KBR, INC. (KBR): Results of Operations and Financial Condition
KBR, INC. (KBR) filed an SEC Form 8-K — Results of Operations and Financial Condition. Exhibit 99.1 KBR Reports Second Quarter Fiscal 2026 Results Second Quarter Fiscal 2026 Results (All comparisons against the second quarter fiscal 2025 unless noted.) • Revenues of $2.0 billion, up 2% • Net income attributable to KBR of $96 million, up 32%; Operating income of $17
How this was made
The 30-second read
Why it matters
The report combines stronger adjusted profitability (adjusted EBITDA and adjusted EPS up) with weaker GAAP operating income (down 11%) attributed to one-time separation/spin-off costs and EUCOM contingency runoff. Bookings and backlog remain solid with 1.1x book-to-bill and $23.0B backlog and options.
Market read
Traders can update near-term expectations for KBR’s separation transition by weighing adjusted EPS/EBITDA strength against GAAP operating income decline and cash flow softness, while monitoring bookings and backlog durability.
What to watch
Cash flow from continuing operations was $50M versus $217M prior year, and the release flags one-time separation costs; traders may underweight the cash conversion and cost-structure transition risk into the separation timeline.
KBR Reports Second Quarter Fiscal 2026 Results
Second-quarter revenue, net income, diluted EPS and Adjusted EBITDA increased, while operating income declined on one-time spin-off costs and other separation charges. Mission Technology Solutions revenue declined because of EUCOM contingency runoff, Sustainable Technology Solutions revenue grew but its margins declined, and operating cash flows from continuing operations fell materially.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| RevenueGAAP | $1,984 million | – | up 2% or $32 million |
| Operating incomeGAAP | $172 million | – | down 11% or $22 million |
| Operating income marginGAAP | 8.7% | – | – |
| Net income attributable to KBRGAAP | $96 million | – | up 32% or $23 million |
| Net income attributable to KBR from continuing operationsGAAP | $95 million | – | – |
| Diluted earnings per share attributable to KBRGAAP | $0.75 | – | up 34% or $0.19 |
| Diluted earnings per share from continuing operationsGAAP | $0.74 | – | – |
| Adjusted EBITDAnon-GAAP | $258 million | – | up 7% or $16 million |
| Adjusted EBITDA marginnon-GAAP | 13.0% | – | – |
| Adjusted earnings per sharenon-GAAP | $0.99 | – | up 9% or $0.08 |
| Operating cash flows from continuing operationsGAAP | $50 million | – | – |
| Adjusted operating cash flowsnon-GAAP | $64 million | – | – |
| Bookings and optionsother | $1.8 billion | – | – |
| Book-to-billother | 1.1x | – | – |
| Backlog and optionsother | $23.0 billion | – | – |
| Six months revenueGAAP | $3,907 million | – | down 2% due to expected EUCOM contingency runoff |
| Six months operating incomeGAAP | $352 million | – | down 11% |
| Six months operating income marginGAAP | 9.0% | – | – |
| Six months net income attributable to KBRGAAP | $198 million | – | up 5% |
| Six months net income attributable to KBR from continuing operationsGAAP | $198 million | – | – |
| Six months diluted earnings per share attributable to KBRGAAP | $1.55 | – | up 8% |
| Six months diluted earnings per share from continuing operationsGAAP | $1.55 | – | – |
| Six months Adjusted EBITDAnon-GAAP | $509 million | – | up 4% |
| Six months Adjusted EBITDA marginnon-GAAP | 13.0% | – | – |
| Six months Adjusted earnings per sharenon-GAAP | $1.95 | – | up 2% |
| Six months operating cash flows from continuing operationsGAAP | $160 million | – | – |
| Six months adjusted operating cash flowsnon-GAAP | $183 million | – | – |
| Six months bookings and optionsother | $3.7 billion | – | – |
| Six months book-to-billother | 1.1x | – | – |
| Mission Technology Solutions operating incomeGAAP | $116 million | – | up 7% or $8 million |
| Mission Technology Solutions operating income marginGAAP | 8.9% | – | – |
| Mission Technology Solutions Adjusted EBITDAnon-GAAP | $158 million | – | up 16% or $22 million |
| Mission Technology Solutions Adjusted EBITDA marginnon-GAAP | 12.1% | – | – |
| Mission Technology Solutions book-to-billother | 0.8x | – | – |
| Sustainable Technology Solutions operating incomeGAAP | $103 million | – | down 18% or $22 million |
| Sustainable Technology Solutions operating income marginGAAP | 15.2% | – | – |
| Sustainable Technology Solutions Adjusted EBITDAnon-GAAP | $123 million | – | down 8% or $11 million |
| Sustainable Technology Solutions Adjusted EBITDA marginnon-GAAP | 18.2% | – | – |
| Sustainable Technology Solutions book-to-billother | 1.5x | – | – |
| Net debtother | $2,258 million | – | – |
| TTM Adjusted EBITDAnon-GAAP | $987 million | – | – |
| Net leverageother | 2.3x | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Mission Technology SolutionsContinued expansion within International Government Clients, particularly in Australia and the United Kingdom, was more than offset by lower EUCOM contingency-related activity and reduced activity within U.S. Government Federal Civilian Clients. | $1,308 million | – | down 2% or $28 million |
| Sustainable Technology SolutionsContinued execution of previously awarded work and ramp-up of newer project awards, particularly in the Middle East and Latin America, with additional growth in Australia and Asia, partially offset by U.S. projects nearing completion. | $676 million | – | up 10% or $60 million |
Capital returns
- Payments to repurchase common stock were $25 million for the three months ended July 3, 2026, compared with $48 million for the three months ended July 4, 2025.
