CACI's Sustained Outperformance in National Security Tech: A Case for Strategic Buy-In

The U.S. defense sector is entering a golden era of growth, driven by geopolitical volatility, technological disruption, and a relentless push for modernization. Amid this backdrop, CACI International Inc. (NYSE: CACI) stands out as a masterclass in valuation discipline, margin resilience, and backlog fortification. With FY25 results underscoring operational excellence and FY26 guidance painting a bullish trajectory, the company is uniquely positioned to capitalize on a $447 billion defense market by 2033. For investors seeking a high-conviction play in national security tech, CACI's financials and strategic positioning present a compelling case for immediate buy-in.

Valuation Discipline: A Foundation for Sustainable Growth

CACI's FY25 performance demonstrates a rare blend of revenue growth and disciplined capital allocation. Annual revenues surged 12.6% to $8.6 billion, with 7.2% organic growth reflecting strong demand for its software-defined solutions and cybersecurity expertise. The company's adjusted EBITDA margin of 11.2%—up 21.2% year-over-year—underscores its ability to maintain profitability even in a high-inflation environment. This margin resilience is further amplified by a 60.7% reliance on cost-plus-fee contracts, which insulate the business from pricing pressures and ensure steady cash flows.

The company's capital deployment strategy is equally impressive. Share repurchases totaling $150 million in FY25, combined with strategic acquisitions, have enhanced shareholder value while expanding CACI's technological footprint. With a free cash flow of $442.5 million in FY25 and a projected $710 million in FY26, CACI has the liquidity to fund innovation, reward shareholders, and scale operations without overleveraging.

Margin Resilience: Outperforming Peers in a Competitive Landscape

CACI's margin strength is a critical differentiator in a sector dominated by giants like Lockheed Martin and Northrop Grumman. While these peers focus on hardware-heavy systems, CACI's 90.3% prime contract revenue model allows it to capture higher margins through software integration, AI-driven analytics, and recurring service contracts. For example, a $434 million digital financial management task order and a $400 million mission-essential systems modification in Q3 2025 highlight its ability to secure high-margin, long-term engagements.

The company's recurring revenue streams further bolster margin stability. With 1.2x book-to-bill ratio and a funded backlog of $4.2 billion (up 11% YoY), CACI's revenue visibility extends well into FY26. This contrasts sharply with competitors who rely on volatile, one-off defense contracts. As the DoD accelerates its shift toward AI and cyber resilience, CACI's expertise in these areas—evidenced by $638 million in intelligence community contracts for AI projects—positions it to outperform peers in both margin and margin growth.

Long-Term Backlog Strength: A Catalyst for Future Earnings

CACI's $31.4 billion backlog is not just a number—it's a strategic asset. This backlog, bolstered by a 9.8% YoY increase, ensures a steady pipeline of revenue for years to come. Notably, 90.3% of the backlog comes from prime contracts, which typically offer higher margins and greater operational flexibility. The funded backlog of $4.2 billion, up from $3.8 billion in FY24, further reduces execution risk and provides a clear path to FY26 earnings.

The company's FY26 guidance reinforces this optimism. With revenue projections of $9.2–$9.4 billion and adjusted net income of $605–$625 million, CACI is forecasting double-digit growth in both top and bottom lines. These figures are underpinned by a robust contract pipeline, including $9.6 billion in FY25 awards and a 1.1x book-to-bill ratio. As the U.S. defense budget continues to expand—projected to hit $950 billion in FY2026—CACI's backlog will serve as a compounding engine for earnings.

Sector Tailwinds: A Perfect Storm for CACI

The U.S. defense sector is experiencing a confluence of tailwinds that favor CACI's business model. The FY2025 budget of $895 billion prioritizes modernization in AI, cyber, and space capabilities—areas where CACI is a leader. For instance, its $93 million spectrum superiority contract and $143 million electronic warfare modification align directly with DoD priorities. Meanwhile, the global defense industry is projected to grow to $2.4 trillion by 2025, with CACI's niche in software-defined solutions placing it at the forefront of this expansion.

Investors should also consider macroeconomic factors. CACI's free cash flow is expected to jump to $710 million in FY26, driven by tax reforms and efficient working capital management. This liquidity, combined with a P/E ratio of 22.5x (well below its 5-year average of 28.3x), suggests the stock is undervalued relative to its growth prospects.

Investment Thesis: A High-Conviction Buy

CACI's combination of valuation discipline, margin resilience, and backlog strength makes it a rare gem in the defense sector. The company's FY25 results—$8.6 billion in revenue, $26.48 in adjusted EPS, and $966.8 million in EBITDA—have already exceeded expectations, while FY26 guidance sets a clear path to $28.03 in adjusted EPS. With a $31.4 billion backlog and a 11.7% EBITDA margin, CACI is not just surviving in the defense sector—it's thriving.

For investors, the case for a strategic buy-in is compelling. CACI's alignment with U.S. defense modernization, its margin-protected business model, and its ability to convert backlog into earnings make it a high-conviction play. As geopolitical tensions persist and the defense budget continues to rise, CACI is poised to deliver outsized returns for those who act now.

In a world where uncertainty is the only certainty, CACI offers a rare combination of stability and growth. This is not just a stock—it's a stake in the future of national security tech.