Summary
Leidos closed fiscal 2025 with a quarter that split sharply between the top line and the bottom line. Revenue fell to $4.21 billion in the fourth quarter, down 3.6% from the prior-year quarter, as a six-week government shutdown and an extra work week in the fourth quarter of fiscal 2024 weighed on comparisons. Profitability moved the other way. Operating income rose 12.4% to $473 million, operating margin climbed to 11.2% from 9.6%, and net income attributable to Leidos common stockholders rose 15.1% to $327 million. Management credited increased efficiencies on certain fixed-price programs and improved program execution and cost control.
The full year tells a steadier story. Revenue reached $17.17 billion, up 3.1%, with demand strongest in integrated air defense, Intelligence Community support and cyber. Operating income for the year was $2.11 billion, up 15.4%, and operating margin expanded to 12.3% from 11.0%. Net income attributable to Leidos was $1.45 billion, up 15.5%, and diluted EPS was $11.14, up 20.8%. On a non-GAAP basis, adjusted EBITDA was $2.42 billion at a 14.1% margin, up 12%, and non-GAAP diluted EPS was $11.99, up 17%.
Cash generation was the standout. Fourth-quarter operating cash flow was $495 million, up 68.4% from the prior-year quarter and the highest fourth quarter in company history. Capital expenditures fell 50% to $43 million. For the year, operating cash flow was $1.75 billion, up 22.0%, while capital expenditures declined 16.1% to $125 million. Free cash flow, a non-GAAP measure, was $452 million for the quarter and $1.63 billion for the year, with free cash flow conversion of 104% for the year. The company ended the period with $1.1 billion in cash and $4.6 billion in debt, and declared a quarterly dividend of $0.43 per share payable March 31, 2026.
Business development stayed busy. Net bookings were $5.6 billion in the quarter, a book-to-bill ratio of 1.3, and $17.5 billion for the year, a ratio of 1.0. Backlog stood at $49.0 billion, of which $9.7 billion was funded, and remaining performance obligations rose 13.5% to $18.5 billion. Deferred revenue, current portion only, was $348 million, up 4.5%. Segment results were mixed. Health & Civil revenue fell 9% to $1.21 billion while its margin improved to 21.9%. Defense Systems revenue rose 1% to $546 million at an 8.1% margin. National Security & Digital revenue slipped 3% to $1.85 billion at a 10.6% margin, and Commercial & International revenue rose 1% to $610 million at an 8.4% margin.
Awards included a five-year, $2.2 billion Air Force contract for the ABADS-MD program, a potential six-year, $455 million takeaway for Air Force Cloud One Next, a $151 million Army modification on the Common Hypersonic Glide Body, and a $142 million DISA award. Leidos also won positions on two large IDIQ vehicles: the Missile Defense Agency's SHIELD, a ten-year vehicle with a $151 billion ceiling, and DMEA's ATSP5, a ten-year vehicle with a $24.5 billion ceiling.
Guidance for fiscal 2026 calls for revenues in a range of $17.5 billion to $17.9 billion, an adjusted EBITDA margin in the mid 13% range, non-GAAP diluted EPS of $12.05 to $12.45, and cash flows provided by operating activities of approximately $1.75 billion. The outlook carries real risk. The six-week shutdown pushed fourth-quarter revenue down, and the Department of Homeland Security was shut down in February 2026 after its appropriations bill failed. Roughly 87% of revenue comes from U.S. government contracts, exposing Leidos to budget delays and competitive pressure. The pending $2.4 billion acquisition of Entrust, backed by a $1.4 billion bridge loan, adds integration and leverage risk, and goodwill represented 47% of total assets at year end.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2026 | Q3 FY2026 | QoQ | Q4 FY2025 | YoY |
|---|---|---|---|---|---|
| Revenue | $4.21B | $4.47B | -5.9% | $4.43B | -5.1% |
| Gross profit | $739.0M | $821.0M | -10.0% | $763.0M | -3.1% |
| Gross margin | 17.6% | 18.4% | -0.8 pp | 17.2% | +0.4 pp |
| Research & development | $187.0M | — | — | $150.0M | +24.7% |
| Sales & marketing | $266.0M | $286.0M | -7.0% | $279.0M | -4.7% |
| Operating income (loss) | $473.0M | $535.0M | -11.6% | $421.0M | +12.4% |
| Operating margin | 11.2% | 12.0% | -0.7 pp | 9.5% | +1.8 pp |
| Net income (loss) | $327.0M | $367.0M | -10.9% | $284.0M | +15.1% |
| Net margin | 7.8% | 8.2% | -0.4 pp | 6.4% | +1.4 pp |
| Diluted EPS | $2.52 | $2.82 | -$0.30 | $2.09 | +$0.43 |
Risks
Approximately 87% of total revenue came from U.S. government contracts in fiscal 2025, and DoW and U.S. Intelligence Community work represented about 49% of total revenues. Harm to Leidos's reputation or relationships with these agencies could reduce future revenues and growth prospects.
