LDOS
IndustrialsLeidos
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XBRL · SEC EDGAR2009–2026(17yr)| Metric | FY 2009 | FY 2010 | FY 2011 | FY 2012 | FY 2013 | FY 2014 | FY 2015 | FY 2016 | FY 2017 | FY 2018 | FY 2020 | FY 2021 | FY 2021 | FY 2022 | FY 2023 | FY 2025 | FY 2026Latest | YoY |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | $10.1B | $10.8B | $11.1B | $10.6B | $11.2B | $5.8B | $5.1B | $7.0B | $10.2B | $10.2B | $11.1B | $12.3B | $13.7B | $14.4B | $15.4B | $16.7B | $17.2B | +3.1% |
| Gross Profit | $1.4B | $1.5B | $1.5B | $981.0M | $1.4B | $766.0M | $671.0M | $852.0M | $1.2B | $1.5B | $1.5B | $1.7B | $2.0B | $2.1B | $2.2B | $2.8B | $3.1B | +10.8% |
| Gross Margin | 13.7% | 13.9% | 13.4% | 9.3% | 12.2% | 13.3% | 13.3% | 12.1% | 12.3% | 14.8% | 14.0% | 14.1% | 14.7% | 14.5% | 14.5% | 16.8% | 18.0% | +1.3pp |
| Operating Income | $776.0M | $867.0M | $958.0M | $311.0M | $734.0M | $164.0M | -$214.0M | $417.0M | $559.0M | $749.0M | $912.0M | $998.0M | $1.2B | $1.1B | $621.0M | $1.8B | $2.1B | +15.4% |
| Operating Margin | 7.7% | 8.0% | 8.6% | 2.9% | 6.6% | 2.8% | -4.2% | 5.9% | 5.5% | 7.3% | 8.2% | 8.1% | 8.4% | 7.6% | 4.0% | 11.0% | 12.3% | +1.3pp |
| Net Income | $452.0M | $497.0M | $618.0M | $59.0M | $525.0M | $164.0M | -$323.0M | $244.0M | $366.0M | $581.0M | $667.0M | $628.0M | $753.0M | $685.0M | $199.0M | $1.3B | $1.4B | +15.5% |
| Net Margin | 4.5% | 4.6% | 5.6% | 0.6% | 4.7% | 2.8% | -6.4% | 3.5% | 3.6% | 5.7% | 6.0% | 5.1% | 5.5% | 4.8% | 1.3% | 7.5% | 8.4% | +0.9pp |
| Free Cash Flow | $524.0M | $562.0M | $663.0M | $707.0M | — | — | — | — | $445.0M | $695.0M | $871.0M | $1.2B | $927.0M | $857.0M | $958.0M | $1.2B | $1.6B | +30.7% |
| FCF Margin | 5.2% | 5.2% | 6.0% | 6.7% | — | — | — | — | 4.4% | 6.8% | 7.9% | 9.4% | 6.7% | 6.0% | 6.2% | 7.5% | 9.5% | +2.0pp |
| EPS (Diluted) | $1.09 | $1.24 | $1.63 | $0.18 | $1.54 | $1.94 | $-4.36 | $2.35 | $2.38 | $3.80 | $4.60 | $4.36 | $5.27 | $4.96 | $1.44 | $9.22 | $11.14 | +20.8% |
1. THE BIG PICTURE
Leidos is essentially a high-stakes human capital business that has successfully embedded itself into the most sensitive corners of the U.S. government, from cyber operations to mission software. While it positions itself as an "innovation leader," its reality is that of a massive federal utility whose growth is capped by congressional budgets rather than market demand. Leidos is currently in a transition phase, using its robust cash flow to acquire commercial capabilities like the power design firm Entrust to dilute its overwhelming dependence on the Department of War.
2. WHERE THE RISKS HIT HARDEST
Leidos’s core strength in "Mission Software" and AI integration is directly threatened by its contractual obligations to the U.S. government. Under certain government-funded contracts, the U.S. government maintains the right to disclose or license Leidos’s developed software and data to third parties, including direct competitors (10-K Item 1). This creates a structural vulnerability where Leidos’s primary intellectual property can be handed to rivals by its own customer.
Furthermore, Leidos’s "Operational Track Record" is at the mercy of the congressional appropriations process. Despite having a "proven history of program execution," a six-week government shutdown in the fourth quarter of 2025 was a primary driver behind a 4% decline in quarterly revenue (8-K). This highlights that even perfect execution cannot protect Leidos from the external risk of federal gridlock.
3. WHAT THE NUMBERS SAY TOGETHER
The financial data reveals a company becoming more efficient even as its top-line growth remains modest. While revenue fell 4% in the most recent quarter, net income jumped 19% to $335 million (8-K). This suggests that Leidos is successfully shifting its business mix toward higher-margin services—such as digital modernization and cyber—which require less overhead than traditional hardware-heavy contracts.
