Government services provider Maximus (NYSE:MMS) missed Wall Street’s revenue expectations in Q3 CY2025, with sales flat year on year at $1.32 billion. The company’s full-year revenue guidance of $5.33 billion at the midpoint came in 4.5% below analysts’ estimates. Its non-GAAP profit of $1.62 per share was 3% below analysts’ consensus estimates.
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Maximus (MMS) Q3 CY2025 Highlights:
- Revenue: $1.32 billion vs analyst estimates of $1.34 billion (flat year on year, 1.7% miss)
- Adjusted EPS: $1.62 vs analyst expectations of $1.67 (3% miss)
- Adjusted EBITDA: $160.2 million vs analyst estimates of $166.6 million (12.2% margin, 3.8% miss)
- Adjusted EPS guidance for the upcoming financial year 2026 is $8.10 at the midpoint, beating analyst estimates by 6.2%
- EBITDA guidance for the upcoming financial year 2026 is $729 million at the midpoint, above analyst estimates of $711.8 million
- Operating Margin: 9.3%, in line with the same quarter last year
- Market Capitalization: $4.50 billion
StockStory’s Take
Maximus delivered flat year-on-year revenue in Q3, falling short of Wall Street’s expectations, but the market responded positively to its results. Management highlighted that steady demand in U.S. federal service programs, particularly in the clinical and disaster response domains, supported operational stability. CEO Bruce Caswell attributed performance to disciplined execution, noting, “Our contractual relationships remained stable and secure throughout the year, with cancellations or impacts at just 1.5% of revenue.” Cost discipline and expanded technology initiatives also contributed to maintaining operating margins despite sector volatility.
Looking ahead, management expects margin expansion driven by increased technology adoption, ongoing cost controls, and a healthy pipeline in federal and state markets. CEO Caswell described the company’s focus on AI-enabled solutions and modernization as critical for government clients, stating, “We are embedding AI directly into our business processes, enabling customers to benefit from advanced automation and real-time insights.” The company anticipates that evolving Medicaid and SNAP requirements, along with new federal opportunities, will shape growth in the next year and beyond.
Key Insights from Management’s Remarks
Management attributed Q3’s operational resilience to stable federal demand, cost management, and technology investments while pointing to significant policy and technology shifts as upcoming growth catalysts.
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Federal programs demand steady: Programs tied to clinical support and natural disaster response within the U.S. Federal Services segment experienced higher-than-typical volumes, underpinning both revenue and margin stability. This demand moderated by quarter end but demonstrated the essential nature of Maximus’s federal contracts.
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Technology and automation adoption: Broader deployment of automation and technology initiatives increased productivity and enabled cost savings across the organization. CFO David Mutryn emphasized, “The continued deployment of technology and automation as well as cost management” were key to margin performance.
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AI-driven platform rollout: The company’s Total Experience Management (TXM) solution, a FedRAMP-secure and cloud-based platform, was highlighted as a differentiator for government clients. Early customer demos revealed strong interest in TXM’s AI capabilities for improving citizen services and operational efficiency.
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Policy changes create new demand: Maximus is actively preparing for expanded Medicaid and SNAP eligibility determinations as required by the One Big Beautiful Bill Act. The company is engaging with state clients to help them comply with new payment accuracy and work requirement rules, leveraging decades of experience in similar programs.
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Contract portfolio remains durable: The company reported minimal contract attrition and continued diversification, with 54.4% of contracts now performance-based. This mix helps shield Maximus from procurement delays and positions it for outcome-driven opportunities.
Drivers of Future Performance
Maximus’s outlook is shaped by technology-enabled margin expansion, evolving federal and state policy, and a shift toward performance-based contracts.
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Margin expansion through technology: The company expects ongoing deployment of AI tools and automation to drive further productivity gains and cost efficiencies, supporting non-GAAP margin expansion even as revenue growth flattens. Management sees technology as a lever for sustainable profitability, especially in the U.S. Federal and Services segments.
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Policy-driven growth opportunities: Anticipated changes in Medicaid and SNAP administration, especially payment accuracy and work requirement enforcement, are expected to drive new state-level demand. CEO Bruce Caswell described SNAP program changes as “the most significant expansion opportunity for our U.S. Services business since the Affordable Care Act.”
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Pipeline and contract wins: A robust contract pipeline, particularly in defense and national security, positions Maximus for new business wins that could contribute to growth in 2027 and beyond. Management is also targeting select M&A to gain access to critical customer relationships and technical certifications.
Catalysts in Upcoming Quarters
In future quarters, the StockStory team will watch (1) the pace and scale of AI-enabled solution deployments, including measurable impacts on productivity and margin, (2) signs of procurement activity and contract wins related to Medicaid and SNAP policy changes, and (3) progress in federal and defense pipeline conversion—including contract awards and successful M&A execution. Execution on these fronts will be key to sustaining earnings momentum in a flat revenue environment.
Maximus currently trades at $82.07, up from $77.76 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free for active Edge members).
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