Amentum Holdings Inc. (NYSE: AMTM) reported its first quarter fiscal year 2026 financial results on Tuesday, characterized by steady operational performance and strategic growth in high-demand technical sectors. Despite a reported decline in revenue due to contract transitions and divestitures, the company achieved margin expansion and reaffirmed its full-year outlook.
Key Performance Metrics and Strategic Positioning
Amentum’s performance for the quarter ended January 2, 2026, was highlighted by significant contract wins in the nuclear energy and space sectors. The company reported a book-to-bill ratio of 1.1x, with a total backlog reaching $47.2 billion. This momentum is supported by a robust pipeline of $23 billion in pending awards and a target for over $35 billion in new bids for the remainder of the fiscal year.
The company’s focus on “Accelerating Growth Markets”—specifically global nuclear energy, space systems, and critical digital infrastructure—now accounts for approximately $4 billion in annual revenue. These segments typically command higher margins and present high-single-digit growth potential.
First Quarter Financial Overview
For the first quarter of fiscal 2026, Amentum’s financial results included:
Revenue: Reported at $3.2 billion, a 5% decrease compared to the prior-year period. On a normalized basis, adjusting for joint venture transitions, divestitures, and the impact of the government shutdown, revenue grew by 3%.
Adjusted EBITDA: Stood at $263 million, reflecting an adjusted EBITDA margin of 8.1%. This represents an improvement over the 7.7% margin recorded in the first quarter of fiscal 2025.
Adjusted Diluted EPS: Increased 6% year-over-year to $0.54, up from $0.51 in the same period last year.
Free Cash Flow: Reported as a use of $142 million. Management attributed this outflow primarily to the timing of collections impacted by holiday closures and the government shutdown.
Segment Performance
The Digital Solutions segment reported revenue of $1.34 billion, a 4% increase on a reported basis and 8% on a normalized basis. Growth in this area was driven by new contract awards, maintaining a steady adjusted EBITDA margin of 7.7%.
The Global Engineering Solutions segment saw reported revenue of $1.9 billion, down 11% primarily due to the aforementioned divestitures and JV transitions. However, the segment achieved significant margin expansion, with adjusted EBITDA margins rising to 8.4% from 7.6% in the prior-year quarter.
Business Outlook and Executive Commentary
Management reaffirmed its fiscal year 2026 guidance, expecting revenue between $13.95 billion and $14.3 billion. The company projects adjusted diluted EPS in the range of $2.25 to $2.45 and free cash flow between $525 million and $575 million.
During the earnings presentation, leadership emphasized that the solid first-quarter results demonstrate the efficacy of Amentum’s global growth strategy. The company’s alignment with high-demand government and commercial needs remains a primary driver of its long-term value proposition.
Capital Structure and Market Dynamics
Amentum’s financial profile was bolstered by a credit rating upgrade from Moody’s to Ba3 during the quarter. This upgrade led to a 25-basis point reduction in the interest rate of its Term Loan B, which is expected to enhance future market access and terms.
The company ended the quarter with $247 million in cash and an undrawn $850 million revolving credit facility. Management stated it remains on track to achieve a net leverage ratio below 3.0x by the end of fiscal 2026, supported by a disciplined capital deployment strategy that includes debt reduction and opportunistic strategic mergers or acquisitions.
In the broader sector, Amentum is positioning itself to capitalize on an estimated 25% increase in Space Force and NASA spending for fiscal year 2026. The company’s involvement in critical programs, such as the Rolls-Royce Small Modular Reactors and the U.S. Air Force Remotely Piloted Aircraft contract, underscores its role as a key partner in global security and energy infrastructure.
Reasons to Pass on AMTM
- Reported revenue decline: First-quarter revenue decreased 5% year over year due to contract transitions and divestitures.
- Headline growth obscured by adjustments: Underlying growth relies on normalization adjustments, limiting near-term revenue visibility.
- Negative quarterly cash flow: Free cash flow was a $142 million outflow, reflecting working capital and collection timing pressures.
- High government exposure: Heavy reliance on government programs increases sensitivity to budget delays, policy changes, and shutdowns.
- Operational complexity: Ongoing joint venture transitions and portfolio reshaping create execution and integration risk.
- Modest margins: Adjusted EBITDA margins remain in the low-8% range, offering limited buffer against cost pressures.
- Leverage remains a focus: Net leverage is still above long-term targets despite recent credit improvements.
- Long-cycle contract risk: A large backlog tied to multi-year contracts may limit pricing flexibility and responsiveness.