Amentum Holdings (AMTM) Report Interpretation

Overview

This earnings review assesses Amentum after F3Q26 results. Goldman Sachs highlights better-than-expected profitability and higher EPS guidance, but views weaker revenue and a subdued 2027 growth outlook as limiting the case for a more positive rating.

Core views

Goldman Sachs keeps Amentum at Neutral following F3Q26. The quarter was mixed: revenue of $3.49bn was down 2% year-on-year and 2% below both Goldman Sachs estimates and consensus, while total adjusted EBITDA of $290mn was 2% above both benchmarks. The 8.3% adjusted EBITDA margin rose 60bp year-on-year, and adjusted EPS of $0.67 exceeded consensus of $0.61. Free cash flow was $135mn. Total backlog ended the quarter at $48.2bn, including $6.2bn of funded backlog; total backlog was up 1% quarter-on-quarter and 8% year-on-year, whereas funded backlog was down 10% quarter-on-quarter despite being up 10% year-on-year. Segment performance explains the revenue/profit divergence. Global Engineering Solutions revenue was $2.03bn, down 5% year-on-year and 2% below Goldman Sachs estimates, reflecting transitions to unconsolidated joint ventures, the prior-year divestiture and expected contract ramp-downs, partly offset by new awards. Its adjusted EBITDA was $174mn, in line with estimates, and its 8.6% margin expanded 110bp year-on-year. Digital Solutions revenue of $1.46bn rose 3% year-on-year but was 3% below estimates; new awards in critical digital infrastructure and space systems were partly offset by the prior-year Rapid Solutions divestiture. Digital Solutions adjusted EBITDA reached $116mn, 4% above Goldman Sachs estimates, with an 8.0% margin that was flat year-on-year. Management's FY2026 update also balanced lower sales expectations against improved earnings expectations. Revenue guidance was reduced to $13.80bn–$13.95bn from $13.95bn–$14.30bn, below consensus of $14.141bn. Adjusted EBITDA guidance was raised at the low end to $1.115bn–$1.140bn from $1.100bn–$1.140bn, while adjusted diluted EPS guidance increased to $2.40–$2.50 from $2.25–$2.45. Free-cash-flow guidance remained $525mn–$575mn. For FY2027, Amentum provided preliminary guidance for only 0%–1% revenue growth, roughly 20bp of adjusted EBITDA-margin expansion, mid-single-digit adjusted EPS growth and 10% year-on-year free-cash-flow growth. Goldman Sachs attributes the constrained revenue outlook principally to greater NASA insourcing and the exit from lower-margin work, while expecting margins to improve. Reflecting revised growth and margin assumptions, Goldman Sachs lowered its FY2026–FY2030 adjusted EBITDA estimates to $1.131bn/$1.153bn/$1.202bn/$1.240bn/$1.288bn from $1.135bn/$1.207bn/$1.261bn/$1.306bn/$1.359bn. It reduced the 12-month price target to $24 from $27, applying a 7.5x target 5–8Q forward EV/EBITDA multiple versus 7.7x previously, citing mark-to-market relative to peers. The report's Neutral stance therefore reflects a company that is improving profitability and cash generation but faces limited top-line growth.

Analysis framework

Goldman Sachs compares quarterly revenue, EBITDA and EPS with its model and consensus, then separates performance by the Global Engineering Solutions and Digital Solutions segments. It incorporates updated management guidance into FY2026–FY2030 growth and margin assumptions, revises EBITDA estimates, and values the shares using a target forward EV/EBITDA multiple relative to peers.

Methodology notes

• Valuation methodsEV/EBITDA valuation

  Target 5–8Q forward EV/EBITDA multiple

  Goldman Sachs derives its $24 12-month price target by applying a 7.5x enterprise-value-to-EBITDA multiple to estimated EBITDA over the stated forward period; the multiple was reduced from 7.7x to reflect peer mark-to-market.

• Corporate Fundamentals and FinanceFree cash flow analysis

  Free cash flow and free-cash-flow guidance

  The report uses quarterly free cash flow and FY2026–FY2027 free-cash-flow guidance to assess cash generation alongside earnings and revenue trends.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Amentum Holdings (AMTM)

  Primary covered company; profitability outperformance and expected margin expansion are offset by constrained revenue growth.

  Strengths

  F3Q26 adjusted EBITDA and EPS exceeded expectations; total adjusted EBITDA margin rose 60bp year-on-year; FY2026 EPS guidance increased.

  Weaknesses

  F3Q26 revenue missed estimates and FY2026 revenue guidance was reduced; FY2027 revenue growth is guided at only 0%–1%.

  Comparison

  The target EV/EBITDA multiple was reduced to 7.5x from 7.7x to reflect mark-to-market versus peers.

  Risks

  DoD spending priorities, contract renewal and new-bid competition, and better-than-expected merger execution.

Key data

• F3Q26 revenue$3.49bnDown 2% year-on-year and 2% below Goldman Sachs estimates and consensus.
• F3Q26 adjusted EBITDA$290mn2% above Goldman Sachs estimates and consensus; 8.3% margin, up 60bp year-on-year.
• F3Q26 adjusted EPS$0.67Above consensus of $0.61.
• Total backlog$48.2bnUp 1% quarter-on-quarter and 8% year-on-year; funded backlog was $6.2bn.
• FY2026 revenue guidance$13.80bn–$13.95bnReduced from $13.95bn–$14.30bn; consensus was $14.141bn.
• FY2026 adjusted EBITDA guidance$1.115bn–$1.140bnLow end raised from $1.100bn; consensus was $1.125bn.
• FY2027 preliminary revenue growth0%–1%Accompanied by about 20bp adjusted EBITDA-margin expansion and 10% free-cash-flow growth.
• 12-month price target$24Reduced from $27; based on a 7.5x target 5–8Q forward EV/EBITDA multiple.

Impact & implications

The report sees the business mix shifting toward better margins as lower-margin work exits, but believes NASA insourcing and that exit will constrain 2027 revenue growth. Goldman Sachs therefore views improved profitability and cash generation as insufficient to outweigh the limited top-line outlook in its Neutral rating.

Risks

• Changes in DoD spending priorities could affect Amentum's outlook.
• Contract renewal risk and competition for new bids could pressure results.
• Merger execution that is better than Goldman Sachs expects is identified as a key risk to its view.