CACI Q1 FY2027 Earnings: $2.47B Revenue, a 2.0x Book-to-Bill, and Debt-Funded Growth

CACI opened fiscal 2027 with revenue of $2.47 billion, up 8.2% year over year, and a 2.0x book-to-bill on $4.8 billion of contract awards — while only 2.1% of that revenue growth was organic. Operating income grew nearly twice as fast as sales, up 16.6%, but net income grew just 4.5%, because the interest bill on the acquisitions that bought the other six points of growth rose 58.6%. This is the defense contractor's bargain in one quarter: bought growth, real margins, and a debt stack that takes its cut first.

The Headline Numbers​

CACI's fiscal year ends June 30, so the first quarter of fiscal 2027 is the three months ended September 30, 2026. Every figure below comes from the Form 10-Q and the earnings release (8-K Exhibit 99.1), with annuals from the FY2026 and FY2025 10-Ks.

Read the table from the middle outward. Operating income grew 16.6% on 8.2% more revenue — a 72-basis-point margin expansion — because direct costs rose just 3.3%, far slower than sales. The 10-Q credits "a favorable shift in revenue mix," and the mix tables below show exactly what shifted. But two lines below operating income, interest expense and other ate $27.1 million of the $35.3 million operating gain, and the tax provision took another $2.6 million. Net income kept $5.6 million of the $35.3 million. That is the whole CACI story right now: the operations are accelerating and the capital structure is taxing the acceleration.

The cash lines deserve a skeptical paragraph. Operating cash flow fell 5.7% and free cash flow fell 6.6% even as EBITDA rose 22.4% — the release blames "higher working capital," and DSO did tick up three days to 59. But note the direction of the accruals: revenue up 8.2%, receivables up only 1.0% sequentially ($1,705.1 million to $1,722.9 million). The working-capital drag sits in prepaid expenses and payables timing, not in uncollected bills. Free cash flow still covered net income at 102%. A miss on cash growth, not a quality problem — unless DSO keeps climbing.

Revenue Deep Dive​

One customer is more than half the company, and it had a very good quarter. Department of War revenue grew 14.8% and supplied $174.6 million of the quarter's $187.0 million of growth — more than nine of every ten new dollars.

The contract-type mix is where the margin story lives. Fixed-price work — where CACI bears the cost risk but keeps the efficiency gain — jumped from 27% to 33% of revenue, growing 34.4% while cost-plus-fee revenue actually shrank 5.5%.

Fixed-price (+34.4%) is doing double duty: it is the fastest-growing line and the reason direct costs fell three points as a share of revenue. When fixed-price work executes well, every efficiency point drops to operating income — and with operating margin at 10.0%, the highest in the four-period window, it executed well this quarter. The risk runs the other way by construction: CACI's own risk factors warn that fixed-price contracts "require us to price our contracts by predicting our expenditures in advance" and that inflation can turn a bid into a loss. A third of revenue now rides on the estimating desk.

Cost-plus-fee (−5.5%) shrinking in absolute dollars is the number to watch next quarter. Cost-plus is the ballast of a government-services P&L — reimbursed costs plus a negotiated fee, low margin, near-zero risk. Its decline is partly mix arithmetic (fixed-price grew faster), but an outright dollar decline means some cost-plus work ended or converted. If that continues, CACI is trading a safer book for a richer one.

Technology versus Expertise confirms the direction: Technology revenue grew 11.4% to $1,449.3 million (59% of sales) while Expertise grew 3.9% to $1,025.3 million. Management's "software-defined approach" and "technology-first national security company" positioning is not just branding — the product-heavy half is outgrowing the labor-heavy half three to one. Prime-contractor share slipped 1.5 points to 89% as subcontractor revenue grew 25.9%, worth a footnote but not a worry at that scale.

The demand signal in the release is bookings, not adjectives. CEO John Mengucci cited "a 2.0x book-to-bill and another quarter of double-digit funded backlog growth," and the awards list backs him: a $1.5 billion ceiling award supporting U.S. Central Command ($1.2 billion recognized), a $1.6 billion Army Special Operations task order ($1.2 billion recognized), and $281 million of Navy electromagnetic-warfare work — all mission areas where CACI's acquired radio-frequency and space capabilities now bid. Notably absent: any pricing language, any "demand exceeds supply," any upcycle wording. For a services contractor, the honest demand metric is awards, and awards actually fell 3.4% against a strong prior quarter. The book-to-bill stayed at 2.0x because revenue, not awards, is the denominator that moved. Bulls should read "healthy pipeline"; bears should note the pipeline did not convert into award growth this quarter.

The Margin Story​

Operating margin has now expanded four periods in a row — 8.5% to 10.0% — while net margin has gone sideways to down. The wedge between the two is the acquisition financing, and it widens every quarter.

