10-Q · August 4, 2026
Leidos delivered 7.2% year-over-year Q2 revenue growth to $4.558 billion, led by a 32.0% Homeland increase and continued Intelligence & Digital and Defense growth, with bookings rising to $4.9 billion and backlog…
Earnings analysis · 10-Q
LDOS earnings analysis
Filed November 3, 2026 · Our reading of the company's report
The latest report
Leidos delivered solid third-quarter growth, with revenue up 3.6% year over year to $4.630 billion, operating margin of 11.9%, stronger Homeland and Intelligence & Digital performance, and backlog of $49.554 billion.…
Read full summary
Leidos delivered solid third-quarter growth, with revenue up 3.6% year over year to $4.630 billion, operating margin of 11.9%, stronger Homeland and Intelligence & Digital performance, and backlog of $49.554 billion. However, Health contracted materially, quarterly operating cash flow declined to $523 million, and debt rose to $6.0 billion following the Entrust acquisition. The continuing resolution expires December 11, 2026, and the SES divestiture is expected to reduce fourth-quarter revenue; overall sentiment is neutral.
Gross and operating margin
How much of each revenue dollar the business keeps.
One point per quarterly or annual filing. Both margins are shares of that report's revenue.
Where revenue came from
The business segments reported by the company.
Shares of the segments disclosed in this filing, largest first.
How we read each report
Our analysis across the last few reports.
Our model's reading of each filing, not the share price or the market's reaction. Annual and quarterly reports each occupy one position.
Reported figures
- Operating margin
- 11.9%
What stood out
-
Revenue and operating income grew year over year
Third-quarter revenue was $4,630 million, up 3.6% from $4,469 million a year earlier and approximately 1.5% above the $4.56 billion prior quarter. Operating income increased 3.4% year over year to $535 million, while operating margin was 11.9% versus 12.0% a year earlier and 11.1% in the prior quarter.
-
Homeland growth accelerated
Homeland was the strongest growth segment, with revenue up 32.1% to $1,024 million and operating income up 62.0% to $81 million. Management attributed growth partly to $142 million of Entrust revenue, higher volumes and program wins.
-
Intelligence margins improved
Intelligence & Digital revenue increased 1.4% to $1,546 million, while operating income rose 21.3% to $171 million and margin expanded to 11.1% from 9.2%. Management cited program wins and improved program mix.
-
Backlog remained strong
Bookings totaled an estimated $5.5 billion in the quarter and $13.7 billion for the first nine months, compared with $5.9 billion and $11.9 billion, respectively, in the prior-year periods. Total backlog increased to $49,554 million from $47,656 million.
-
Year-to-date cash generation improved
Nine-month operating cash flow increased to $1,617 million from $1,255 million, helped by favorable working capital and $148 million of lower tax payments. Quarterly operating cash flow was $523 million, down from $711 million because of vendor-payment and payroll timing.
-
Lower tax rate supported earnings
The effective tax rate declined to 14.3% from 23.8% in the quarter, primarily due to a higher federal research tax credit and lower unrecognized tax benefits. Net income attributable to Leidos common stockholders increased 11.7% to $410 million from $367 million.
What to watch
-
Health segment contraction
Health revenue declined 11.7% to $1,068 million and operating income fell 25.9% to $240 million. Management attributed the deterioration to reduced managed-health-services volumes and lower related incentive fees in the second half of fiscal 2026.
-
Higher leverage and interest expense
Outstanding debt increased to $6.0 billion from $4.6 billion at January 2, 2026, following the issuance of $600 million and $800 million of senior notes. Quarterly non-operating expense increased to $71 million from $51 million, primarily because of higher interest expense.
-
Continuing-resolution exposure
Federal funding is secured only through December 11, 2026, under a continuing resolution. Management states that failure to enact appropriations or an additional continuing resolution could result in a partial or full federal government shutdown; 83% of quarterly revenue came from the U.S. government.
-
SES divestiture reduces future revenue
The SES Business divestiture closed on October 5, 2026, with Leidos retaining a 41.5% non-controlling interest. Management expects fourth-quarter revenue to be lower than it otherwise would have been as a result of the transaction.
-
Acquisition increased cash investment needs
Nine-month investing cash outflow increased to $2,445 million from $372 million, primarily because of $2,338 million paid for the Entrust acquisition, net of cash acquired, as well as higher capital expenditures.
Management's outlook
The 10-Q does not provide new quantitative revenue or EPS guidance. The filing states that federal funding is secured through December 11, 2026, under a continuing resolution; prior FY2026 guidance was disclosed in the November 2, 2026 8-K rather than this filing.
Earlier filings 4
10-Q · May 5, 2026
Leidos reported Q1 2026 revenues of $4.4 billion, representing a 3.7% increase from $4.25 billion in the prior year. However, diluted EPS was $2.56, missing the analyst expectation of $2.90, showing a decline from the…
10-K · February 17, 2026
Leidos emphasizes mission-critical, technology-enabled services across five strategic pillars (space & maritime; energy infrastructure; digital modernization & cyber; mission software; managed health services) and…
10-Q · August 5, 2025
Leidos reported Q2 revenues of $4,253 million, up $121 million (+2.9%) versus the prior-year quarter, with operating income of $571 million and diluted EPS of $3.01 (vs $2.37 a year ago). Cash generation improved (net…
This is our reading of a public filing, not the filing itself. Analysis can contain errors; check the source document for full context.