- Payments of dividends to shareholders were $21 million for the three months ended July 3, 2026, compared with $21 million for the three months ended July 4, 2025.
- Payments to repurchase common stock were $29 million for the six months ended July 3, 2026, compared with $204 million for the six months ended July 4, 2025.
- Payments of dividends to shareholders were $42 million for the six months ended July 3, 2026, compared with $41 million for the six months ended July 4, 2025.
What drove it
- Consolidated revenue growth was driven by the continued ramp-up of recently awarded projects within Sustainable Technology Solutions and growth in Mission Technology Solutions across International Government Clients.
- Adjusted EBITDA reflected strong project execution, including unconsolidated JVs, favorable portfolio mix and continued cost discipline across the enterprise.
- Mission Technology Solutions Adjusted EBITDA reflected favorable portfolio mix, disciplined cost management and benefits from contract closeouts.
- Sustainable Technology Solutions growth reflected execution of previously awarded work and ramp-up of newer project awards, particularly in the Middle East and Latin America.
Concerns
- Operating income declined as higher gross profit was more than offset by one-time spin-off costs and other charges associated with the planned separation.
- Mission Technology Solutions revenue declined because International Government Clients growth was more than offset by lower EUCOM contingency-related activity and reduced activity within U.S. Government Federal Civilian Clients.
- Sustainable Technology Solutions operating income and Adjusted EBITDA declined, reflecting the timing and mix of work executed during the quarter, including a higher contribution from equipment procurement activity.
- Reported Mission Technology Solutions backlog and book-to-bill do not reflect approximately $10.6 billion of awarded work currently under protest.
- Operating cash flows from continuing operations and adjusted operating cash flows were below the prior-year period.
What to watch
- Conclusion of protests related to approximately $10.6 billion of awarded Mission Technology Solutions work, including the National Science Foundation Antarctica contract.
- Conversion of recently awarded Sustainable Technology Solutions projects as work ramps in the Middle East, Latin America, Australia and Asia.
- The effect of EUCOM contingency-related activity runoff and reduced activity within U.S. Government Federal Civilian Clients on Mission Technology Solutions revenue.
- One-time spin-off costs and other charges associated with the planned separation.
- Sustainable Technology Solutions project mix, including equipment procurement activity, and its effect on operating income and Adjusted EBITDA margins.
Balance sheet and cash flow
- Operating cash flows from continuing operations were $50 million for the three months ended July 3, 2026, compared with $217 million for the three months ended July 4, 2025.
- Adjusted operating cash flows were $64 million for the three months ended July 3, 2026, compared with $217 million for the three months ended July 4, 2025.
- Operating cash flows from continuing operations were $160 million for the six months ended July 3, 2026, compared with $308 million for the six months ended July 4, 2025.
- Adjusted operating cash flows were $183 million for the six months ended July 3, 2026, compared with $308 million for the six months ended July 4, 2025.
- Net debt was $2,258 million as of July 3, 2026, compared with $2,117 million as of January 2, 2026.
- TTM Adjusted EBITDA was $987 million as of July 3, 2026, compared with $968 million as of January 2, 2026.
- Net leverage was 2.3x as of July 3, 2026, compared with 2.2x as of January 2, 2026.
Analysis
KBR reported second-quarter revenue of $1,984 million, up 2% or $32 million, and Adjusted EBITDA of $258 million, up 7% or $16 million. Adjusted EBITDA margin rose to 13.0% from 12.4%. Net income attributable to KBR increased to $96 million from $73 million, while diluted earnings per share attributable to KBR increased to $0.75 from $0.56. Adjusted earnings per share increased to $0.99 from $0.91, supported by higher Adjusted EBITDA, lower below-the-line expenses and lower adjusted weighted average common shares outstanding due to open market share repurchases.
