CACI Q2 Deep Dive: Technology Shift and Backlog Growth Shape Outlook

Defense, intelligence, and IT solutions provider CACI International (NYSE:CACI) fell short of the markets revenue expectations in Q4 CY2025, but sales rose 5.7% year on year to $2.22 billion. On the other hand, the company’s outlook for the full year was close to analysts’ estimates with revenue guided to $9.4 billion at the midpoint. Its non-GAAP profit of $6.81 per share was 4.9% above analysts’ consensus estimates.

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StockStory’s Take

CACI’s second quarter fiscal 2026 results reflected ongoing momentum in technology-driven solutions, even as revenue fell short of Wall Street expectations. Management pointed to steady demand across its core national security markets and highlighted the growing role of software-defined technologies, particularly in electronic warfare and agile software development. CEO John Mengucci emphasized that CACI’s ability to anticipate customer needs and accelerate delivery was a primary factor in maintaining stable operating margins and strong cash flow, despite some lingering impacts from government shutdowns and delays in federal procurement processes.

Management’s updated outlook for the year is underpinned by increased visibility from a robust backlog and a constructive macro environment for defense and intelligence spending. The company is focusing on expanding its technology portfolio, especially through the pending acquisition of ARCA, which is expected to strengthen CACI’s position in space and intelligence markets. CFO Jeffrey MacLauchlan noted that they are "highly confident in [their] ability to hit the high end if not exceed" their revenue and EBITDA margin targets, while acknowledging that future performance will depend on timely government funding and the continued ramp-up of recently awarded programs.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to strong execution in technology segments, a favorable customer mix, and continued investment in high-growth areas like electronic warfare and enterprise software.

• Technology revenue mix rising: Management stated that nearly 60% of total revenue now comes from technology offerings, up from prior years, driven by demand for software-defined solutions in electronic warfare and agile development projects.
• Electronic warfare leadership: CACI highlighted its leading position in electronic warfare (EW), with CEO Mengucci noting recent wins with the Army and Navy and growing demand from the Air Force. The company’s software-defined EW solutions are increasingly integrated into military operations, supporting adaptability against evolving threats.
• Acquisition of ARCA: The pending acquisition of ARCA is seen as a strategic move to strengthen CACI’s space and intelligence market offerings. Mengucci emphasized ARCA’s established presence in national security missions and its alignment with long-term defense funding streams.
• Agile software and AI deployments: CACI’s enterprise technology division secured major contracts with U.S. Customs and Border Protection, using agile methods and introducing AI-based object tracking to enhance border security and operational efficiency.
• Macro environment and funding flows: Management observed that reconciliation funding is beginning to reach key programs, particularly in border security and counter-UAS (unmanned aerial systems) initiatives, providing incremental growth drivers for the technology portfolio.

Drivers of Future Performance

Looking ahead, CACI’s management expects continued growth to be fueled by demand for technology-driven national security solutions and the integration of recent acquisitions.

• Expansion of technology portfolio: Management believes that increasing the share of technology-based revenue, such as software-defined electronic warfare and AI-enabled enterprise solutions, will support margin expansion and long-term growth.
• Integration of ARCA acquisition: The company expects the addition of ARCA to enhance its competitive standing in the space and intelligence markets, with potential for new long-term contracts and increased exposure to high-growth segments.
• Government procurement and funding risks: While the outlook is positive, management cautioned that the pace of new contract awards and funding flows may be influenced by external factors such as acquisition reform efforts, government shutdowns, and broader defense budget cycles.

Catalysts in Upcoming Quarters

In future quarters, the StockStory team will be monitoring (1) the pace at which CACI’s technology-driven contracts, especially in electronic warfare and enterprise software, convert from backlog to revenue; (2) the successful integration and early contributions of the ARCA acquisition to CACI’s space and intelligence portfolio; and (3) the impact of government funding flows, contract protests, and procurement reforms on award timing and execution. Continued progress in AI-enabled offerings and agile development will also serve as important markers.

CACI currently trades at $648.50, up from $632.56 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free).

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