Applied Signal Technology, Inc.
Announces First Quarter Operating Results and a $28 Million Contract Award

Sunnyvale, CA. February 26, 2008 - Applied Signal Technology, Inc. (NASDAQ - APSG) announced its operating results for the first quarter of fiscal year 2008 ended February 1, 2008. In addition, during the month of February 2008, the company signed a $28 million development contract. Approximately $5 million of this order was booked during fiscal 2007; approximately $4 million was booked during the first quarter of fiscal 2008; and the remaining $19 million was booked during the second quarter of fiscal 2008.

Revenues for the first quarter of fiscal year 2008 were $42,725,000, compared with revenues of $43,544,000 recorded during the first quarter of fiscal year 2007.

Operating income for the first quarter of fiscal year 2008 was $2,380,000, compared with operating income of $3,140,000 recorded during the first quarter of fiscal year 2007. The decrease in operating income is primarily due to an increase in our stock-based compensation expense as a result of modifying our employee stock purchase plan.

Net income for the first quarter of fiscal year 2008 was $1,488,000, or $0.12 per diluted share, compared with net income of $1,863,000, or $0.15 per diluted share, recorded during the first quarter of fiscal year 2007. The decrease in net income is primarily due to an increase in our stock-based compensation expense and an increase in our estimated effective tax rate. Our effective tax rate for fiscal year 2008 is estimated to be 44.9%, compared to an effective tax rate of 43.2% for fiscal 2007.

New orders received during the first quarter of fiscal year 2008 were $26,889,000 compared to fiscal year 2007 first quarter new orders of $39,149,000.

Regarding the first quarter operating results, Mr. Gary Yancey, President and Chief Executive Officer of the Company, commented, “Even though the year-over-year first quarter revenue was flat, we are still anticipating revenue growth in fiscal year 2008 compared to fiscal year 2007. Our backlog is strong and we are anticipating strong order flow for fiscal year 2008.”

Mr. Yancey concluded his remarks, “We are observing more opportunities in the military marketplace as we had anticipated. I feel this will bolster our continued growth opportunities along with our traditional Intelligence Agency customers.”

The Company will host a conference call on February 26, 2008 to discuss first quarter results. If you wish to participate in the conference call, please dial 1-877-407-8035 for domestic callers or 1-201-689-8035 for international callers on February 26, 2008 at 5:00 p.m. eastern time/2:00 p.m. pacific time. There is no pass code required. This call may be listened to simultaneously over the Internet through World Investor Links’ Vcall Website, located at www.vcall.com. A rebroadcast of the call will be available upon its completion and will remain available for a limited time.

Applied Signal Technology, Inc. provides advanced digital signal processing products, systems and services in support of intelligence, surveillance, and reconnaissance for global security. For further information about Applied Signal Technology’s products and services visit our website at www.appsig.com.

Except for historical information contained herein, matters discussed in this news release may contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those expected. Statements as to the Company’s fiscal 2008 revenue growth; fiscal 2008 order opportunities; future opportunities within the military marketplace and the intelligence community; and the U.S. Government’s demand for Intelligence, Surveillance and Reconnaissance (ISR) are forward-looking statements. The risks and uncertainties associated with these statements include whether orders will be issued by procurers including the U. S. Government; the timing of any orders placed by procurers; whether we will be successful in obtaining contracts for these orders if they are forthcoming; whether any contracts obtained by us will be profitable and whether any such contracts might be terminated prior to completion; whether we will be able to hire qualified staff as needed; and other risks detailed from time to time in our SEC reports including our latest Form 10-K filed for the fiscal year ended October 31, 2007. The Company assumes no obligation to update the information provided in this news release.

Applied Signal Technology, Inc.
Condensed Consolidated Statements of Income
for the Periods Ended February 1, 2008, and February 2, 2007
(in thousands except per share data)

Applied Signal Technology, Inc.
Condensed Consolidated Balance Sheets
(in thousands)