Leidos generates 10.5 cents of free cash flow for every dollar of revenue, outperforming much larger peers like Lockheed Martin (8.7%) and Northrop Grumman (2.0%) (XBRL). However, this efficiency is overshadowed by a balance sheet risk: goodwill accounts for 47% of total assets (10-K Item 1A). Any failure to integrate acquisitions like the $2.4 billion Entrust purchase could trigger massive impairment charges that would wipe out years of retained earnings.
4. IS IT WORTH IT AT THIS PRICE?
At a forward P/EP/EPrice-to-Earnings ratio — share price divided by annual earnings per share; how much investors pay per dollar of profit. Higher P/E = higher growth expectations of 13.5x, Leidos trades at a 34% discount to the peer median of 20.5x (Peer Benchmarking). The market is currently pricing in a long-term growth rate of just 0.5% (CAPM analysis). This valuation appears attractively valued when contrasted with Leidos’s fundamentals. Leidos grew its trailing twelve-month revenue by 3.1%, and its 10.5% FCFFCFFree Cash Flow — cash left after paying for operations and capital investments; what the company can actually spend, save, or return to shareholders margin is the second-highest in its peer group.
The market's hesitation likely stems from the 87% revenue concentration and the fact that Leidos returns only 1.3% of its market cap via buybacks—ranking 5th of 6 among its peers. Investors are essentially demanding a "complexity discount" for the risk of government shutdowns and bid protests. However, if Leidos can achieve its 2026 revenue guidance of $17.5 billion to $17.9 billion, it will easily outpace the 0.5% growth the market has priced in.
5. WHAT WOULD CHANGE THIS VIEW?
- Cautious if the Entrust acquisition faces integration delays or if Leidos reports a goodwill impairment in its health or civil segments, which would signal that its diversification strategy is failing.
- Constructive if the "NorthStar 2030" strategy results in non-government revenue rising above 15% of the total mix, reducing the impact of federal budget cycles.
6. BOTTOM LINE
Structural Advantage: Deep domain expertise and a security-cleared workforce that create significant barriers to entry for commercial tech rivals. Bottom Line: Leidos is a highly efficient cash generator trading at a steep discount, making it a compelling play for those who believe federal defense spending will remain a national priority.
1. Top 5 Material Risks
- Government Revenue Concentration: Approximately 87% of total revenue in fiscal 2025, 2024, and 2023 was generated from U.S. government contracts. Any harm to Leidos’s reputation or relationships with agencies like the Department of War (DoW) or the U.S. Intelligence Community could lead to a decrease in business and adversely affect future revenues and growth.
- Budgetary Uncertainty: Revenues from the DoW and U.S. Intelligence Community accounted for 49% of total revenues in fiscal 2025 and 2023 (48% in 2024). Delays in the congressional appropriations process, government shutdowns, or shifts in defense spending priorities can lead to contract terminations, payment delays, and the inability to secure new task orders.
- Competitive Bidding and Protests: A majority of future business is expected to be awarded through competitive bidding. The costs of preparing bids are substantial, and the likelihood of bid protests by competitors can result in significant expenses, delays in project start-ups, or the loss of contract awards.
- Contractual Performance and Termination: The U.S. government may terminate contracts for convenience or default. If Leidos experiences performance difficulties, cost overruns, or failures to meet technical goals, it may be subject to remediation plans, liability for excess costs, or termination, which would negatively impact profitability and reputation.
- Goodwill Impairment: As of January 2, 2026, goodwill represented 47% of total assets. Adverse changes in the business climate, loss of key personnel, or poor contract performance can trigger impairment charges, which directly reduce shareholders’ equity and negatively impact results of operations.
2. Company-Specific Risks
- Executive Compensation Restrictions: Under the executive order "Prioritizing the Warfighter in Defense Contracting," future contracts may restrict stock buybacks, dividends, and executive incentive compensation, potentially making Leidos less attractive to key talent compared to commercial-sector competitors.
- Inspection System Liability: Leidos manufactures inspection systems for detecting explosives and contraband. If these systems fail to detect threats, Leidos faces potential product liability claims, negative publicity, and reputational damage that could reduce demand for its security products.
- Subcontractor Dependency: Leidos relies on teaming arrangements with other contractors. If these partners fail to satisfy their obligations or face regulatory issues, Leidos’s ability to fulfill prime contracts is jeopardized, potentially leading to termination for default.
- Artificial Intelligence Risks: The use of AI in Leidos’s business exposes Leidos to risks of "hallucinatory" outputs, flawed algorithms, and potential intellectual property disputes, which could lead to operational inefficiencies or legal liability.
3. Regulatory/Legal Risks
- Organizational Conflict of Interest (OCI): U.S. government OCI rules may disqualify Leidos from competing for new contracts if Leidos is deemed to have impaired objectivity or unequal access to non-public information.
