Goldman Sachs Upgrades CACI International, Downgrades Parsons Amid Diverging Growth Prospects

Goldman Sachs Makes a Sector-Defining Call

In a move that could reshape investor sentiment in the U.S. government IT and services sector, Goldman Sachs has upgraded CACI International (NYSE: CACI) from Sell to Buy and downgraded Parsons Corporation (NYSE: PSN) from Buy to Neutral.

The changes come as Goldman analysts assess diverging growth trajectories for the two companies amid shifting U.S. government spending priorities.

Why CACI International Got the Upgrade

Goldman Sachs now sees CACI as one of the better-positioned names in the sector. The investment bank highlighted several strengths:

Advanced Technology Focus
CACI has shifted toward high-demand advanced technologies — such as cyber operations, electronic warfare, and artificial intelligence-driven solutions — areas expected to see continued funding from both the Department of Defense (DoD) and federal civilian agencies.

Strong Book-to-Bill Ratio
With a trailing 12-month funded book-to-bill ratio above 1, CACI is bringing in more business than it delivers each year, a sign of healthy backlog growth.

Margin Advantage
CACI’s margins exceed the sector average, giving it operational flexibility and potential for earnings leverage as revenues grow.

Attractive Valuation
Goldman noted that CACI now trades at a discount to Booz Allen Hamilton and Parsons on revised estimates, suggesting upside potential as growth accelerates.

Why Parsons Got the Downgrade

Parsons’ outlook, according to Goldman Sachs, has turned more uncertain.

H3: Major Contract Roll-Off
The company recently completed a significant federal contract, creating a near-term revenue gap that will be challenging to fill quickly.

H3: Growth Acceleration Doubts
Goldman doubts Parsons can achieve the implied acceleration in its core business during the second half of 2025, especially as competition intensifies.

H3: Fiscal 2026 Headwinds
The bank sees a challenging comparison ahead for FY 2026, which could pressure growth metrics.

H3: Premium Valuation Risk
Following a sharp rebound in its shares, Parsons now trades at the highest multiples in the group, leaving less room for error.

Sector Context — Government IT & Services in Transition

Goldman remains cautious on the broader Government IT & Services group.

H3: Policy-Driven Uncertainty
Government funding decisions remain in flux due to evolving policy priorities and efficiency initiatives aimed at streamlining operations.

H3: DoD Contracting Threshold Changes
The Department of Defense has issued memos raising the threshold for contracting third-party IT, implementation work, and services — potentially slowing contract awards.

H3: Mixed Q2 Results Across the Sector
Earnings from companies like AMTM, Leidos, and V2X were generally ahead of expectations, but bookings data was uneven, reflecting funding uncertainties.

CACI vs. Parsons — The Comparative Edge

Valuation:

• CACI: Discount to peers on forward estimates
• Parsons: Trading at sector-high multiples

Growth Drivers:

• CACI: Strong tech pivot, steady backlog
• Parsons: Needs new contract wins to offset roll-offs

Risk Factors:

• CACI: Dependent on sustained government tech budgets
• Parsons: Growth slowdown risk and valuation compression potential

Investor Takeaways

Goldman’s move underscores a broader market theme — investors are favoring companies with clear growth catalysts, strong backlogs, and competitive margins in a policy-sensitive sector.

For CACI Holders:

• Upgrade supports bullish sentiment
• Potential for re-rating as earnings grow

For Parsons Holders:

• Downgrade highlights near-term execution challenges
• Monitor for new contract wins or strategic shifts

Navigating the Sector in 2025 and Beyond

With U.S. government IT and services spending evolving under efficiency mandates, companies must adapt quickly. CACI International appears better positioned for medium-term outperformance, while Parsons faces valuation and growth headwinds.

For investors, the message is clear: follow the contracts, follow the backlog, and follow the margins.