Booz Allen Hamilton opened fiscal 2027 the way it closed fiscal 2026 - revenue down, profits up. First-quarter revenue fell 4.2% year over year to $2.80 billion as a slowed federal procurement environment continued to thin the company's customer-staff bench (headcount down 7.5% to 30,900 from 33,400 a year earlier), but the offset landed where investors actually care: adjusted EBITDA grew 7.4% to $334 million, the adjusted EBITDA margin expanded 130 basis points to 11.9%, adjusted diluted EPS rose 22.3% to $1.81, and free cash flow nearly tripled to $261 million from $96 million. GAAP net income fell 27% to $198 million and GAAP diluted EPS dropped 24.5% to $1.63, mostly because the prior-year quarter carried a one-time $86 million IRS-driven tax-reserve release that did not recur. Strip out that calendar effect and the GAAP picture lines up with the adjusted one: the quarter is a margin-and-cash print, not a revenue one.
The strategic moves underneath the print are the load-bearing tells. Booz Allen closed its $235 million acquisition of Defy Security at the start of the quarter and signed a $720 million definitive agreement to acquire Ultra I&C Mission Solutions, a defense-software and edge-compute business, in mid-June. Total backlog grew 3% year over year to $39.5 billion; the quarterly book-to-bill ratio of 1.5x is the strongest single quarter in two years. The headline question the quarter answers is whether Booz Allen can hold its adjusted margin in the low double digits while the procurement cycle thaws; the open question the next three quarters have to answer is whether the demand environment - particularly in the Civil and Commercial book, which is down sharply - turns with the federal budget cycle, or whether the slowdown is the new base.