ANALYSIS: Federal contractors navigate Trump administration uncertainty
Gettyimages.com/Teera Konakan
By
Nick Wakeman
Recent quarterly earnings calls by SAIC and Accenture reveal early impacts as DOGE reviews create market anxiety.
Most of the executives we speak to are reluctant to directly address the pressures they are feeling because of the changes wrought by the Trump administration.
But one place we are looking at is the quarterly reports and investor calls that public companies make. Here we begin to get a fuller picture of the actions companies are taking.
The quarterly filings with the Securities and Exchange Commission also include a section where companies describe the risks they see to their business. Some are boiler plate items such as warnings about competition.
But in Science Applications International Corp.’s most recent 10-K filing, it talks about how the Department of Government Efficiency efforts to reduce federal spending “create uncertainty and risk” because of potential changes in budget priorities and the issuing of awards.
Accenture alluded to the same challenges in its most recent quarterly report and investor call.
The two companies are the only publicly traded companies on our Top 100 to have reported quarterly earnings deep enough into the Trump administration for executives to have much substance to talk about.
Accenture and SAIC run on a different fiscal calendar than most companies. Accenture’s most recent quarter ended Feb. 28, and the company had its earnings call on March 20. SAIC’s quarter ended Jan. 31, and its earnings call was March 17.
The most recent quarters for other publicly traded government contractors ended on Dec. 31, and their most recent investor calls were in late January and early February, too early for substantive comments. There were analyst questions about the new administration but most everyone gave “wait-and-see” type of answers.
But Accenture and SAIC held their investor calls two months into the new administration and could give more insights into the impact their executives are seeing.
In their earnings call, SAIC CEO Toni Townes-Whitley said the impact on the company of executive orders and program cancellations has been “nominal.”
“However, given how dynamic the environment has been, we believe it prudent to be prepared should conditions change,” she said.
SAIC is on a list of ten large companies with so-called consulting contract that are being targeted for possible cancellation. Accenture is on that list as well.
As a result, SAIC has been playing offense and explaining the work it is doing.
“We've been able to clarify the work that we do, explain where SAIC fits in this ecosystem, explain the mission criticality of our work, as well as some of the technical work that we do to support at an enterprise IT level,” Townes-Whitley told analysts. “I think with greater explanation, it will start to, if you will, bring down some of the more knee-jerk reactions that all of us have had over the last few weeks.”
During Accenture’s investor call, CEO Julie Sweet said that Accenture Federal Services represents 8% of the company’s global revenue and 16% of Americas revenue in fiscal 2024.
The review of its consulting is still ongoing but “we continue to believe our work for federal clients is mission critical,” she said.
However, the new administration has slowed procurements, which has had a negative impact on revenue, Sweet said.
She remains optimistic about the federal business overall. “We see major opportunities over time for us to help consolidate, modernize, and reinvent the federal government,” she said.
Given that Accenture is a global company primarily focused on commercial markets, it’s worth noting that Sweet said she sees “significant uncertainty in the global economic and geopolitical environment.”
That is a shift from what the company saw in December, she said.
As I said, the other publicly traded companies on the Washington Technology Top 100 won’t be reporting their quarterly results until late April or early May, so we expect more details on the risks and opportunities.
While his company won’t report for several more weeks, CACI International CEO John Mengucci and Chief Financial Officer Chief Financial Officer Jeff MacLauchlan spoke at the Bank of America Global Industrials Conference on March 19 and fielded several DOGE and Trump administration questions.
Both described customers in chaos.
“Our pipeline per se doesn’t look different,” MacLauchlan said. “But it’s worth noting that the people who comprise the government are in chaos. People are worried about their jobs and their friends down the hall.”
The result is a slow in routine day-to-day operations such as contract modifications, he said. “People are apprehensive.”
That’s to be expected, Mengucci said. “There is so much noise today that the signal doesn’t get out. We are screaming into a hundred mile an hour wind,” he said. “But we are in the right markets that are well funded. But there are a lot of unknowns.”