Amentum Holdings, Inc. Q2 FY2026 earnings call

• Overall Q2 2026 Financial and Operational Performance

  • Delivered solid core results: total revenue of $3.5 billion (3% normalized year-over-year growth); adjusted EBITDA of $275 million (7.9% margin, +20 bps YoY); adjusted diluted EPS of $0.60 (13% YoY growth); free cash flow of $220 million, which represented a rebound from Q1 2026 collection delays.
  • Achieved strong business development: $4 billion in net bookings, LTM book-to-bill of 1.2x, ending total backlog of $48 billion (7% YoY growth, an all-time high), and funding backlog of $6.9 billion (20% YoY growth). First half FY26 proposal submissions reached over $20 billion, putting Amentum on track to exceed the full-year FY26 target of $35 billion. There is $26 billion in outstanding proposals awaiting award, 65% of which is new business to Amentum.
  • Notable Q2 awards include a 14-year $406 million UK SMR contract, a two-year $112 million European nuclear decommissioning contract, a five-year $425 million CALFIRE aviation fleet sustainment contract, over $300 million in intelligence contracts, and over $600 million in CDI awards for AI workload data center retrofits and secure connectivity.

• Strategic Growth Focus: Critical Digital Infrastructure (CDI)

  • CDI has strong multi-decade tailwinds: data center demand is projected to grow 29% annually, global mobile data traffic is expected to quadruple, and edge computing is projected to grow 36% annually through 2030, all driven by AI and digital transformation.
  • Amentum focuses on three core CDI verticals: (1) full lifecycle smart commercial infrastructure and data centers, including retrofitting legacy facilities for AI workloads; (2) next-generation digital connectivity (5G/6G fiber and wireless network deployment for commercial and government customers); (3) cyber and network defense, with differentiated capabilities to secure both IT and operational technology environments for sensitive customers.
  • When combined with Amentum's other high-growth verticals (global nuclear energy, space systems and technology), the company has over $4 billion in annual revenue from high-margin, high-growth end markets, which management believes is underappreciated by investors.

• Capital Structure Update

  • Post-quarter, Amentum issued a new $1.4 billion term loan A facility to reprice and pay down existing term loan B debt, and increased revolving credit capacity to $1 billion. These actions reduced the weighted average cost of debt by 50 basis points and strengthened the balance sheet. The company remains on track to reach net leverage below 3.0x by the end of FY26.

1. Digital Solutions: Revenue of $1.5 billion (42.9% of total company revenue), growing 10% year-over-year driven by new contract ramp-up in critical digital infrastructure (CDI) and space systems. Adjusted EBITDA came in at $105 million, with adjusted EBITDA margins of 7.2%. Margins were slightly lower year-over-year due to a prior-year fiscal deduction, new program start timing, and higher net write-ups in the year-ago quarter, partially offset by higher revenue volume.
2. Global Engineering Solutions: Revenue of $2 billion (57.1% of total company revenue), with year-over-year declines from joint venture transitions, a prior divestiture, and wind-down of historical legacy programs, partially offset by contributions from new contract awards. Adjusted EBITDA was $170 million, with adjusted EBITDA margins expanding 100 basis points year-over-year to 8.5%. Margin growth came from a focus on higher-margin opportunities including an increased mix of fixed-price work and disciplined program execution.

• Amentum reaffirms its full fiscal year 2026 guidance, maintaining prior ranges after a strong first half performance: total revenue of $13.95 to $14.3 billion; adjusted EBITDA of $1.1 to $1.14 billion; adjusted diluted EPS of $2.25 to $2.45; and full-year free cash flow of $525 to $575 million.
• Timing expectations: approximately 48% of remaining full-year revenue and profit will be recognized in Q3 2026, with a sequential increase in Q4 2026 driven by an extra working day, funded project timing, and new award contributions. The majority of full-year free cash flow will be generated in Q4 2026 in line with historical seasonality, aligned with the U.S. government fiscal year end.
• Long-term underlying growth targets remain on track: Amentum continues to target 4% to 6% CAGR through FY28, in line with prior long-term guidance.

• NASA has issued a workforce directive to incrementally insource certain technical capabilities currently provided by contractors. While Amentum expects the revenue impact to be immaterial in FY26, it estimates an approximate 1% negative revenue impact to FY27, with a slightly smaller impact to EBITDA. No further material impacts are currently quantified, but insourcing could reduce future revenue from NASA contracts.
• Fast ramping of new large programs can lead to temporarily lower margins in the short term as programs reach full operational scale. Margin performance can also vary quarter-to-quarter due to timing of program write-ups and new program start costs.
• Outcome of pending contract awards is uncertain, even with a large backlog of proposals awaiting decision; actual future growth depends on Amentum winning a large share of these pending opportunities.
• Market and macroeconomic factors, as well as changes in government budget priorities, could impact actual results relative to forward-looking projections, as disclosed in the company's SEC filings.

Q: With strong Q2 bookings, what is the outlook for booking trends in the second half of FY26, and can current book-to-bill levels be sustained? / A: Amentum is well on track to meet its full-year target of submitting over $35 billion in proposals, matching its 2025 submission level. Long-term secular trends in AI, data, national security and nuclear energy continue to drive strong demand across both high-growth and core markets. Management expects book-to-bill will remain at the consistent 1.2x LTM level Amentum has delivered since going public, and strong 2026 bidding activity sets up strong new business flow for 2027.

Q: Global Engineering Solutions margins expanded 100 bps YoY this quarter after a Q1 lift from the government shutdown; is this margin level sustainable for the second half, or is it driven by one-time factors? / A: Most of the margin expansion is driven by sustainable, fundamental factors. Amentum's long-standing strategy to prioritize higher-margin fixed-price work is paying off, with customers increasingly shifting from traditional cost-plus contracting to fixed-price or T&M structures, increasing the overall mix of higher-margin work. Higher equity income from joint ventures, better disciplined program execution, and realized cost synergy benefits also contributed to the margin improvement. While minor quarterly timing variation is possible, the underlying improvement is expected to hold.

Q: How does the $40 billion Japanese SMR investment in the U.S. impact Amentum's nuclear growth opportunity? / A: Amentum has unmatched hands-on experience and scale for new nuclear construction in the U.S. built from decades of complex nuclear project work, and is in active discussions for multiple SMR projects across the country, including the project targeted by this Japanese investment. Amentum already has existing SMR partnership experience in Europe, and management expects a number of U.S. SMR projects will move from planning to active construction in the second half of 2026 and into 2027, creating meaningful new growth opportunities.

Q: What is the expected long-term customer mix split between government and commercial customers for CDI? / A: CDI is not a new market for Amentum; the company has been building its commercial telecom capabilities for over a decade, which acts as a foundational capability that can be leveraged for new data center and edge computing growth. Current tailwinds are driven primarily by AI-fueled commercial demand for data center capacity, network expansion, and cybersecurity, but Amentum's existing government cybersecurity and infrastructure capabilities provide dual-use advantages that benefit both customer segments. The business will grow across both government and commercial, with commercial growing faster from current tailwinds, building on Amentum's existing dual-use expertise.