Summary
Leidos reported revenue of $4.25 billion for the quarter, up 2.9% from the prior-year quarter. Year-to-date revenue reached $8.50 billion, up 4.8%. Operating income climbed 20.2% to $571 million in the quarter and $1.10 billion for the six months, up 23.7%. Operating margin expanded to 13.4% from 11.5% in the quarter and to 13.0% from 11.0% year to date. Net income attributable to Leidos common stockholders was $391 million, up 21.4%, and diluted EPS of $3.01 rose 27.0%. For the six months, net income was $754 million, up 24.4%, and diluted EPS was $5.80, up 31.2%.
Profitability gains came from cost management, better program execution and a $25 million insurance reimbursement for legal costs mostly incurred in earlier periods. Adjusted EBITDA was a record $647 million, and adjusted EBITDA margin was 15.2%. Non-GAAP diluted EPS of $3.21 rose 22%. Those are non-GAAP measures and exclude items such as acquisition, integration and restructuring costs and amortization of acquired intangibles.
Segment performance was mixed. Defense Systems grew fastest, helped by space sensing and integrated air defense work, including the Indirect Fires Protection Capability Increment 2 system. Health & Civil leaned on higher volumes in managed health services. Commercial & International benefited from security product demand and a rebaselining of UK contracts that depressed the prior-year quarter. National Security & Digital absorbed the Kudu Dynamics acquisition, which closed on May 23, 2025, and added artificial intelligence-enabled cyber capabilities.
Cash generation was strong. Net cash provided by operating activities was $486 million for the quarter, up 27.6%, and $544 million for the six months, up 10.1%. Capital expenditures were $29 million in the quarter, up 26.1%, and $51 million year to date, up 27.5%. Free cash flow, a non-GAAP measure, was $457 million. The company ended the quarter with $930 million in cash and cash equivalents and $5.1 billion of debt. It returned $61 million to shareholders, including $9 million of share repurchases and $52 million of dividends, and declared a quarterly dividend of $0.40 per share payable September 30, 2025.
Demand signals were softer on bookings but stronger on backlog. Net bookings were $3.9 billion, a book-to-bill ratio of 0.9. Total backlog was $46.2 billion, of which $7.1 billion was funded. Remaining performance obligations were $16.0 billion, up 15.9% from the prior-year quarter, while current deferred revenue slipped 7.4% to $274 million. Notable awards included a ten-year, $1.3 billion Intelligence Community take-away, a six-year, $390 million recompete, a $350 million Air Force electronic warfare IDIQ subcontract, a $128 million FBI task order and an $87 million NATO IT modernization contract.
Management raised full-year guidance. Revenue is now expected between $17.00 billion and $17.25 billion, up from a prior range of $16.90 billion to $17.30 billion. Adjusted EBITDA margin is guided to the mid 13% range versus mid-high 12% before. Non-GAAP diluted EPS is projected at $11.15 to $11.45, up from $10.35 to $10.75. Cash flows provided by operating activities are expected at approximately $1.65 billion, up from approximately $1.45 billion. The company does not reconcile forward-looking adjusted EBITDA margin or non-GAAP EPS to GAAP measures.
Risks remain tied to the federal budget. The government is operating under a continuing resolution through September 30, 2025, and Congress is still working on fiscal 2026 appropriations. About 87% of revenue came from U.S. government contracts. Other exposures include budget reductions or sequestration, delays in procurement, competitor protests, tariffs on imported goods, and tax uncertainty from the One Big Beautiful Bill Act and the Pillar Two global minimum tax framework.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2026 | Q1 FY2026 | QoQ | Q2 FY2025 | YoY |
|---|---|---|---|---|---|
| Revenue | $4.25B | $4.25B | +0.2% | $4.11B | +3.6% |
| Gross profit | $782.0M | $757.0M | +3.3% | $680.0M | +15.0% |
| Gross margin | 18.4% | 17.8% | +0.6 pp | 16.6% | +1.8 pp |
| Sales & marketing | $217.0M | $230.0M | -5.7% | $231.0M | -6.1% |
| Operating income (loss) | $571.0M | $530.0M | +7.7% | $475.0M | +20.2% |
| Operating margin | 13.4% | 12.5% | +0.9 pp | 11.6% | +1.9 pp |
| Net income (loss) | $391.0M | $363.0M | +7.7% | $322.0M | +21.4% |
| Net margin | 9.2% | 8.6% | +0.6 pp | 7.8% | +1.3 pp |
| Diluted EPS | $3.01 | $2.77 | +$0.24 | $2.37 | +$0.64 |
Risks
Leidos generated approximately 87% of total revenues from U.S. government contracts in both the three and six months ended July 4, 2025. The federal government is operating under a continuing resolution through September 30, 2025, while Congress works to advance fiscal year 2026 appropriations bills, creating budget and funding timing risk.
Net bookings were an estimated $3.9 billion and $6.0 billion for the three and six months ended July 4, 2025, down from $4.0 billion and $7.8 billion in the prior-year periods. Funded backlog also decreased to $7,122 million at July 4, 2025 from $8,023 million at June 28, 2024.
The One Big Beautiful Bill Act was enacted on July 4, 2025, resulting in a $150 million decrease to income taxes payable and a $130 million decrease to deferred tax assets as of that date. Leidos estimates a fiscal 2025 impact of approximately $280 million decrease to income taxes payable and $245 million decrease to net deferred taxes, subject to future Treasury guidance or interpretive rules.
Non-operating expense, net increased to $53 million for the three months ended July 4, 2025 from $49 million in the prior-year quarter, and to $105 million for the six months ended July 4, 2025 from $96 million in the prior-year period. The increases were primarily driven by higher interest expense from the two $500 million senior notes issued in February 2025.
Changes in international trade policies, including higher tariffs on imported goods and materials, may increase the cost of certain goods needed to fulfill contractual requirements and for internal purposes. Leidos expects to recover certain portions through contractual measures and currently does not expect a significant effect on its business.
SaaS KPIs
All quarters →Net bookings
Adjusted EBITDA margin
Book-to-bill ratio
Adjusted EBITDA
Funded backlog
Backlog
Free Cash Flow
Operating cash flow conversion ratio
Non-GAAP operating income
Non-GAAP free cash flow conversion ratio
Non-GAAP diluted EPS
Non-GAAP net income
Organic revenues
Summary, forecast, risks and KPIs are extracted from Leidos Holdings, Inc.'s SEC filings for Q2 FY2026 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 1, 2026.