10-Q: Amentum Holdings Reports Q2 2026 Results, Net Income Jumps

Amentum Holdings, Inc. reported a significant increase in net income for the second quarter of fiscal year 2026, driven by improved operating income and a lower effective tax rate.

Summary

• Amentum Holdings, Inc. reported revenues of $3.478 billion for the three months ended April 3, 2026, a slight decrease of 0.4% from $3.491 billion in the prior year period.
• Net income attributable to common shareholders surged to $54 million ($0.22 per diluted share) for the quarter, a substantial increase from $4 million ($0.02 per diluted share) in the same period last year.
• For the six months ended April 3, 2026, revenues were $6.715 billion, down 2.8% from $6.907 billion in the prior year period.
• Net income attributable to common shareholders for the six-month period was $98 million ($0.40 per diluted share), compared to $16 million ($0.07 per diluted share) in the prior year.
• The company's Digital Solutions (DS) segment saw revenue growth of 10% for the quarter and 7% for the six months, while Global Engineering Solutions (GES) experienced revenue declines of 7% and 9% respectively.
• Adjusted EBITDA for DS decreased slightly by 2% for the quarter but remained flat for the six months, while GES saw an increase of 6% for the quarter and 2% for the six months.
• Total backlog increased to $47.8 billion as of April 3, 2026, up from $44.8 billion in the prior year, indicating future revenue potential.
• Subsequent to the quarter end, on April 24, 2026, the company amended its credit facility, establishing a new $1.4 billion Term Loan A and a $1.591 billion Term Loan B, and increasing the revolving credit facility.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this as a positive filing, with significant improvements in profitability and earnings per share, alongside a growing backlog, despite a slight dip in overall revenue.

Positives

• Significant increase in net income attributable to common shareholders for both the three-month ($54 million vs $4 million) and six-month ($98 million vs $16 million) periods.
• Diluted earnings per share improved to $0.22 for the quarter and $0.40 for the six months, up from $0.02 and $0.07 respectively.
• Operating income increased by 37.3% to $151 million for the three months ended April 3, 2026.
• Digital Solutions segment revenue grew by 10% for the quarter and 7% for the six months.
• Global Engineering Solutions segment Adjusted EBITDA increased by 6% for the quarter and 2% for the six months, indicating improved operational performance.
• Total backlog increased by $3.0 billion to $47.8 billion, signaling strong future revenue potential.
• Effective tax rate decreased significantly to 30.8% for the quarter and 31.0% for the six months, compared to 91.7% and 66.7% in the prior year periods, respectively.
• The company was in compliance with all debt covenants as of April 3, 2026.

Negatives

• Overall revenues decreased slightly by 0.4% for the quarter and 2.8% for the six months.
• Global Engineering Solutions segment revenues decreased by 7% for the quarter and 9% for the six months.
• Cost of revenues as a percentage of revenues increased slightly to 90.1% for the quarter and 90.0% for the six months, compared to 89.5% in the prior year periods.
• The company experienced a decrease in net cash provided by operating activities by $78 million for the six months ended April 3, 2026, compared to the prior year period.

Risks

• Government shutdowns can negatively impact business due to delays in new program starts, contract awards, and other factors.
• Decreases in, or delays in approving, the federal government's budget, decreases in government spending, delays in contract awards, and pauses on government contracts could adversely impact the business.
• U.S. Government investigations into contract compliance could result in administrative, civil, or criminal liabilities, including repayments, fines, penalties, suspension, or debarment.
• Modification or termination of a contract under a joint venture could trigger an impairment in the fair value of investments in these entities.
• The company's future financial performance depends on future cash flows from operations, which could be affected by factors outside of its control, including worldwide economic and financial market conditions.

Future Outlook

The company's backlog of $10.1 billion is expected to be recognized as revenue over the next 12 and 24 months, with approximately 78% and 92% expected within those periods, respectively. Management believes that internally generated funds, available borrowing capacity, and cash on hand will provide sufficient liquidity for at least the next twelve months.

