US Government Modernization And AI Will Expand Demand

Key Takeaways

• Leadership in software-centric, AI-driven government solutions, combined with strong contract wins and talent retention, positions the company for long-term revenue outperformance and margin expansion.
  
• Robust pipeline of new business and industry-best execution underpin higher sustained growth in both earnings and free cash flow compared to peers.
  
• Dependence on government contracts, technological shifts, regulatory scrutiny, and rising competition threaten CACI's revenue visibility, margins, and future market opportunities.

Catalysts

Through its subsidiaries, engages in the provision of expertise and technology to enterprise and mission customers in support of national security in the intelligence, defense, and federal civilian sectors.

• While analyst consensus sees CACI's software-centric approach driving solid revenue growth, this viewpoint may understate the magnitude: the accelerating mandate for software-defined capabilities at the highest levels of government, combined with CACI's early, deep investments and proven delivery metrics, positions the company to dominate next-generation government modernization, pointing toward material outperformance in both revenue growth and margin expansion.
  
• Analyst consensus highlights a robust backlog and strong book-to-bill; however, this may be too conservative given CACI's record $17 billion pipeline with a majority focused on new business, indicating the potential for a sustained multiyear book-to-bill significantly above historical norms and thereby supporting an even higher trajectory for future revenue and EBITDA.
  
• The government's rapid shift toward artificial intelligence, advanced analytics, and digital transformation as enduring national security imperatives ensures long-term systemic demand for CACI's proprietary analytics platforms, suggesting accelerating organic growth and mix shift toward higher-margin, technology-driven solutions.
  
• CACI's demonstrated ability to translate industry-leading agile software development practices and commercial processes into government contract wins-culminating in a blueprint for cost saving and operational efficiency already validated by multi-year, mission-critical awards-creates unmatched resilience and cash flow visibility, enabling sustained free cash flow per share growth well above peers.
  
• The growing shortage of specialized, cleared technical talent combined with CACI's proven track record in talent retention and agile upskilling should further skew high-value contract awards to the company, not only limiting downside risk but opening pathway for significant recurring earnings growth over the coming decade.

CACI International Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on CACI International compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming CACI International's revenue will grow by 8.9% annually over the next 3 years.
• The bullish analysts are assuming CACI International's profit margins will remain the same at 5.7% over the next 3 years.
• The bullish analysts expect earnings to reach $619.1 million (and earnings per share of $30.02) by about July 2028, up from $476.6 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 24.0x on those 2028 earnings, up from 22.0x today. This future PE is greater than the current PE for the US Professional Services industry at 23.7x.
• Analysts expect the number of shares outstanding to decline by 1.4% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.12%, as per the Simply Wall St company report.

CACI International Future Earnings Per Share Growth

Risks

• CACI is highly dependent on U.S. government contracts, which exposes it to fluctuations in federal budget cycles and appropriations; any long-term reduction in defense spending or administrative delays could directly constrain revenue growth and earnings.
  
• Secular advances in commercial and off-the-shelf technology could prompt government agencies to seek standardized solutions over CACI's custom offerings, intensifying price-based competition and eroding long-term net margins.
  
• Ongoing regulatory and public scrutiny around surveillance, privacy, and ethics in government technology may prompt new legislative or policy constraints, potentially eliminating lucrative contract opportunities and diminishing revenue visibility.
  
• Increased competition from both established defense primes and new, more agile technology players threatens to reduce contract win rates and negotiating power for CACI, pressuring long-term net margins and limiting predictable earnings growth.
  
• Sector-wide adoption of automation and AI could structurally reduce demand for human-led consulting services-one of CACI's traditional strengths-shrinking the company's future addressable market and dampening long-term revenue prospects.

Valuation

• The assumed bullish price target for CACI International is $576.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of CACI International's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $576.0, and the most bearish reporting a price target of just $300.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $10.8 billion, earnings will come to $619.1 million, and it would be trading on a PE ratio of 24.0x, assuming you use a discount rate of 7.1%.
• Given the current share price of $477.46, the bullish analyst price target of $576.0 is 17.1% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.