Federal services contractors saw their shares climb on Friday, even as a government watchdog report questioned the reliability of savings claimed by the Department of Government Efficiency (DOGE). The mixed signals underscore the complex dynamics facing companies that do business with the U.S. government.
According to the Government Accountability Office (GAO), a review of $61 billion in contract savings reported by DOGE found that 56.7%—or $34.6 billion—lacked either documented termination actions or sufficient identification information. Specifically, $27.4 billion (44.9%) was tied to contracts with no recorded termination, while $7.2 billion (11.8%) could not be matched to federal procurement records.
The GAO's findings do not necessarily mean the savings are fraudulent. Some contracts may have been modified or partially deobligated rather than terminated, and delays in USAID records could inflate the no-action category. However, the audit highlights that DOGE's headline figure may exaggerate the true revenue impact on contractors.
Investors appeared to take guarded comfort from the results. The data does not reverse genuine federal spending reductions, but it suggests that DOGE's top-line number was an unreliable indicator of contractors' actual revenue at risk. This nuance helped lift shares of Booz Allen Hamilton (BAH), Leidos Holdings (LDOS), CACI International (CACI), and Science Applications International (SAIC) by between 1.0% and 2.4% on Friday.
The GAO's review also revealed significant methodological issues. DOGE applied its specified contract formula to only 27.5% of the reported savings, with the remaining 72.5% calculated using different or unclear methods. For grants, the GAO could not confirm the methodology for 96.2% of the $49.21 billion disclosed, and for leases, errors included counting cost reductions for 108 departures that began before DOGE's establishment.
In a narrower review of 21 selected Defense and Health contracts representing $7.5 billion in DOGE savings, the GAO found only $77.8 million in deobligated funds that could potentially be reused—about 1.0% of the claim. Notably, a Defense Health Agency technology deal with reported savings of over $1.7 billion showed no cancellation, scope reduction, or deobligation.
Despite the audit's findings, the DOGE website continues to report estimated overall savings of $215 billion, with contracts, grants, and leases with full details accounting for about 30% of that figure. The site's most recent update was on January 1, 2026.
Company disclosures provided stronger signals for investors. CACI reported a 10.9% increase in fiscal 2026 revenue to $9.57 billion, with annual contract awards of $10.2 billion and funded backlog rising to $5.4 billion. CEO John Mengucci highlighted a 66% growth in free cash flow. The company's stock surged 21.4% on Thursday following its earnings announcement.
Booz Allen, however, serves as a cautionary tale. Its latest report indicated that growth was coming from national-security contracts rather than civil agency work, highlighting that DOGE's accounting issues have not alleviated challenges for contractors reliant on civil projects.
Analysts remain divided on the sector. Consensus ratings are more favorable for CACI and Leidos, while Booz Allen and SAIC hold more cautious outlooks. As the market digests the GAO's findings, investors will likely focus on the tangible metrics of funded backlogs and contract awards rather than headline savings figures.