Management Comments

• "While we view the budget environment as constructive and believe core funding sources for our primary customer-based markets will continue to experience bipartisan tailwinds, there can be no certainty about the level of funding for any particular GFY or that appropriations bills will be passed in a timely manner."
• "We believe our scale, breadth of capabilities, and depth of experience give us a robust understanding of our customers evolving needs."
• "We believe Amentums capabilities are strategically aligned to well-funded, long-term priorities for the federal government, allied nations, and commercial customers."
• "The decrease in SG&A was primarily attributable to synergies arising from the merger of the Jacobs Solutions Inc. (Jacobs) Critical Mission Solutions business and portions of the Jacobs Divergent Solutions business..."
• "We believe that the combination of internally generated funds, available bank borrowings, and cash and cash equivalents on hand will provide the required liquidity and capital resources necessary to fund on-going operations, capital expenditures, scheduled principal and interest payments on our debt obligations, scheduled lease payments, and other working capital requirements over at least the next twelve months."

Industry Context

StockSavvy.ai notes that Amentum's performance is closely tied to U.S. federal government spending, particularly in defense and intelligence. The company's strategic focus on digital solutions and global engineering aligns with increasing government modernization priorities and global security concerns. The reported increase in backlog suggests continued demand for its services.

Comparison to Industry Standards

• The company's revenue mix shows a significant portion (57% for the quarter, 57% for the six months) derived from cost-plus-fee contracts, which generally offer lower risk regarding inflation compared to fixed-price contracts.
• The effective tax rate of approximately 31% for the current periods is higher than the U.S. federal corporate tax rate of 21%, attributed to factors like valuation allowances against deferred tax assets.
• The company's Adjusted EBITDA margin for the DS segment was approximately 17.4% for the quarter and 7.4% for the six months, while the GES segment margin was approximately 8.5% for the quarter and 8.4% for the six months. These margins should be compared against industry benchmarks for government contracting and engineering services firms.

Legal Proceedings

• The company is involved in various claims, disputes, and administrative proceedings arising in the normal course of business.
• Management believes that any liabilities or losses from these matters will not materially adversely affect the company's operations and liquidity.
• The company is occasionally the subject of investigations by various agencies of the U.S. Government regarding compliance with contract requirements, which could lead to liabilities or debarment.
• Currently, there are no investigations that are expected to have a material impact on the company's results of operations.

Related Party Transactions

• Related party receivables due from equity method investments were $58 million as of April 3, 2026.
• Related party revenues earned from equity method investments were $65 million for the three months ended April 3, 2026.

Stakeholder Impact

• Shareholders benefit from the significant increase in net income and earnings per share.
• Creditors are impacted by the recent amendments to the credit facility, including the establishment of new term loans and an increased revolving facility.
• Employees may be affected by synergies arising from the merger of Jacobs' businesses, potentially leading to SG&A reductions.
• U.S. Government agencies, as primary customers, are subject to the company's performance and compliance with contract terms.

Next Steps

• Continue to monitor U.S. federal budget and appropriations bills for potential impacts on government contracts.
• Integrate new credit facilities (Term Loan A and Term Loan B) and manage debt obligations.
• Execute on the growing backlog of $47.8 billion.
• Adopt new accounting standards ASU 2023-09 and ASU 2024-03 in future periods.

Key Dates

Recommendation

While the significant increase in net income and EPS is a strong positive, the slight decline in overall revenue and the ongoing reliance on government contracts, which carry inherent risks like shutdowns and investigations, warrant a cautious approach. The recent debt restructuring provides financial flexibility but also increases leverage. Therefore, a 'hold' recommendation is appropriate pending further clarity on revenue stabilization and the impact of macroeconomic factors.

Keywords

Amentum Holdings, SEC Filing, 10-Q, Quarterly Report, Financial Results, Revenue, Net Income, Earnings Per Share, Digital Solutions, Global Engineering Solutions, Backlog, Credit Facility, Government Contracts