The federal government buys most of its technology not as software seats but as labour and programmes: engineers with security clearances, multi-year contracts to run intelligence networks, integrate satellite payloads or process veterans' disability claims. Four listed companies in that business reported inside the same fortnight, and the results — not a sector re-rating — are what moved them.

CACI: the business confirms the move, the multiple does not

CACI International, a Reston, Virginia contractor that builds signals-intelligence, electronic-warfare, counter-drone and secure computing systems for the Pentagon and intelligence agencies, closed its fiscal year on 30 June with revenue of $9.57bn, up 10.9%. The fourth quarter grew 17.6% to $2.71bn and operating margin widened to 10.05% from 8.97%. It then guided fiscal 2027 to $10.65-10.85bn of revenue, at least $900m of free cash flow and adjusted earnings of $32.96-33.86 a share — above the $31.13 analysts carried. Funded backlog, the portion actually appropriated and payable, rose 28.6% to $5.4bn, though total backlog grew just 1.9% to $32.0bn. Free cash flow grew 66% and the company won $10bn of awards. UBS, raising its target, noted the 7.2% organic growth guided for 2027 matches what CACI delivered in each of the prior two years. Verdict on the business: CONFIRMS. On valuation: CONTRADICTS — 26.5x trailing and 20.7x forward earnings, against a 19.2-23.9x trailing range over two years, and 17.7x enterprise value to EBITDA versus 10.1x at Leidos.

Leidos: faster growth, thinner margins, half the multiple

Leidos, a 47,000-employee group running national-security systems, air-traffic-control modernisation and veterans' health services, grew second-quarter revenue 7.2% to $4.56bn — an acceleration from 3.7% and, before that, a decline. It booked $4.9bn of orders for a 1.1 book-to-bill ratio, lifted total backlog 5% to $48.7bn and funded backlog 44% to $10.2bn, with record free cash flow of $761m and raised full-year guidance.

Against that, operating margin fell to 11.1% from 13.4% and operating income dropped 11.2%. The cause is specific: Health revenue fell 7.6% to $1.09bn with margin down 250 basis points after the Department of Veterans Affairs suspended incentive payments on medical disability exams pending review. Management also flagged the Defense Health Agency taking systems integration in-house. Verdict: INCONCLUSIVE — growth and cash conversion improved, profitability did not. Valuation: possible dislocation, at 12.7x trailing and 11.1x forward earnings on a 12.5% free-cash-flow yield, with the shares 31% below their 52-week high. The tape agrees with the caution: Leidos's 50-day average has sat below its 200-day every session since 6 March, 103 straight — the longest such run in the group, and unbroken by the August pop. CACI's crossed back up only on 7 August, the day after its results.

SAIC: the tape leads, the revenue line does not

Science Applications International, which handles cloud migration and enterprise IT for the military, NASA and civilian agencies, is the one name here in a sustained uptrend — its 50-day above its 200-day since 29 May — and closed 7 August at a 52-week high. Its first-quarter revenue rose 1.55%, the first growth in five quarters, with operating margin at 8.76% against 6.39%, $2.1bn of bookings and $22.9bn of backlog. But full-year 2026 revenue fell 2.9% and consensus still models 2027 revenue down 1.2%. Diluted shares have fallen from 53.7m to 46.5m in two years, so much of the earnings growth is repurchases. At 14.2x trailing against roughly 11.5x last November, the re-rating has outrun the fundamentals: INCONCLUSIVE on business, stretched on valuation.

BigBear.ai was the drag, not the driver

The suspicion that a small, volatile stock manufactured the group's month is wrong. BigBear.ai, a 579-person seller of AI decision-support software, fell 1.2% over the 30 days. Revenue grew 13.2% to $36.7m and gross margin improved to 32.8%, but operating margin was minus 74.4% and diluted shares rose 49% year-on-year to 479m. On 31 July it signed an agreement to sell up to 100m more shares into the market. At 11.9x sales against 0.73-1.49x for the three primes, the de-rating looks earned.

The overhang neither set of results addressed

The House passed a stopgap funding bill 220-205 on 21 July to run to 4 December and left town; the Senate has not acted, and only two of twelve 2027 spending bills have cleared the House. Separately, the General Services Administration says its consolidated buying programme saved $1.1bn in a year by replacing fragmented purchasing with 20 vendor agreements — structural pressure on bespoke contract volume that none of the four has neutralised.

The setup

Where it stands — Two earnings days supplied most of a 17% month; CACI's numbers justify it, Leidos's are mixed, SAIC's are not there yet. Would confirm — CACI printing first-quarter fiscal 2027 organic growth at or above the 7.2% guided midpoint. Would invalidate — Leidos funded backlog falling back below $8bn, or the VA incentive suspension extending into 2027. Watch next — The 30 September funding deadline; the Senate has passed none of the twelve 2027 appropriations bills. Valuation — CACI 26.5x trailing / 20.7x forward vs a 19.2-23.9x two-year range; Leidos 12.7x / 11.1x on a 12.5% free-cash-flow yield.