Truist Securities analysts believe the U.S. government services sector is set for a strong 2026. A more supportive funding environment is expected to emerge, driven by the One Big Beautiful Bill Act. While near-term conditions are uneven, the medium-term outlook is improving, especially for firms with heavy exposure to defense and intelligence work.

The expected impact of the OBBBA is a central pillar of this outlook. Funding from the legislation should begin flowing through the system over the course of 2026, improving business dynamics and visibility on contract awards. Analysts predict this will lead to a pickup in bookings activity during the summer and fall of 2026.

Truist estimates this could translate into 2–4 points faster organic growth for defense-focused contractors like CACI and Leidos. Conversely, the brokerage remains cautious on civil-exposed parts of the sector. Recent government shutdowns and procurement challenges have hurt growth rates for companies with higher exposure to federal civilian spending, a trend not expected to reverse quickly.

Within the group, Truist downgraded ICFI to Hold after the stock significantly outperformed peers. They prefer Amentum for its long-term nuclear exposure and maintain CACI as their top pick, citing its software-focused model and strong expected growth trajectory. Parsons faces headwinds from confidential contract revenue issues.