U.S. Treasury Cancels Contracts as Booz Allen Delivers 40% Q3 EPS Surprise
U.S. Treasury canceled all Booz Allen Hamilton contracts after ex-employee Charles Littlejohn leaked IRS data, stripping the firm of key government work. In Q3, the firm beat EPS estimates by 40% with $1.77 earnings on $2.62 bn revenue, a 4% miss, while shutdown impacts and cost cuts shaped guidance.
1. Treasury Cancels Booz Allen Contracts Over Tax Data Breach
The U.S. Department of the Treasury announced the immediate termination of all contracts with Booz Allen Hamilton following a massive IRS data breach attributed to a former Booz Allen employee, Charles Edward Littlejohn. Littlejohn pleaded guilty to stealing and leaking tax returns for former President Trump and thousands of other high–net-worth individuals, exploiting broad search parameters to avoid detection. The contract cancellations affect multiple Treasury initiatives valued in the hundreds of millions of dollars and represent a significant hit to Booz Allen’s government-services pipeline, as the firm has historically derived over 60% of its revenues from federal work.
2. Fiscal Third-Quarter Financial Results Highlight Mixed Performance
For the quarter ended December 31, 2025, Booz Allen Hamilton reported earnings of $1.77 per share, exceeding analysts’ consensus by 40% and up from $1.55 per share a year earlier. However, revenues of $2.62 billion missed estimates by nearly 4% and declined 10% year-over-year, reflecting both lower funding levels and timing shifts in billable expenses. The company has now beaten EPS estimates in three of the past four quarters but has fallen short on revenue in each. Management attributed the top-line weakness to a prolonged government shutdown that shifted approximately $60 million of national-security billings into the fourth quarter.
3. Q3 Earnings Call Details Cost Actions, Backlog and Updated Guidance
During the third-quarter earnings call, Chairman and CEO Horacio Rozanski reiterated three strategic priorities: cost reduction, outcome-based contracting and investment in growth vectors such as cyber, AI and national security. The company executed cost-cutting measures that reduced run-rate spending by $150 million, with most benefits expected in the next fiscal year. Net bookings totaled $888 million, producing a book-to-bill ratio of 0.3x, while funded backlog declined 10% to $35 billion but total backlog rose 2% to over $38 billion. Interim CFO Kristine Martin Anderson narrowed full-year revenue guidance to $11.3–11.4 billion, raised adjusted EPS to $5.95–6.15 and maintained free cash flow targets of $825–900 million, reflecting both shutdown impacts and improved pipeline activity.