‘I just don’t see a pronounced slowdown,’ CACI CEO and President John Mengucci says.
Two federal IT solution providers–CACI International and General Dynamics IT–showed a level of resilience in their quarterly earnings reports this week despite cuts by the Department of Government Efficiency (DOGE) led by billionaire Elon Musk.
CACI International–No. 19 on CRN’s 2024 Solution Provider 500 and mainly a provider to U.S. government customers supporting national security–has not seen decreased demand from the government.
The Reston, Va.-based solution provider reported third fiscal quarter earnings Wednesday. Company executives saw revenue growth of 12 percent year over year to $2.2 billion. It saw income from operations grow 8 percent to $196 million. Net income fell 3 percent year over year to $111.9 million.
The solution provider even raised the low end of its revenue guidance, now forecasting $8.55 billion to $8.65 billion thanks to greater organic growth, according to a transcript of CACI’s quarterly earnings call held Wednesday.
“I just don’t see a pronounced slowdown,” CEO and President John Mengucci said, according to a transcript of the call. “We continue to see good demand signals from customers in our key focus areas. The world is a dangerous place, and demand is being driven by geopolitical realities as well as a new administration. … Our strategy and capabilities are extremely well aligned with the new administration’s priorities.”
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CACI, GD Quarterly Earnings
Should the forecast hold, that would mean between 14.5 percent and 16 percent year over year growth, with six points from acquisitions. The previous guidance was for at least $8.45 billion.
CACI is still looking to buy companies–with efforts still underway to integrate Azure Summit Technology and Applied Insight. Both acquisitions closed in October.
Mengucci put the impact from DOGE on CACI at about $1 million, “a testament to the strategy we have” in focusing on technology and digital application sales over consulting and hours, he said.
“It doesn’t mean we’re going to be DOGE immune. But I think to a great extent, we’ve positioned this business long before these concepts have come out, which is why we’re so strongly supportive of them,” he said.
Fellow government IT solutions provider General Dynamics IT has lost about $93 million in annual contracts, according to Fortune, representing less than 1 percent of GDIT’s total revenue. GDIT–No. 14 on CRN’s 2024 Solution Provider 500–has also won at least $33.1 million in new contracts since Jan. 20.
On the earnings call Wednesday for GDIT parent General Dynamics–representing the company’s first fiscal quarter, ended March 31–the company reported that GDIT revenue grew 9 percent year over year. Jason Aiken, executive vice president for General Dynamics’ technologies division, which includes GDIT, declined on the call to provide an annualized number of the DOGE impact on the business.
“We’ve been in active conversation and actively working with the customer to identify opportunities for savings for increased value and so on from the services and the solutions that we provide,” Aiken said on the call, according to a transcript.
“It’s important as a reminder that we are not strictly in the consulting business per se,” he continued. “We deliver mission-driven solutions. We deliver solutions to the customer’s most challenging technology issues. But the fact is we are in the conversation and as part of that conversation, we are going to partner with our customer and we are going to find the savings that they’re looking for.”
General Dynamics CEO Phebe Novakovic said on the call that the IT services side of the market sees “a significant amount of uncertainty … as the administration establishes its own spending priorities,” according to the transcript.
Jeff MacLauchlan, CACI executive vice president, CFO and treasurer, said U.S. government decision-making might be slower in the current environment. The solution provider has seen an extra day or two on invoice approvals and day-to-day business, “but it’s been only mildly disruptive and relatively short lived,” he said, according to a transcript.
“It’s been very manageable disruption from our view,” he said.
CACI will submit another $10 billion of bids over the next two quarters, with more than 75 percent of that toward new business. Its pipeline includes $17 billion of bids under evaluation, about 80 percent of that new business to CACI, MacLaughlan said.
Mengucci said that he continues to see requests for proposals (RFPs) in parts of the government targeted for cuts.
“While DOGE is not done with its work, we remain confident that our strategy, differentiated software-based capabilities and superior program execution are extremely well-aligned to the new administration and DOGE’s objectives–peace through strength, secure borders, increased efficiency and technology modernization,” he said.
CACI hasn’t been alone in increasing its financial outlook. Fellow Reston, Va.-based government IT solution provider Science Applications International Corp. (SAIC) raised its guidance in March, going from at least $7.55 billion in fiscal year 2026 revenue to at least $7.6 billion. It maintained its upper-end guidance of $7.75 billion.
Despite CACI’s success, first calendar quarter 2025 large-contract services awards fell 34 percent year over year, William Blair said in a report Wednesday.
“While the major contractors generally extended programs that were up for renewal, there has been a dearth of new requirements,” according to the investment firm’s report. “Procurement officials indicate that many large new programs have been put on pause to ensure that they align with the new administration’s requirements. The $8.2 billion in total large awards was the lowest amount since we began tracking the data in the first quarter of 2019.”
William Blair hasn’t seen “discernible DOGE impact in financials thus far” from Department of Defense (DoD) IT contractors. But the firm predicts that “government contractors will likely face “some funding disruption from DOGE and the” Trump administration.
The firm called government IT services resilient to tariffs and a potential recession “given how nearly all revenue and the entire supply chain is from the United States.”
“In theory, the U.S. federal government raising money via tariffs is positive for defense spending because it reduces the deficit, thereby decreasing the need for material cuts to the defense budget,” according to the report.
Since market close Wednesday, CACI’s stock is up to about $450 a share, up about 5 percent. General Dynamics traded at about $272 a share Friday after market close, up about 2 percent since Wednesday market close.