U.S. government budget and appropriations uncertainty, continuing resolutions, debt ceiling debates, and shutdowns could delay procurement and contract awards. MD&A notes that on February 13, 2026, the Homeland Security bill was not passed and DHS was shut down until another continuing resolution is agreed upon.
The executive order titled Prioritizing the Warfighter in Defense Contracting is expected to add contract provisions restricting stock buybacks and dividends during underperformance and restricting executive incentive compensation. It also requires a board-approved remediation plan within 15 days if the Secretary of War determines underperformance, with potential enforcement actions.
A majority of business sought is awarded through competitive bidding, and multiple-award contracts increase competition and pricing pressure. Bid protests can cause significant expense, delay contract start-up and funding, or cancel awards, adversely affecting revenues and profitability.
Executive Order 14275, Restoring Common Sense to Federal Procurement, could change Federal Acquisition Regulations, cost allowability, compliance obligations, and reporting requirements. If reforms expand commercial firm competition, Leidos may face pricing pressure, lower win rates, or market share erosion.
Leidos utilizes artificial intelligence, which could expose it to liability or adversely affect the business if it cannot compete effectively with others in adopting AI. MD&A also highlights an enterprise transformation office leveraging AI and automation for process improvements.
Leidos depends on attracting and retaining skilled talent, including employees with security clearances that are difficult and time-consuming to obtain. Immigration restrictions and executive compensation limits tied to the Prioritizing the Warfighter executive order may make employment less attractive to key employees.
Global supply chain issues and inflationary pressures have disrupted supply and increased prices, and tariffs may raise procurement costs for IT hardware. Because firm-fixed-price contracts represented approximately 43% of total revenues in fiscal 2025, cost overruns could reduce profits or cause losses.
As a government contractor, Leidos faces customer-driven cybersecurity certification requirements including CMMC, which are expected to be necessary to win future contracts. Failure to achieve or maintain required certification could prevent bidding on DoW contract awards or follow-on work.
Goodwill represented 47% of total assets as of January 2, 2026. Adverse changes in fiscal and economic conditions, federal budget cuts, or unfavorable discount rates could result in impairment and negatively impact results of operations and shareholders' equity.
Leidos agreed on January 23, 2026, to acquire Entrust for $2.4 billion in cash and entered a $1.4 billion bridge loan facility. Acquisitions and divestitures require significant time and resources, may disrupt the business, distract management, and result in losses or retained liabilities.
Total backlog was $49.0 billion as of January 2, 2026, including $9.7 billion in funded backlog. The U.S. government can decline options or terminate, modify, or curtail programs, so Leidos may realize less than expected revenues or never realize revenues from some backlog contracts.
Leidos uses cost-to-cost estimates for revenue recognition on complex contracts, and changes in underlying assumptions could adversely affect future financial results. Firm-fixed-price contracts increase exposure to cost overruns, and failure to accurately estimate costs or resources could reduce profits or cause losses.
The One Big Beautiful Bill Act had a material impact on fiscal 2025 consolidated financial statements, and Leidos expects income tax payments to decrease by approximately $91 million in fiscal 2026 compared with estimates prior to enactment. Changes in tax laws or adverse tax audit outcomes could increase tax expense.
Revenue from services provided outside the United States to non-U.S. customers was approximately 8% of total revenue in fiscal 2025. International operations face geopolitical conflict, foreign exchange variability, tariffs, FCPA and U.K. Bribery Act compliance, and other regulatory risks.
SaaS KPIs
All quarters →Net bookings
Adjusted EBITDA margin
Book-to-bill ratio
Funded backlog
Backlog
Free Cash Flow
Free Cash Flow Conversion
Summary, forecast, risks and KPIs are extracted from Leidos Holdings, Inc.'s SEC filings for Q4 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.