Parsons (NYSE:PSN) reached a milestone in profitability even as a sharp contraction in its federal business weighed on the top line, reflecting a strategic pivot toward higher-margin infrastructure projects.
The Chantilly, Virginia-based company reported record adjusted EBITDA of $153 million for the fourth quarter of 2025, a 5% increase over the previous year.
For the full fiscal year, adjusted EBITDA hit a record $609 million, yielding a margin of 9.6%.
The margin expansion comes despite a 6% decline in annual revenue to $6.4 billion, as the company navigated a "dynamic" federal macroenvironment and lower volumes on a major confidential contract.
The results highlight a widening gap between the company's two primary engines.
The Critical Infrastructure segment emerged as the primary growth driver, with quarterly revenue surging 12% and full-year sales climbing 15% to $3.1 billion.
This growth was fueled by organic gains in transportation and urban development, alongside contributions from recent acquisitions.
Conversely, the Federal Solutions unit faced significant headwinds.
Annual revenue for the segment plummeted 20%, while adjusted EBITDA dropped 32%.
The decline was largely attributed to reduced volume on a high-profile, fixed-price confidential contract and execution challenges in remote regions.
However, management noted that when excluding the impact of the confidential contract, the underlying federal business continued to see organic growth.
Parsons ended the year with a net income of $241 million and GAAP diluted earnings per share of $2.20.
The company also maintained a steady book-to-bill ratio of 1.0x, indicating a stable pipeline of future work, and generated $478 million in cash flow from operations for the year.
Looking ahead to 2026, the company expects revenue to land between $6.5 billion and $6.8 billion, signaling a recovery from the 2025 contraction.