CACI International: A High-Conviction Bet in Defense and Tech-Driven Growth

In an era where markets oscillate between the gravitational pull of AI-driven tech stocks and the steady, if less flashy, growth of defense contractors, one company has managed to straddle both worlds with remarkable success: CACI International. Over the past decade, CACI has not only outpaced its peers but has also demonstrated a compounding engine that blends the precision of defense contracting with the innovation of technology-driven solutions. For investors seeking a long-term holding that balances stability and growth, CACI offers a compelling case study.

The Power of Compounding in Defense and Tech

The defense sector, often seen as a refuge during economic uncertainty, has historically provided consistent returns through government contracts and geopolitical tailwinds. Meanwhile, tech-driven stocks-particularly those leveraging AI, cloud computing, and cybersecurity-have delivered explosive growth, albeit with higher volatility. CACI, however, has managed to capture the best of both worlds. From 2015 to 2025, the company achieved a 9.7% compound annual growth rate (CAGR) in revenue and a 14.2% CAGR in profits, driven by strategic acquisitions and a pivot toward mission-critical technology for U.S. government clients. This outperformance is not accidental but a result of deliberate operational and strategic shifts.

Strategic Acquisitions and Sector Diversification

CACI's transformation from a staffing-focused contractor to a technology-centric provider has been pivotal. By acquiring firms specializing in AI, cybersecurity, and data analytics, the company has embedded itself into the backbone of national security infrastructure. For instance, its fiscal 2025 second-quarter results revealed an 11.2% year-over-year revenue increase, surpassing analyst expectations. This growth was fueled by 8.1% organic expansion, a testament to the company's ability to scale without overreliance on M&A.

Compared to peers like Parsons and Mercury Systems, CACI's stock performance has been a standout. While some competitors reported declining revenue or post-earnings stock dips, CACI's shares surged 18.6% following its Q3 2025 earnings release, reflecting investor confidence in its execution. Over a five-year horizon, the stock has appreciated by 148.2%, far outpacing the 9.5% average return of the Computer and Technology sector according to Nasdaq data.

Valuation Metrics and Future Prospects

Despite its strong performance, CACI appears undervalued by certain measures. A discounted cash flow analysis estimates its intrinsic value at $729.70, implying a 21.5% undervaluation relative to its current price. Its price-to-earnings (PE) ratio of 25x also lags behind the industry average, suggesting the stock is fairly priced relative to fundamentals according to Longbridge analysis. Analysts project continued growth, with federal contracts and technology upgrades expected to drive a 9.1% annual earnings expansion over the next five years according to Simply Wall St projections.

A Contrarian Edge in a Crowded Market

While tech stocks like Microsoft and Amazon dominate headlines, CACI's niche in government technology offers a unique advantage. The U.S. government's increasing reliance on private-sector innovation-particularly in AI and cybersecurity-creates a durable demand tailwind. As noted by Seeking Alpha, CACI's focus on "mission-critical technology" positions it to benefit from long-term contracts with extended profit margins. This contrasts with the cyclical nature of consumer tech, where demand can wane during economic downturns.

Conclusion: A High-Conviction Holding

For investors with a 10-year horizon, CACI International represents a rare combination of compounding returns, defensive resilience, and growth potential. Its ability to outperform both defense and tech peers-while maintaining a disciplined approach to acquisitions and margin expansion-underscores its status as a high-conviction holding. As the lines between defense and technology blur, CACI is not just keeping pace; it is setting the standard.