Is Now the Optimal Time to Buy SAIC Amid Sector Momentum and Strategic Reinvention?

The defense technology sector has entered a period of robust momentum, driven by escalating global security demands, surging government spending, and rapid advancements in artificial intelligence (AI). Against this backdrop, Science Applications International Corporation (SAIC) emerges as a compelling case study in catalyst-driven growth. With a combination of earnings strength, strategic contract wins, and a reinvigorated business model, SAIC is positioning itself as a key player in the evolving defense landscape. This analysis evaluates whether the current juncture offers an optimal entry point for investors seeking exposure to a company aligning with both sector trends and long-term innovation.

Earnings Strength and Guidance: A Foundation for Confidence

SAIC's fiscal year 2025 results underscore its resilience and operational discipline. In Q2 2025, the company reported revenues of $1.82 billion, reflecting 2% organic year-over-year growth, with adjusted EBITDA reaching $170 million, or 9.4% of revenues. This performance prompted SAIC to raise its full-year 2025 adjusted diluted EPS guidance to $8.10–$8.30, a 4.2% increase from prior estimates. By Q3 2025, revenues had further climbed to $1.98 billion, a 4.3% year-over-year increase, reinforcing the company's ability to capitalize on its contract portfolio.

The December 2025 guidance update for FY2026, which raised revenue and EPS projections, signals management's confidence in sustaining this trajectory. Despite a 5.6% revenue contraction in Q3 2026, SAIC achieved EBITDA margins of 9.9%, demonstrating margin expansion and operational efficiency. These metrics, coupled with a free cash flow of $135 million and $120 million in capital returns, highlight SAIC's financial prudence and shareholder-centric approach.

Contract Wins and Management Signals: Fueling Future Growth

SAIC's recent contract wins are pivotal to its growth narrative. The $1.4 billion COBRA task order, awarded to support the Department of Defense's CJADC2 initiative, is a cornerstone of its FY2025–2026 strategy. This five-year contract aims to modernize command-and-control systems, enhancing decision superiority and operational readiness across the joint force. Similarly, the $928 million HOPE 2.0 contract for the Air Force TENCAP program and the $202 million Navy training contract underscore SAIC's ability to secure high-value, mission-critical work.

Management's strategic emphasis on aligning innovation with customer needs is evident in its reallocation of $100 million in indirect costs toward business development and customer engagement. Interim CEO Jim Reagan's focus on margin expansion and operational efficiency has translated into a 4.2% increase in FY2026 EPS guidance, reinforcing the company's commitment to long-term value creation.

Strategic Reinvention and AI Leadership: Aligning with Sector Trends

SAIC's strategic realignment into three business groups-Army Navy, Air Force/Space/Intelligence, and Civilian- reflects a streamlined approach to customer focus and operational agility. This restructuring, effective January 2026, is designed to optimize resource allocation and accelerate growth in high-priority markets.

The company's AI capabilities further solidify its competitive edge. Recognized as a Leader in the IDC MarketScape for U.S. Defense and Intelligence Agencies AI Services 2025, SAIC excels in agentic AI for data management and tactical edge AI deployment via its partnership with Google Public Sector. These innovations align with the Department of Defense's push for rapid AI integration, positioning SAIC to benefit from the sector's projected $5.8 billion in AI spending by 2029.

Valuation and Sector Momentum: A Compelling Case for Entry

SAIC's stock currently trades at $87.15, significantly below the $116 fair value estimated by analysts. This undervaluation is supported by strong fundamentals: a 32.24% return on equity over three years, projected 6.7% annual EPS growth, and a 9.9% EBITDA margin in Q3 2026. Analysts forecast 1.9% annual revenue growth and 0.7% earnings growth, metrics that, while modest, are underpinned by SAIC's contract backlog and strategic reinvention.

The broader defense tech sector is also experiencing momentum. Palantir Technologies (PLTR) and RTX Corporation (RTX) have delivered returns of 395.2% and 34.6% over the past year, respectively, driven by AI adoption and advanced weaponry demand. SAIC's focus on AI-driven solutions and its alignment with DoD priorities suggest it is well-positioned to capture a share of this growth.

Conclusion: A Catalyst-Driven Entry Point

The convergence of earnings strength, strategic contract wins, and AI leadership creates a compelling case for SAIC as a catalyst-driven investment. While the stock's current valuation offers a margin of safety, the company's FY2026 guidance and sector momentum suggest upside potential. Investors seeking exposure to a defense tech firm with a clear innovation roadmap and strong operational execution may find SAIC an attractive entry point in Q4 2025.