Amentum Holdings, the government services pure-play spun out of Jacobs in late 2024, printed a third quarter that separated the two halves of the equity story in a way few quarters have since the September 2024 spin-merge. On the operating side, the company delivered a 60-basis-point expansion in Adjusted EBITDA margin to 8.3%, lifted Adjusted Diluted EPS 20% year-over-year to $0.67, and converted $135 million of free cash flow from a quarter whose reported revenue actually shrank 2% to $3,490 million. The combination of a $290 million Adjusted EBITDA print against lowered fiscal-year 2026 revenue guidance of $13.8 billion to $13.95 billion, $50 million below the prior floor, is the central data point of the quarter: management is explicitly trading roughly $150 million of full-year revenue at the top end for cleaner margins and a tighter cost base.
The thesis the market is being asked to underwrite, in our reading, is that Amentum has moved past the messy post-spin consolidation phase and is now a margin-and-cash-flow story rather than a revenue-growth story. Three data points reinforce that read. First, the 8.3% Adjusted EBITDA margin is the highest quarterly mark in Amentum's short public history and is 60 basis points above the prior-year quarter, achieved while cost of revenues held flat at 89.7% of revenue. Second, selling, general and administrative expense fell 26% year-over-year to $122 million, or 3.5% of revenue, down from 4.6% a year ago, an explicit synergy capture from the Jacobs Critical Mission Solutions combination. Third, the contract-mix table embedded in the latest 10-Q shows a continued shift toward cost-plus-fee work (53% of revenue in Q3, up from 47% in the prior-year quarter), which compresses upside on individual programs but stabilizes the cash flow profile against fixed-price execution risk.
The single load-bearing risk is what the market is pricing in the revenue cut. The 52-week trading range of $19.80 to $38.11 and the current $20.43 print put Amentum's market capitalization at roughly $5.0 billion against $3,875 million of gross debt and $459 million of cash, an enterprise value near $8.4 billion and 3.0 times net leverage on $1,128 million of last-twelve-months Adjusted EBITDA. With the revenue ceiling lowered and the share price sitting within striking distance of post-spin lows, the trade is whether the margin and cash-flow story can hold multiple support through the fiscal 2026 reporting cycle. The next data point that tests this is the Q4 FY2026 print in November, when investors will be able to back into a fourth-quarter run-rate against the new full-year range and assess whether the cost-plus-fee mix shift is durable or a one-quarter effect of the contract-transition churn.