What moved, mechanically: direct costs fell a full three percentage points as a share of revenue year over year (67.6% to 64.6%), contributing roughly $75 million of operating leverage on this quarter's sales base. That single line more than funded the 16.1% jump in indirect costs — fringe benefits and overhead on a larger labor base, up 1.5 points as a share of revenue — plus the 46.0% jump in depreciation and amortization from the intangible assets the ARKA acquisition put on the books in March. Gross leverage up, overhead reinvested, amortization along for the ride: operating margin up 72 basis points.

Then the financing wedge. Interest expense has doubled in two fiscal years on an annual basis, and the effective tax rate at 25.2% sits four points above the 21% statutory rate (state taxes, net of R&D credits) with none of FY2025's one-off audit-resolution benefit. Operating margin is at its window high; net margin at 5.3% is below FY2025's 5.8%. Management guides investors to adjusted EPS — $7.66, up 11.8% — which adds back the $54.3 million of intangible amortization. That add-back is honest as far as it goes (amortization is non-cash), but the cash left the building when CACI paid $2.6 billion for ARKA and $1.3 billion for Azure Summit. Adjusted earnings describe the operations; GAAP earnings describe the owners' claim after the deals. Both are true; only one pays down the debt.

The One Big Question: Can the Acquisition Machine Outrun Its Own Interest Bill?​

CACI has bought roughly $4.3 billion of companies in two fiscal years — Azure Summit ($1.3 billion, radio-frequency technology) and Applied Insight ($314 million) in FY2025, ARKA ($2.6 billion, space domain) in FY2026 — and funded them with debt. Total debt tripled from $1.5 billion at the end of FY2024 to $4.9 billion at the end of FY2026: a $660 million revolver draw, $1.2 billion term loan, two term-loan-B tranches totaling $1.5 billion, and $1.5 billion of 2033 senior notes. The quarter's GAAP-to-non-GAAP bridge shows what that means for the P&L:

The $40.6 million gap between GAAP and adjusted net income is 31% of reported earnings — the quarterly rent on the acquisition strategy, paid in amortization. Add the $73.2 million interest line and the deals cost the quarter roughly $114 million before tax, against the $187 million of new revenue they mostly supplied. That math works while acquired revenue grows and the debt amortizes. Watch the two series that say whether it is working:

* Quarterly, not annualized.

Coverage has nearly halved in two years, from 6.2x to 3.4x — still comfortable for a contractor with $34 billion of backlog, but the trend has one direction while acquisition debt keeps arriving. The mitigating line is the first row: debt actually fell $65.4 million this quarter, the first sequential paydown in the ledger's three-period window, funded by $161.3 million of operating cash. If that becomes the pattern — acquire, integrate, delever — the machine works. If FY2027 brings another billion-dollar deal before leverage normalizes, coverage goes to 3x with goodwill at three-quarters of assets, and the next bid for growth gets priced accordingly. The raised full-year guidance (revenue $10.70–10.90 billion, adjusted EPS $33.18–34.08, free cash flow of at least $900 million) assumes the first path. The backlog — $34.0 billion total, up just 0.3%, but $6.2 billion funded, up 14.8% — funds it either way, since funded backlog is appropriated money that converts to revenue within roughly a year at current burn rates.

Tracking a $2.5B Quarter in Plain Text​

A contractor this acquisitive is exactly why modeling a company in Beancount clarifies it: double-entry forces every dollar to reconcile, so the acquired intangibles cannot hide inside operating income and the deal debt cannot hide inside equity. This is our shared method — how we model every company — applied line by line to CACI's filings. Here is the quarter's income statement as the ledger records it (income posts negative as a credit, expenses positive as a debit):

; FY2027Q1 Income Statement — quarter ended September 30, 2026
; Check: −2474.597 + 1597.689 + 550.113 + 79.267 + 73.240 + 43.921 + 130.367 = 0 ✓
 
2026-09-30 * "CACI International Inc" "FY2027Q1 Income Statement"
  Income:Revenue                               -2474.597 MUSD  ; revenues
  Expenses:CostOfRevenue                        1597.689 MUSD  ; direct costs
  Expenses:SellingGeneralAdministrative          550.113 MUSD  ; indirect costs and selling expenses
  Expenses:DepreciationAndAmortization            79.267 MUSD  ; depreciation and amortization
  Expenses:OtherNet                               73.240 MUSD  ; interest expense and other, net
  Expenses:IncomeTax                              43.921 MUSD  ; income taxes
  Equity:Adjustments                             130.367 MUSD  ; net income offset (RE set by balance assertion)

The one balance-sheet number that tells the narrative is total debt versus equity: $4,836.1 million of debt against $4,626.7 million of shareholders' equity. CACI owes more than it owns on paper — debt-to-equity of 1.05x — because $8.5 billion of its $11.9 billion balance sheet is goodwill and intangibles from the deals, recorded at what management paid rather than what the assets would fetch. The ledger carries both sides honestly:

2026-09-29 pad Assets:NonCurrent:Goodwill                 Equity:Adjustments
2026-09-30 balance Assets:NonCurrent:Goodwill                   6486.111 MUSD
2026-09-29 pad Liabilities:NonCurrent:LongTermDebt        Equity:Adjustments
2026-09-30 balance Liabilities:NonCurrent:LongTermDebt         -4789.313 MUSD  ; long-term debt, net of current portion

Goodwill alone ($6.5 billion) exceeds total equity. That is not an accusation — government-services goodwill rarely impairs, since the customer base is the U.S. federal budget — but it is the risk in one ratio: if acquired programs underperform, the write-down lands on an equity base with no cushion. The ledger starts at FY2025 because that is when the current deal cycle (Azure Summit, then ARKA) begins; everything before it is a different, smaller company.

