Parsons Ends Fiscal 2025 With Strong Cash Flow and Strategic Acquisition Momentum

Parsons Corporation (NYSE: PSN ) reported record financial results for the fourth quarter and full fiscal year 2025, outperforming the high end of all long-term goals established during Investor Day 2023. Despite the overall decline in revenue caused by some major projects, the company achieved its highest adjusted EBITDA margins and strong cash flow, reflecting the successful implementation of its “One Parsons” growth plan.

Record Performance Between Portfolio Changes

For the fiscal year ending December 31, 2025, Parsons brought in $6.36 billion in total revenue. While this represented a 6% decline from 2024, the decline was primarily driven by lower fixed-price confidential contract volume in the Federal Solutions segment. Excluding this particular contract, total revenue grew by 12%, organic growth of 8%.

The company’s focus on quality work led to a record adjusted EBITDA of $609 million. Adjusted EBITDA margin expanded to 9.6%, an increase of 60 points year-on-year and an improvement of 110 points over the past two years.

Key Financial Metrics for Fiscal Year 2025:

Net Income: $6.36 billion

Adjusted EBITDA: $609 million (up 1% year-over-year)

Adjusted EBITDA margin: 9.6% (record high)

Cash Flow from Operations: $478 million (exceeding upper guidance)

Backlog Funded 73% of total backlog (highest level since IPO)

Component Performance and Strategic Effectiveness

The Critical Infrastructure segment was the main growth driver, with annual revenue up 15% to $3.14 billion. Driven by strong performance in North America and EMEA markets, the segment achieved a record adjusted EBITDA margin of 10.4%, up 350 points from last year.

The Federal Solutions segment reported revenue of $3.22 billion. While the segment’s total revenue fell 20% due to the private contract, organic revenue grew 7% when that contract was excluded.

Parsons matched its previous company record with 15 contract wins worth $100 million or more by 2025. Key awards for Q4 included:

A ten-year, $392 million contract for biometrics and network engineering.

A $125 million duplicate order supporting the US Army Research Laboratory.

A $100 million+ award to design and manage the construction of a rocket vehicle facility in Florida.

Management Commentary and M&A Strategy

Management noted that the company’s performance from 2023 to 2025 confirms the strength and durability of its complementary portfolio. The company emphasized its “One Parsons” approach, which uses different synergies to capture market share in both the defense and infrastructure sectors.

Management highlighted the company’s aggressive M&A strategy as a key pillar of growth. In 2025, Parsons completed three acquisitions, including Applied Sciences Consulting, strengthening its water and storm expertise. Shortly after the end of the fiscal year, the company closed the acquisition of Altamira Technologies, a provider of intelligence and space solutions, for up to $375 million.

2026 Outlook and Market Foundation

Parsons entered 2026 with a strong base, including an $8.7 billion backlog and another $11 billion in contract winnings that have not yet been booked. The company’s pipeline stands at $55 billion, with more than 120 opportunities valued at $100 million or more.

Guidance for Fiscal Year 2026:

Total Revenue: $6.5 billion – $6.8 billion

Adjusted EBITDA: $615 million – $675 million

Cash Flow from Operations: $470 million – $530 million

The 2026 outlook implies revenue growth of 10.5% if you exclude the impact of the private contract. Management expects adjusted EBITDA margins to grow to around 9.7% in the middle of guidance. The company maintains a low risk of repossession after 2026, with only about 5% of its portfolio to be competitive.

Reasons to Skip PSN

• Summary of article income: Total revenue for 2025 is down 6% year-over-year, reflecting the concentration risk associated with a single fixed-price contract.
• Dependence on large contracts: Performance was significantly impacted by volume changes on one confidential Federal Solutions contract, highlighting exposure to project-specific volatility.
• Federal share revenue decline: Federal Solutions revenue was down 20% on a reported basis, underscoring sensitivity to the dynamics of federal systems.
• M&A merger risk: An active acquisition strategy, which includes multiple deals in 2025 and the acquisition of Altamira, introduces execution and consolidation risk.
• Presentation of the government budget: A significant portion of the revenue is tied to US defense and infrastructure spending, increasing sensitivity to funding shifts and policy changes.
• Modest margin profile: Despite record levels, adjusted EBITDA margins remain below 10%, providing a limited cushion in the event of cost overruns or pricing pressure.
• Risk of conversion backlog: Major backlogs and implementation of pipelines are dependent on timely funding, implementation, and contract awards, which may be subject to delays.
• The direction depends on the normalization: Growth estimates for 2026 do not include the impact of the private contract, limiting direct comparison with reported figures.