CACI — Q1 FY2027 Financial Report Analysis

Overview

CACI International, a Reston, Virginia-based contractor that sells software, electronic-warfare and space hardware, and technical staff to the US military and intelligence agencies, grew revenue 8.2% to $2.47 billion in the first quarter of its fiscal year 2027 (the three months to September 30, 2026; CACI's fiscal year ends in June). Most of that growth was bought rather than built: the company says only 2.1% was organic — growth from the business it already owned a year ago — with the rest coming from acquisitions, chiefly ARKA Group, which CACI bought for $2.64 billion in March 2026. Operating profit rose faster than sales (+16.6%), but interest expense on a larger debt load rose faster still (+58.6%), so GAAP net income grew only 4.5% and diluted earnings per share (EPS) 3.7%, to $5.84. Management nudged up its full-year revenue and adjusted-earnings outlook.

Key figures

Operating margin is computed from the 10-Q income statement (income from operations divided by revenue). Book-to-bill is new contract awards divided by revenue; above 1.0x means the company signed more new work than it billed in the quarter.

Where the growth came from

CACI breaks revenue down by customer, and the split shows growth concentrated in the military:

Defense revenue added $174.6 million, almost the whole $187.0 million increase. Federal civilian work — agencies such as Homeland Security, Justice and Health and Human Services — shrank by $15.3 million. The filing does not split the acquired revenue by customer, so it can't say how much of the defense jump is ARKA versus existing programs.

Two other splits explain the margin gain:

• Technology vs. Expertise. "Technology" revenue (software, data platforms, electronic-warfare and space hardware) rose 11.4% to $1.45 billion, while "Expertise" — essentially billing for skilled staff — rose 3.9% to $1.03 billion. Technology is now 58.6% of revenue, up from 56.9%.
• Contract type. Fixed-price revenue jumped 34.4% to $821.8 million (33.2% of revenue, up from 26.7%), while cost-plus-fee revenue fell 5.5%. On a cost-plus contract the government reimburses costs plus a set fee, so margins are capped but protected; on a fixed-price contract the company keeps any savings but absorbs any overruns. More fixed-price work tends to mean higher margins and more risk — and the 10-Q attributes the drop in direct costs as a share of revenue "to a favorable shift in revenue mix."

Overhead moved the other way: indirect costs and selling expenses rose 16.1% and climbed to 22.2% of revenue from 20.7%, which the filing attributes to fringe benefits and other costs "associated with a larger labor base." Depreciation and amortization rose 46.0% to $79.3 million because of intangible assets acquired in fiscal 2026.

The International segment (mostly UK work) is small: $76.4 million of revenue, down 1.5%, at 3.1% of the total, with operating income of $13.3 million.

Contract wins and backlog

Contract backlog — the total value of signed contracts not yet turned into revenue, including option years the government may or may not exercise — is the main leading indicator for a government contractor. CACI booked $4.8 billion of awards in the quarter, about 61% of it new business rather than renewals. The two largest were a U.S. Central Command award with a $1.5 billion ceiling (CACI counted $1.2 billion in backlog) and a five-year, $1.6 billion task order for U.S. Army Special Operations Command (also $1.2 billion counted).

The backlog picture is split. Funded backlog — the part for which Congress has actually appropriated money — rose 14.8% to $6.2 billion, which supports near-term revenue. But total backlog was essentially flat at $34.0 billion versus $33.9 billion a year ago, even with ARKA added. A 2.0x book-to-bill in one quarter has not translated into a larger overall order book year over year.