- Government Audits: Leidos is subject to routine audits by the DCAA and DCMA. Adverse findings regarding accounting systems or cost structures can result in the suspension of payments, mandatory customer refunds, or disqualification from future bidding.
- Data Privacy and Security: As a contractor for defense and health care, Leidos must comply with evolving cybersecurity standards like CMMC. Failure to maintain certification or unauthorized disclosure of sensitive information can lead to contract termination and monetary penalties.
- Environmental Liability: Operations at sites like the Hanford Site involve handling hazardous substances. Leidos faces joint and several liability for environmental releases, which could result in substantial cleanup costs and civil or criminal sanctions.
4. Financial Impact Map
Government Revenue Concentration → Total Revenue → 87% of total revenue is derived from U.S. government contracts. Budgetary Uncertainty → Total Revenue → 49% of total revenue is derived from DoW and U.S. Intelligence Community contracts. Goodwill Impairment → Shareholders’ Equity / Total Assets → Goodwill represents 47% of total assets as of January 2, 2026. Contractual Performance → Profitability / Operating Results → Performance issues can lead to remediation plans or termination for default, impacting contract margins. Competitive Bidding → Operating Expenses → Substantial labor costs and managerial time are required to prepare bids for contracts that may not be awarded.
Recent Filings
| Form | Filed | Period |
|---|---|---|
| 8-K | Feb 2026 | — |
| 10-K | Feb 2026 | Jan 2026 |
| 10-Q | Nov 2025 | Oct 2025 |
| 14A | Mar 2025 | — |
AI-extracted key facts from press releases and SEC filings. Significance 1–10.
Leidos raises 2026 revenue guidance by $500M, EPS by $0.05
- ▸Raised 2026 revenue guidance by $500 million
- ▸Increased 2026 non-GAAP diluted EPS guidance by $0.05
- ▸Raised 2026 operating cash flow guidance by $50 million
- ▸Entrust acquisition confirmed as immediately accretive to earnings
- ▸Strong Q1 2026 core performance reported
Leidos Closes ENTRUST Acquisition, Secures $454.9M U.S. Air Force Cloud One Contract
- ▸Closed acquisition of ENTRUST Solutions Group to expand energy infrastructure services
- ▸ENTRUST adds over 3,100 specialists in electric grid and natural gas infrastructure
- ▸Secured $454.9M U.S. Air Force contract for Cloud One platform modernization
- ▸Cloud One contract involves collaboration with AWS, Microsoft, Google, and Oracle
- ▸Acquisitions and contract wins support company's NorthStar 2030 strategic growth plan
Leidos Raises $1.39 Billion in Senior Notes to Fund Entrust Acquisition
- ▸Raised $1.387 billion via senior notes maturing in 2029 and 2036
- ▸Proceeds earmarked for acquisition of KENE Parent, Inc. (Entrust)
- ▸Includes mandatory redemption clause at 101% if acquisition fails by August 2026
- ▸Secured separate $454.9 million U.S. Air Force Cloud One modernization contract
- ▸Cloud One contract involves partnership with Amazon and Google
Leidos completes $2.4 billion acquisition of ENTRUST Solutions Group
- ▸Acquisition of ENTRUST Solutions Group finalized for approximately $2.4 billion
- ▸Doubles Leidos' presence in the energy infrastructure market
- ▸Adds 3,100 professionals specializing in electric grid and natural gas engineering
- ▸Expands engineering capabilities and utility customer base
- ▸Supports NorthStar 2030 strategy focused on energy infrastructure growth
Leidos completes $2.4 billion acquisition of ENTRUST Solutions Group to expand energy infrastructure
- ▸Completed $2.4 billion acquisition of ENTRUST Solutions Group
- ▸Doubles Leidos' presence in the energy infrastructure market
- ▸Adds 3,100 professionals specializing in electric grid and natural gas engineering
- ▸Acquisition aligns with NorthStar 2030 strategy to grow energy infrastructure pillar
- ▸Expands engineering capabilities and utility customer base across power delivery spectrum
Leidos Q4 Adjusted EPS $2.76 beats estimates by 7.4%, revenue $4.21B misses
- ▸Q4 adjusted EPS $2.76, beating consensus estimate of $2.57
- ▸Q4 total revenue $4.21B, down 3.6% YoY due to government shutdown
- ▸FY2025 adjusted EPS $11.99, up 17.4% YoY
- ▸Total backlog increased to $49.03B from $48.39B at end of 2024
- ▸Q4 adjusted operating income rose to $473M from $421M YoY
Leidos wins $454.9M U.S. Air Force contract to modernize Cloud One platform
- ▸Awarded $454.9 million contract for U.S. Air Force Cloud One modernization
- ▸Partnership includes AWS, Azure, Google Cloud, and Oracle Cloud infrastructure
- ▸Scope includes multi-cloud environment transformation, security, and automation
- ▸Aligns with company's NorthStar 2030 digital modernization strategy
- ▸Program aims to accelerate cloud adoption and mission readiness across Air Force