive acceleration in cash generation. CACI projects at least $710 million in free cash flow, a more than 60% increase over FY25, fueled by strong operational performance and significant tax benefits. This outlook provides substantial capital flexibility, overshadowing a guided deceleration in top-line growth to ~8%.
🐂 Bull Case
FY26 guidance for over $710M in free cash flow implies a >60% YoY increase. This is driven by a return to >100% FCF conversion and ~$90M in tax benefits, creating significant capacity for M&A or share buybacks.
The company enters FY26 with a $31.4 billion backlog, 11% growth in funded backlog, and a robust new business pipeline, providing strong revenue visibility for the coming year.
The Technology segment, which now accounts for 58% of revenue, grew 19% in Q4, demonstrating successful strategic positioning in high-growth areas like software-defined systems and modernization.
🐻 Bear Case
FY26 guidance implies revenue growth will slow to ~8% from 12.6% in FY25, and adjusted EPS growth will slow to ~4% from 26% in FY25, suggesting moderating momentum and potential margin pressure.
Q4 contract awards of $2.6B were down over 50% YoY against a very strong prior year. Full-year awards of $9.6B were also down significantly from $14.2B in FY24, highlighting the lumpiness of large government contracts.
Days Sales Outstanding (DSO) increased to 56 days from 46 a year ago, contributing to a 36% spike in accounts receivable on 13% revenue growth. This signals increasing working capital needs that could weigh on cash conversion if not managed.
⚖️ Verdict: 🟢
Bullish. The exceptional FY26 free cash flow guidance is a powerful signal of underlying operational health and provides significant firepower for capital deployment. While revenue growth is guided to decelerate, the strong backlog, growing funded work, and momentum in the higher-margin Technology segment provide a solid foundation for achieving targets and creating shareholder value.
Key Themes
Technology Segment Becomes the Primary Growth Engine
CACI's strategic shift is paying off as the Technology segment has become the company's main growth driver. Technology revenue grew 19.1% YoY in Q4, far outpacing the 5.5% growth from the Expertise segment. This trend has been consistent through FY25, with Technology growth accelerating while Expertise growth has decelerated. This mix shift is positive for profitability, as management has noted that its technology-focused acquisitions are accretive to margins.
Working Capital Needs Increasing
A notable red flag is the deterioration in working capital management. Days Sales Outstanding (DSO) has climbed steadily throughout the year, ending Q4 at 56 days, up from 46 days in the prior year. Management attributed about 4 days of this increase to the terms of the Azure acquisition, but the full 10-day jump suggests broader pressure on collections or billing cycles that warrants monitoring.
Alignment with DoD's Software-Centric Priorities
Management highlighted its strategic positioning in areas aligned with the Department of Defense's modernization priorities. These include software-defined systems like the Army's TLS Manpack, counter-UAS technology, and enterprise software modernization such as the IPPS-Army program. With the DoD increasingly focused on speed, efficiency, and software-based capabilities, CACI's investments in these areas are creating a durable tailwind.
Robust Pipeline and Backlog Provide Visibility
Despite a drop in awards versus a record FY24, CACI's forward indicators remain strong. The company ended FY25 with a $31.4 billion backlog, representing ~3.5 years of revenue. Critically, funded backlog grew 11% YoY to $4.2 billion, indicating near-term work is secure. The new business pipeline is also healthy, with $16 billion in bids under evaluation and another $11 billion planned for submission, the majority of which is for new work.
Expertise Segment Growth Continues to Slow
The Expertise segment, which still represents over 40% of revenue, is a significant laggard. Its growth decelerated throughout FY25, ending Q4 with just 5.5% YoY growth, well below the company average of 13%. While the focus is on the high-growth Technology segment, continued weakness here could become a more significant drag on overall corporate performance.
Macro Environment Remains Favorable
Management sees a healthy demand environment driven by global geopolitical realities. They cited the recent 'One Big Beautiful Bill Act' as a favorable development, noting it provides over $150 billion for defense and $170 billion for border security, both areas where CACI is well-positioned to compete for funding.
Other KPIs
Total backlog was roughly flat year-over-year at $31.4B vs $31.6B. However, the more critical near-term component, funded backlog, increased a healthy 11% to $4.2B. This provides strong visibility for FY26 revenue targets.
CACI's full-year results were strong, with revenue up 12.6% (7.2% organic). EBITDA margin expanded 80 basis points to 11.2% for the year, and adjusted diluted EPS grew 26% despite higher interest expense, demonstrating solid operational execution.
Guidance
Accelerating significantly. This guidance implies over 60% YoY growth from FY25's $442.5M. The massive increase is driven by a planned return to >100% FCF conversion and approximately $90 million in tax benefits ($50M from Section 174 modification and a $40M refund), signaling a major cash inflection point for the company.
Decelerating. The midpoint of $9.3B implies 7.8% YoY growth. This represents a slowdown from the 12.6% growth achieved in FY25, reflecting the completion of major program ramps and a tougher comparison base.
Decelerating. The midpoint of $27.58 implies just 4.2% YoY growth, a significant slowdown from 26% growth in FY25. The slower earnings growth relative to revenue growth suggests a slight moderation in margins or an increase in non-operating expenses like interest or taxes.