The Multi-Year Arc​

Four fiscal years compress into one arc: a services contractor compounding revenue at 12.6% annually while remaking itself, through debt-funded deals, into a fixed-price technology vendor.

* Quarterly, not annualized.

Revenue grew every year while operating margin expanded every year — the compounding story is mix (fixed-price climbing back above 30% to 33.2%, the highest share in the five periods on record here) plus acquired technology revenue growing faster than labor. But total backlog barely moved for two years ($31.6 billion to $32.0 billion) before this quarter's jump to $34.0 billion, which means the company spent two years growing revenue faster than its future revenue. That catch-up — funded backlog up 14.8% to $6.2 billion — is arguably the quarter's most important number: appropriated, near-term, executable. Against it sits the debt row, up 3.1x in two years. The arc says CACI can buy growth and integrate it (organic growth stayed positive throughout, 7.2% in FY2026 and 2.1% this quarter); the question the arc cannot answer is what the balance sheet looks like after the next deal.

The Verdict: Bull vs. Bear​

Bull Case

• The mix shift is structural margin expansion, not a one-off. Fixed-price revenue is up 34.4% and is now 33.2% of sales, the highest share in the five periods on record here; direct costs fell three full points as a share of revenue. Every point of direct-cost ratio is worth roughly $25 million a quarter at current scale.
• Funded backlog de-risks the next four quarters. $6.2 billion appropriated and up 14.8% covers 57% of the raised $10.8 billion revenue guide midpoint — more than half the year's growth is substantially pre-sold before the year even plays out.
• The deleveraging has started. Debt fell $65.4 million this quarter while operating cash covered it nearly 2.5x over. One quarter is a data point, but it is the first sequential paydown in the ledger's three-period window.
• Technology is outgrowing Expertise three to one. 11.4% versus 3.9% growth validates the "technology-first" repositioning: CACI is selling more product and spectrum capability with each deal cycle, and product revenue carries the fixed-price margin.
• The guide raise is specific and credible. Revenue, adjusted net income, and adjusted EPS all moved up ($50 million, $5 million, $0.22 at the midpoints) while free-cash-flow guidance held at $900 million-plus — a raise funded by operations, not by redefining cash.

Bear Case

• Only 2.1% of growth was organic, and awards fell. The 8.2% headline is six points of acquired revenue; contract awards declined 3.4% year over year. If ARKA laps and award conversion stays soft, the growth story has to survive on 2% organic with a 2.0x book-to-bill doing reputational work the awards number does not support.
• Interest coverage nearly halved in two years. 6.2x to 3.4x, with $4.8 billion of mostly floating-rate debt and $1.5 billion of 6.375% notes. Another acquisition before leverage normalizes pushes coverage toward 3x — fine until a continuing resolution delays a payment cycle.
• Cost-plus revenue shrank in absolute dollars. The safest 60% of the book is now 53% and falling. A richer mix is a riskier mix: fixed-price estimating errors and inflation land on CACI, not the customer, and a third of revenue now carries that risk.
• Goodwill exceeds equity. $6.5 billion of goodwill against $4.6 billion of shareholders' equity means any material impairment rewrites the balance sheet. Government-services goodwill rarely impairs — until a recompete loss strands an acquired program.
• The signals management did not send. No pricing language, no demand-exceeds-supply, no upcycle wording — and a $42 million jury judgment in a long-running civil suit remains under appeal with nothing recognized. The numbers support "strong start"; nothing in the release prices durability beyond the funded backlog.

Our Take

Buy the backlog, underwrite the leverage. A contractor converting a 10.0% operating margin, its best in the four-period window, with $6.2 billion of funded backlog and a deleveraging quarter behind it deserves credit for executing the classic buy-integrate-delever cycle — but 2.1% organic growth with falling awards means the market is paying for acquired growth at a moment when interest coverage is 3.4x and goodwill exceeds equity. The print to watch is not revenue but awards: if contract awards reaccelerate past $5 billion a quarter while debt keeps falling, the machine works and the multiple holds. If awards stay flat while CACI shops for its next ARKA, the interest bill — not the backlog — becomes the story. Until then, this is a well-executed quarter inside a balance sheet that leaves no room for a badly executed deal, and the ledger above is the receipt.