SAIC Expands Client Base With DIR Deal: What Should Investors Do?

Core Insights - Science Applications International Corp. (SAIC) shares have declined 18% over the past three months, underperforming the Zacks Computers - IT Services industry, Zacks Computer and Technology sector, and the S&P index, which grew by 7.4%, 9.8%, and 6.6% respectively [1][2] Financial Performance - SAIC's fiscal 2025 revenue outlook is projected to be between $7.425 billion and$7.475 billion, raising investor concerns due to a slight expected decline of 0.13% year over year based on Zacks consensus estimates [2][11] - The company is currently facing revenue gaps due to contract transitions and improved bid selections [2] Recent Developments - SAIC secured a $170.9 million contract from the Texas Department of Information Resources to provide cybersecurity services, indicating a growing presence in state and local government sectors [3] - The company has been focusing on increasing its market presence in the federal government sector, with approximately 98% of its revenues coming from U.S. government contracts in recent years [6] Market Position - Major clients include various U.S. government agencies such as Homeland Security, NASA, and military branches, which helps stabilize revenue and minimize fluctuations [6][7] - The increased federal government budget is expected to accelerate contract awards, benefiting SAIC's top-line growth [7] Competitive Landscape - SAIC operates in a competitive market with players like CACI International, KBR Inc., and Leidos Holdings, which creates pricing pressure and low-margin government deals affecting profitability [8][9] - Rising component costs, labor, and logistics expenses, along with recession concerns, may lead to softened spending by government agencies, impacting near-term prospects [10]