US Aerospace & Defense "Gov IT June Obligations: further signs of growth..."

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US Aerospace & Defense "Gov IT June Obligations: further signs of growth..."

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US Aerospace & Defense Equities

AmericasGov IT June Obligations: further signs of growth

in FedCiv and DoD Aerospace

Gavin Parsons

Analyst

gavin.parsons@ubs.com

June/C2Q FedCiv up yoy for our coverage; DoD also returned to growth +1-212-713 2389

FedCiv spending was up 9% yoy in June across our coverage universe, a notable Joao Santos

improvement from down 17% yoy in May. LTM growth also accelerated to +12% YoY Associate Analyst

from +9% last month. We are seeing broad-based strengthening in LTM trends across joao.santos@ubs.com

most names under coverage. This suggests the potential for a transition from +1-212-713 1437

stabilization to growth off the new base (see Figure 6). That said, June strength Nicholas Labbadia

benefited in part from an easier comparison period, reflecting the impact of DOGE- Associate Analyst

related actions in the prior year. DoD obligations were up 31% yoy in March and nicholas.labbadia@ubs.com

LTM improved sequentially albeit is still flat yoy. Obligation activity typically picks up in +1-212-713 5573

the second half of the government-fiscal year and Defense Secretary Hegseth said the

Reconciliation "floodgates" are expected to open soon, so we remain constructive

about the 2H26 acceleration most Gov IT names have guided to. With FedCiv lapping

easier comps and the FY27 FedCiv IT budget request showing 10% yoy growth, we see

an improving outlook in that category.

By category

FedCiv obligations up 9/11% yoy in June/C2Q for our coverage vs. -17% in

May, and +37% yoy in April; LTM is now +12% yoy from +9% last month and

+4% in April. Comps stay easy, also seeing sequential growth.