ICF International (NASDAQ:ICFI) expects to return to growth after what Chairman and Chief Executive Officer John Wasson described as a transition year in 2025, when changes under the new administration and Department of Government Efficiency-related market impacts contributed to a roughly 25% decline in the company’s federal business.
Speaking at a Canaccord Genuity event, Wasson said ICF managed through the period while maintaining profitability and now expects low-single-digit growth this year. At the midpoint of its guidance, the company anticipates 3% revenue growth and 5% growth in non-GAAP earnings per share, with further acceleration expected over time.
The company’s client base is split between government customers, which account for about two-thirds of business, and commercial customers, primarily in energy. Its largest operating areas include energy, environment, infrastructure and disaster recovery, which represent about half of the business, while public health, education, housing and social programs account for about 35%.
Non-Federal Growth Offsets Federal Transition
Wasson said 60% of ICF’s business is non-federal, including commercial energy, state and local work, disaster recovery and international operations. That portion grew approximately 7% in the second quarter, led by commercial energy. International revenue grew 20%, supported by several large, long-term contract wins during the past year, he said.
The remaining 40% of the company’s business is tied to the federal government. Wasson said ICF’s federal operations grew sequentially for a second consecutive quarter, driven primarily by information technology modernization work.
Looking toward 2027 and beyond, Wasson said the company sees potential for high-single-digit to low-double-digit organic growth in its non-federal business. Commercial energy is expected to remain a major driver, alongside international operations and disaster recovery. ICF expects its federal business to grow at a low- to mid-single-digit rate, supported by the modernization of government technology systems.
“The federal government is in the fourth or fifth inning of modernizing their backbone systems,” Wasson said, referring to systems that still rely on legacy programming languages and older software.
Overall, the company expects to deliver mid- to high-single-digit organic growth from 2027 onward, a pace Wasson said would resemble ICF’s performance from 2020 through 2024. During that earlier period, he said the company also improved profitability by 10 to 20 basis points annually.
AI Changes Client Engagement, Management Says
President Anne Choate said artificial intelligence is changing the way ICF engages with federal agencies during the early stages of technology projects. Rather than relying primarily on lengthy procurement cycles and written proposal responses, agencies are increasingly open to seeing prototypes and potential solutions earlier in the process, she said.
ICF uses its ICF Fathom AI sandbox to demonstrate potential solutions, gather client feedback and iterate quickly, Choate said. The approach can enable the company to bridge the needs of chief information officers and agency program offices.
Choate cited transportation grant management as an example. ICF has worked with several Department of Transportation modal agencies and can combine its knowledge of those agencies’ grant programs with modernization needs identified by the department’s technology organization. The company can then develop a prototype designed to illustrate potential efficiency gains and tradeoffs for different agencies.
Wasson said federal civilian customers remain conservative adopters of AI, but the technology is improving productivity in repeatable tasks and basic coding. While AI can reduce the size and duration of certain projects, he said ICF has not seen deterioration in its fees and continues to move to subsequent modernization projects as work is completed more quickly.
He added that more than 80% of ICF’s work is fixed-price or performance-based, a structure he said aligns with the administration’s focus on efficiency, AI-led solutions and reducing waste, fraud and abuse.
Commercial Energy and Data Center Opportunities
Choate said ICF’s energy-efficiency business has grown faster than the broader market, aided by competitive contract wins, expanded services and longstanding utility relationships. She pointed to a recently announced large project in Louisiana as an example of a new opportunity.
The company has also expanded into programs involving electrification, battery storage and behavioral initiatives for utilities. In some cases, ICF’s marketing support for utility program portfolios has created opportunities to expand into services previously handled by competitors, Choate said.
On data centers, Choate said ICF sees opportunities with utilities, developers and hyperscalers. Utilities and developers have been long-standing customers, while hyperscalers represent a newer client category. ICF provides technical and financial due diligence related to mergers and acquisitions, siting, environmental issues, demand and grid interconnection.
For utilities, the company combines integrated resource planning, demand-side management program administration and data-center knowledge to address growing electricity demand. Choate said a small engineering acquisition completed several years ago added capabilities such as substation design that have supported ICF’s ability to participate in the data-center market.
On capital allocation, Wasson said ICF plans to balance stock repurchases and acquisitions. The board recently added $100 million of share-repurchase authorization, and the company has bought back what Wasson characterized as a historically significant amount of stock over the past two quarters. He also said acquisitions remain part of ICF’s strategy, particularly in commercial energy, supported by its balance sheet and cash flow.
About ICF International (NASDAQ:ICFI)
ICF International (NASDAQ: ICFI), commonly known as ICF, is a global consulting and digital services provider specializing in the intersection of strategy, technology, and policy. The firm delivers integrated services and solutions to government and commercial clients in areas such as energy and environment, health and social programs, transportation, infrastructure, technology, and marketing and communications. ICF’s offerings span strategic planning, data analytics, program evaluation, digital transformation, and implementation support.
Founded in 1969 and headquartered in Reston, Virginia, ICF has grown through both organic expansion and targeted acquisitions to broaden its capabilities and geographic reach.
