Leidos Holdings, Inc.

What they do

Leidos provides scientific, engineering and technical services and solutions to government and commercial customers, with 50,000 global employees as reported in the latest 10-Q. Customers include the U.S. Department of War, the U.S. Intelligence Community, the Department of Homeland Security, the Federal Aviation Administration, and the Department of Veterans Affairs. The company reported four reportable segments beginning in fiscal 2026: Intelligence & Digital, Health, Homeland and Defense. It pursues growth across five pillars: defense tech, energy infrastructure, cyber, mission and digital solutions, and managed health services.

Revenue drivers

• Intelligence & Digital (formerly National Security & Digital) — Provides digital modernization, mission software, multi-domain solutions, cyber operations and intelligence analysis to U.S. federal customers; the predecessor National Security & Digital segment represented 44% of total revenues in both fiscal 2025 and fiscal 2024.
• Health — Managed health services and related work for government health customers including the Department of Veterans Affairs; the segment was recast in the fiscal 2026 realignment from the prior Health & Civil segment.
• Homeland — Serves homeland security and civil agency customers such as the Department of Homeland Security and the Federal Aviation Administration; air traffic management solutions were cited as a source of year-over-year revenue growth in the second quarter of 2026.
• Defense — Defense technology products and mission support; the earnings release cited increased customer demand for defense tech products as a driver of second-quarter 2026 revenue growth.

Recent performance

Second quarter fiscal 2026 revenue was $4.56B, up 7% year-over-year and up 4% organically, with net income of $356M, or $2.81 per diluted share. Net income and diluted EPS declined 9% and 7% year-over-year, and net income margin fell to 7.8% from 9.2%. Adjusted EBITDA was $631M with a 13.8% margin, down from 15.2% a year earlier, while non-GAAP diluted EPS rose 2% to $3.26. Operating cash flow was $793M with free cash flow of $761M, and the quarter included $29M of costs tied to the ENTRUST Solutions Group acquisition, the pending Analogic joint venture, and NorthStar 2030 restructuring. Net bookings were $4.9B for a 1.1 book-to-bill ratio, with total backlog of $48.7B, of which $10.2B was funded.

Strategy

Leidos realigned in fiscal 2026 into four reportable segments — Intelligence & Digital, Health, Homeland and Defense — under a program referred to as NorthStar 2030. The company is investing in growth pillars it describes as defense tech, energy infrastructure, cyber, mission and digital solutions, and managed health services. Recent actions include the acquisition of ENTRUST Solutions Group and a pending joint venture with Analogic Corporation. Capital allocation in the second quarter included $300M of debt paydown and $127M returned to shareholders through $72M of share repurchases and $55M of dividends. Management enhanced full-year 2026 guidance for revenues, earnings and cash on the latest earnings release.

Risks

• U.S. government budget and appropriations — With 87% of fiscal 2025 revenue from U.S. government contracts, delays in appropriations or a government shutdown after the September 30, 2026 deadline could disrupt revenue.
• Contract procurement and protest risk — The company cites delays in the U.S. government contract procurement process and delays or loss of contracts from competitor protests as factors that could affect results.
• Government investigation and compliance risk — Leidos identifies governmental reviews, audits and investigations of the company as a risk, alongside compliance with U.S. government procurement rules.
• Tariffs and international trade policy — Changes in global trade policies and higher tariffs could raise the cost of goods needed to fulfill contracts and for internal purposes, though management currently does not expect a significant effect.

Outlook

Management enhanced its full-year 2026 guidance for revenues, earnings and cash on the August 4, 2026 earnings release, citing a balanced portfolio. CEO Tom Bell said the company has greater visibility into the long-term role of the Managed Healthcare pillar and is seeing meaningful growth across the Defense Tech, Energy Infrastructure, and Cyber pillars. The 10-Q notes Congress is increasingly expected to rely on a short-term continuing resolution to fund the government beyond September 30, 2026, and failure to pass appropriations or a CR would result in a full or partial federal government shutdown.