CACI International (CACI) Q4 2026 earnings review
Top-Line Surges, But ARKA Debt Shadows the Bottom Line
CACI finished FY26 with accelerating momentum, driving Q4 revenue up 17.6% YoY to $2.71B. The strategic pivot toward software-defined technology is working perfectly at the operating level, with Q4 Income from Operations jumping 31.7% and EBITDA margins expanding to a robust 13.0%. However, below the operating line, the narrative fractures. Net income reversed into a slight decline (-0.7% YoY), dragged down by a 57.7% spike in interest expenses (tied to the ARKA acquisition) and a severely bloated tax provision. Despite the noisy GAAP bottom line, the cash generation engine is operating at full tilt, printing $735M in FY26 Free Cash Flow (+66% YoY) and guiding for an accelerating $900M+ in FY27. The underlying operational health is excellent, but investors must stomach the near-term leverage digestion.
🐂 Bull Case
EBITDA margins have expanded consistently, hitting 13.0% in Q4. Simultaneously, free cash flow grew 66% in FY26 and is guided to grow another 22% in FY27 to over $900M, providing massive firepower for rapid deleveraging.
Technology revenue grew an accelerating 23.7% YoY in Q4, vastly outpacing the legacy Expertise segment (+9.1%). Technology now commands 61.2% of total revenue, driving structural margin improvements.
🐻 Bear Case
The ARKA acquisition leverage is heavily impacting GAAP earnings. A 57% YoY jump in Q4 interest expense obliterated excellent operating leverage, causing GAAP EPS to decline despite a 31% jump in operating income.
Q4 contract awards collapsed 37.7% YoY to $1.64B, generating a weak 0.6x quarterly book-to-bill ratio. While total backlog is stable, the pace of new awards has decelerated sharply.
⚖️ Verdict: 🟢
Bullish. The disconnect between falling net income and surging operating income is entirely driven by acquisition financing and tax timing, not fundamental weakness. The massive FCF generation ensures CACI will rapidly de-lever while enjoying accelerating top-line growth.
Key Themes
Technology Segment Dominance Driving Margin Expansion
CACI's strategic mandate to shift from a services provider to a software-defined technology company is accelerating. In Q4, Technology revenue surged 23.7% YoY to $1.66B, completely dwarfing the 9.1% growth in the legacy Expertise segment. This mix shift is the primary driver behind the structural expansion of EBITDA margins, which expanded to 13.0% for the quarter.
Department of Defense (DoD) Spending Accelerates
DoD revenue, which makes up over 55% of CACI's business, grew an accelerating 22.4% YoY in Q4 to $1.5B. This is being driven by the deployment of counter-UAS systems like SkyValor, which successfully completed operational evaluations and is deploying to the Southern Border, alongside scaling electronic warfare (EW) programs like SPECTRAL.
Free Cash Flow Machine Funding Deleveraging
Operating cash flow, excluding MARPA, jumped 67.4% in Q4. FY26 Free Cash Flow hit $735.4M, crushing prior estimates. With FY27 guidance calling for at least $900M in FCF, CACI has the liquidity to aggressively pay down the $2.6B debt taken on for the ARKA acquisition, fulfilling management's promise to return leverage to the 'low threes' within six quarters.
Macro Tailwinds: Homeland Defense and Border Security
The deployment of the SkyValor drone defense system to the Southern Border directly validates management's previous commentary regarding massive reconciliation funding flowing toward counter-UAS and homeland security infrastructure (such as the Golden Dome initiative). CACI is successfully capturing this targeted funding.
Interest and Tax Headwinds Crush GAAP Earnings
Despite a stellar 31.7% increase in Income from Operations, Q4 Net Income actually declined by 0.7% YoY. This reversal was caused by two massive below-the-line items: Interest expense spiked 57.7% (to $72M) due to ARKA debt, and income taxes surged over 1,200% (from $3.1M to $43.3M). Investors must rely on Adjusted EPS ($8.91, +6.1%) to gauge true performance until the debt is paid down.
Quarterly Bookings Environment Remains Sluggish
Q4 contract awards decelerated sharply, falling 37.7% YoY to $1.64B. This resulted in a weak quarterly book-to-bill ratio of roughly 0.6x. While the company's funded backlog grew an impressive 28.6% YoY to $5.4B (insulating near-term revenue), the lumpy nature of federal contract adjudication remains a persistent headwind to top-line visibility.
Other KPIs
Accelerating significantly from 11.5% in the prior year period. This marks a critical inflection point, proving that the integration of the higher-margin ARKA business and the shift toward software-defined technology is fundamentally improving the profitability profile of the company.
Accelerating. Up a massive 28.6% YoY from $4.2B. Even though total backlog was relatively flat (+1.9% YoY), the sharp increase in funded backlog provides management with highly secure revenue visibility for FY27, de-risking the aggressive top-line guidance.
Guidance
Accelerating. The $10.75B midpoint implies a 12.4% YoY growth rate, pacing faster than the 10.9% growth achieved in FY26. This indicates high confidence that the ARKA integration and pipeline of submitted bids will yield strong top-line conversion.
Accelerating. The $745M midpoint implies 12.6% YoY growth. This metric strips out the heavy intangible amortization from recent acquisitions, offering a cleaner view of core earnings power.
Stable to Accelerating. Implies a 22.4% increase over FY26's $735.4M. This figure is pivotal, as it guarantees CACI has the internal liquidity required to pay down its elevated debt load without needing to tap the capital markets.
Key Questions
Debt Deleveraging Timeline
Given the $900M FCF guidance for FY27, are you tracking ahead of your target to return to the 'low 3s' leverage ratio within six quarters of the ARKA close? At what leverage level will you pivot back to share repurchases?
Q4 Award Sluggishness
Q4 contract awards fell nearly 38% YoY, resulting in a 0.6x book-to-bill. Is this entirely a function of delayed government adjudication timing, or are you seeing competitive shifts in the enterprise IT modernization space?
Tax Rate Normalization
Q4 saw an abnormally high income tax provision ($43M vs $3M last year). What is the expected normalized run-rate for taxes as a percentage of pre-tax income going into FY27?