GAAP operating income moved in the opposite direction, declining to $172 million from $194 million, and operating income margin declined to 8.7% from 9.9%. The company attributed the decline to one-time spin-off costs and other charges associated with the planned separation, which more than offset higher gross profit. For the six months ended July 3, 2026, revenue was $3,907 million, down 2% due to expected EUCOM contingency runoff, while operating income was $352 million, down 11%. Six-month Adjusted EBITDA increased to $509 million from $490 million.
Mission Technology Solutions revenue was $1,308 million, down 2% or $28 million. International Government Clients expansion, particularly in Australia and the United Kingdom, was outweighed by lower EUCOM contingency-related activity and reduced U.S. Government Federal Civilian Clients activity. Its Adjusted EBITDA increased to $158 million from $136 million and its Adjusted EBITDA margin increased to 12.1% from 10.2%. Sustainable Technology Solutions revenue was $676 million, up 10% or $60 million, but operating income declined to $103 million and Adjusted EBITDA declined to $123 million. The segment cited timing and mix of work, including a higher contribution from equipment procurement activity, while stating that underlying project execution and demand trends remained strong.
Demand indicators are differentiated by segment. Sustainable Technology Solutions backlog reached a record $5.5 billion and its book-to-bill was 1.5x. Mission Technology Solutions book-to-bill was 0.8x and backlog and options totaled $17.5 billion, but reported backlog and book-to-bill exclude approximately $10.6 billion of awarded work currently under protest. Consolidated backlog and options totaled $23.0 billion and quarterly book-to-bill was 1.1x. The release also identifies an $8 billion ceiling Antarctic Science and Engineering Support Contract that is not yet recorded in backlog or book-to-bill.
Cash conversion was a notable weaker element of the release. Operating cash flows from continuing operations were $50 million, compared with $217 million in the prior-year quarter, and adjusted operating cash flows were $64 million, compared with $217 million. KBR repurchased $25 million of common stock and paid $21 million of dividends during the quarter. Net debt was $2,258 million as of July 3, 2026, compared with $2,117 million as of January 2, 2026, and net leverage was 2.3x compared with 2.2x. No forward guidance was included in the provided filing text.
Management, verbatim
We delivered a strong first half while continuing to position both businesses for long-term success as we advance toward separation.
Stuart Bradie, President and Chief Executive Officer
Demand remains healthy across our core markets, supported by strong customer relationships, disciplined execution and growing visibility into future performance.
Stuart Bradie, President and Chief Executive Officer
We remain confident in the opportunities ahead and our ability to create long-term value for shareholders.
Stuart Bradie, President and Chief Executive Officer
Not in the filing
stated, not guessed- Forward guidance for revenue, gross margin, operating expenses, tax rate and other metrics was not included in the provided filing text.
- Previous-release outlook was not provided.
- Gross profit and gross margin were not reported as line items in the provided filing text.
- Free cash flow was not reported in the provided filing text.
- Cash and cash equivalents and total gross debt were not separately reported in the provided filing text.
- Quarter-over-quarter comparisons for operating results were not reported in the provided filing text.
- Prior-year values for Mission Technology Solutions and Sustainable Technology Solutions operating income were not reported on their own line items in the provided filing text.
- Prior-year comparisons for backlog, backlog and options, bookings and options, and book-to-bill were not reported in the provided filing text.
AlphAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.
Background
KBR filed an SEC 8-K with Exhibit 99.1 reporting second quarter fiscal 2026 results and discussing progress toward separation of its businesses (STS and MTS).
Ticker impact
KBR reported Q2 FY2026 results with revenues $2.0B (+2%), net income $96M (+32%), and adjusted EPS $0.99 (+9%), plus $1.8B bookings and 1.1x book-to-bill.
Near-term bias modestly positive on EPS/EBITDA strength, tempered by operating income decline and runoff-driven revenue softness.
The filing provides multiple directional datapoints (net income and adjusted EPS up, adjusted EBITDA up, operating income down) and explicitly attributes the weaker operating income to separation costs and EUCOM runoff, which can affect near-term sentiment and forward expectations.
Market effects
Defense and government services contractors may see read-through from KBR’s commentary on healthy demand and visibility beyond reported backlog via awarded work under protest.
Limited to US-listed defense/engineering services sentiment; no specific regional macro linkage beyond government client activity.
EUCOM contingency runoff reference suggests Europe-related defense demand timing effects, but no new international contract details were disclosed.
Counterpoint
Operating income and operating margin declined (down 11%, margin 8.7%), implying the earnings quality may be supported by adjustments and lower below-the-line items rather than core profitability expansion.
Key entities
- public_companyKBR, Inc.
Subject of the SEC 8-K, reporting Q2 FY2026 financial results, bookings, backlog, and separation-related cost actions.
- segmentSustainable Technology Solutions (STS)
KBR segment cited for strong bookings and record backlog levels in the quarter.
- segmentMission Technology Solutions (MTS)
KBR segment cited for strong customer demand and awarded work under protest providing visibility beyond reported backlog.