What the headline numbers hide

• Debt is eating the operating gain. Long-term debt principal stood at $4.86 billion at September 30 (against $279 million of cash), down from $4.93 billion at June 30. The 10-Q attributes the interest increase to "higher outstanding debt balances." Part of the floating-rate debt is hedged with $1.4 billion of interest-rate swaps; the filing says each one-point change in rates would have moved quarterly interest expense by $5.1 million. Until debt comes down further, interest will keep absorbing much of the operating profit growth.
• The GAAP vs. adjusted EPS gap widened. CACI's adjusted EPS ($7.66) excludes only the amortization of acquired intangible assets — a non-cash accounting charge that writes down the value of purchased contracts and technology. That charge rose to $54.3 million from $36.0 million, so the after-tax gap between GAAP and adjusted EPS grew to $1.82 a share from $1.22. Adjusted EPS growth of 11.8% looks three times better than GAAP growth of 3.7% mainly for that reason. The adjustment does not remove the higher interest cost, so adjusted EPS still carries the full cost of the acquisition financing.
• Cash conversion is adequate, not strong. Operating cash flow excluding MARPA (a program under which CACI sells some government receivables to a bank to collect cash sooner) was $144.8 million: about 1.1x GAAP net income but only 0.85x adjusted net income, and down 9.5% year over year. The company points to higher working capital; days sales outstanding (how long customers take to pay) rose to 59 from 56. Q1 free cash flow of $133.5 million is about 15% of the "at least $900 million" full-year target, leaving roughly $767 million for the next three quarters.
• No help from buybacks or taxes. Share repurchases were just $4.4 million and the diluted share count rose 0.7%, so EPS growth slightly lagged net income growth. The effective tax rate edged up to 25.2% from 24.9%.
• No accounting one-offs in either quarter. The notable non-recurring item is legal: the long-running Al Shimari (Abu Ghraib) lawsuit, in which a 2024 jury had awarded the three plaintiffs $3 million each in compensatory and $11 million each in punitive damages, was dismissed by the District Court on October 21, 2026, after the appeals court reversed the verdict in light of the Supreme Court's June 2026 Cisco v. Doe decision. The plaintiffs have said they may seek Supreme Court review.

Budget and shutdown risk

About 79% of CACI's revenue comes from the Department of War and the intelligence agencies. The 10-Q calls the budget backdrop "constructive": fiscal 2026 defense appropriations were enacted at $838.7 billion, and the July 2025 "One Big Beautiful Bill Act" provided about $156 billion of multi-year defense money that stays available even through a shutdown. The near-term risk is the calendar: the government is currently funded by a continuing resolution — a stopgap that keeps agencies running at last year's levels and typically blocks new program starts — that expires December 11, 2026. The filing warns that continuing resolutions "can negatively affect our business by delaying new programs, contract awards, or other customer decisions." Last year's shutdown began October 1, 2025, after the comparison quarter ended, so it does not distort this quarter's year-over-year figures.

Takeaway: CACI's existing business is getting more profitable — a shift toward fixed-price technology work lifted operating margin to 10.0% — but it is growing only about 2% on its own, and the higher interest bill on its debt absorbed about three-quarters of the operating profit gain. Shareholders got 3.7% GAAP EPS growth from 8.2% revenue growth, and that gap will persist until the debt comes down.

Outlook

Management raised fiscal 2027 guidance modestly:

The revenue range implies a step-up from here. Q1 revenue of $2.47 billion annualizes to about $9.9 billion; reaching even the $10.7 billion low end requires the remaining three quarters to average about $2.74 billion, roughly 11% above the Q1 level. The large Q1 awards and 14.8% growth in funded backlog give management a basis for that, but it leaves little room for slippage — and the December 11 funding deadline is the most obvious source of it.

What to watch next quarter: whether organic growth moves meaningfully above 2%, which the full-year revenue guidance effectively requires; whether interest expense starts to fall as debt is repaid; whether federal civilian revenue keeps shrinking; and whether the continuing resolution is extended in December or lapses into another shutdown.

Sources: CACI International Form 10-Q for the quarter ended September 30, 2026 (filed October 22, 2026) and the earnings release (Form 8-K, Exhibit 99.1) dated October 21, 2026. Adjusted EPS, EBITDA and free cash flow are company-defined non-GAAP measures.