AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-2: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 5/6 · 19/10/2026
Moat63
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
structural advantage · 3/4 · Complex installed FAA systems, decade-plus extensions and renewed specialized cyber work demonstrate a strong program-specific incumbency advantage. Cleared expertise supports delivery, but company-wide technological exclusivity and quantified switching costs remain unproven.
durability · 3/4 · Long FAA extensions and subsequent repeat awards demonstrate persistence beyond a single procurement cycle. Government termination rights and competitive task orders prevent an exceptional durability grade or any assurance that these benefits persist throughout the portfolio.
customer dependency · 2/4 · Customers repeatedly retain Leidos on operational systems, supporting meaningful reliance. Dependency remains mixed because customers control work-in-process and the RHRP modification explicitly bridges toward a transition; mission criticality alone does not make Leidos irreplaceable.
erosion resilience · 2/4 · Renewals, follow-on awards and organic growth show continued commercial relevance. Health volume declines, fixed-price development delays and expanding competition temper resilience. Potential technology and procurement risks are distinguished from the observed operating setbacks.
Pricing power—
Insufficient evidence for every rubric criterion; no category score is inferred.
realized pricing · — · The passages establish negotiated rates and competitive pricing, but no observed comparable price changes. Prior-period revenue revisions combine variable fees, scope changes and completion estimates, so they cannot isolate realized pricing outcomes.
retention · 3/4 · Decade-plus FAA extensions, two renewed cyber task orders and an aircraft-support follow-on award directly demonstrate repeat demand. Existing-contract volume growth supplies additional indirect evidence. No retention percentage is inferred, and Health contraction and the RHRP transition limit breadth.
margin resilience · 2/4 · Program efficiencies supported 2025 performance, but first-half 2026 revenue rose while operating income declined. Health volume pressure, Homeland write-downs and completed higher-margin Defense work show mixed resilience. Acquisition costs and the prior-year insurance benefit also affect comparisons; margins do not independently prove pricing power.
contractual freedom · 1/4 · Fixed negotiated hourly rates, competitively bid fixed prices, government cost-pricing rules and unilateral customer termination materially constrain discretion over prices and terms. Negotiation permits some flexibility but does not establish unilateral repricing freedom.
Predictability100
Five consecutive annual periods. Equal weights: nondeclining revenue frequency; revenue-growth volatility (5–40pp); positive FCF frequency; FCF-margin volatility (3–20pp). Stability indicator, not a growth forecast.
- Nondeclining revenue years (%)
- 100.00
- Revenue growth volatility (pp)
- 1.94
- Positive FCF years (%)
- 100.00
- FCF margin volatility (pp)
- 1.26
Financial strength70
Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, or reported pretax profit plus reported interest expense when operating income is unavailable. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
- debtFcfGrade
- 73.42
- netDebtEbitGrade
- 66.43
- interestCoverageGrade
- 63.22
- currentRatioGrade
- 76.23
- Debt / FCF (x)
- 2.86
- Net debt / operating income (x)
- 1.68
- Current ratio (x)
- 1.70
- cashInterestPaid
- 220.00
- cashInterestCoverage
- 7.95
Capital allocation93
Three-year equal-weight indicators: pretax return on average invested capital (0–25%; equity + debt − cash, each year and its prior year), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income or, if unavailable, EBIT calculated from reported pretax profit plus reported interest expense; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. Nonpositive invested capital has no defined return and remains unavailable. Does not establish acquisition quality or buyback timing.
- 3-year pre-tax operating return (%)
- 18.32
- 3-year average dilution (%)
- -2.22
- 3-year average SBC / revenue (%)
- 0.52
- cashConversionGrade
- 100.00
Management63
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 2/4 · First-half operating cash flow of $1.094 billion exceeded $63 million of capital spending, and diluted shares declined. Against that, $2.338 billion of acquisition cash spending accompanied debt growth from $4.6 billion to $6.0 billion and continued shareholder distributions. Cash growth partly reflects timing, while Entrust's preliminary goodwill and unproven acquisition returns keep discipline mixed.
incentive alignment · 3/4 · Actual 2025 grants combined performance shares, PRSUs and options. Disclosed incentives include three-year EBITDA and relative shareholder returns, annual cash flow and revenue, and acquired-revenue exclusions. Alignment is strong but imperfect: PRSUs have a first-year hurdle, adjusted metrics require judgment, and actual executive holdings are absent.
execution · 2/4 · Named renewals and follow-on awards, organic revenue growth and cash generation demonstrate delivery and commercial progress, partly through indirect operating evidence. Health contraction, program write-downs, development delays and lower consolidated operating income offset those achievements. Management's qualitative execution claims are not taken as proof of exceptional performance.
governance · 3/4 · Actual disclosed practices include an independent chair, annual elections, majority voting, proxy access, special-meeting rights and fully independent key committees. The ratified one-share authorization overrun is a minor realized control lapse. These arrangements support strong governance structure without establishing exceptional oversight outcomes.
Evidence
Leidos received 10 plus year extensions to the ERAM and ATOP contracts for continued delivery of the evolving National Airspace System needs.
Business / Transportation Solutions / ERAM and ATOP extensions · Filed 11/02/2025
The Defense Information Systems Agency (DISA) awarded Leidos over $461M in multi-year awards, including the renewal of two cyber task orders.
New Business Awards / GSM-O II cyber task-order renewals · Filed 05/05/2026
The U.S. Air Force Sustainment Center awarded Leidos a $475 million follow-on AIS PIS contract to manage the computerized diagnostic system that fixes the F-16 fighter jets.
New Business Awards / AIS PIS follow-on contract · Filed 04/08/2026
We deliver many of the FAA’s key automation systems and services, including the En Route Automation Modernization (“ERAM”), Advanced Technologies and Oceanic Procedures (“ATOP”), Time Based Flow Management, Terminal Flight Data Manager, Enterprise-Information Display System, Geo-7 and Future Flight Services.
Business / Transportation Solutions / installed FAA systems · Filed 11/02/2025
Three Months Ended Six Months Ended Defense (dollars in millions) July 3, 2026 July 4, 2025 Percent change July 3, 2026 July 4, 2025 Percent change Revenues $ 955 $ 899 6.2 % $ 1,838 $ 1,778 3.4 % Operating income 84 78 7.7 % 146 152 (3.9 %) Operating margin 8.8 % 8.7 % 7.9 % 8.5 % The increase in revenues for the three and six months ended July 3, 2026, as compared to the three and six months ended July 4, 2025, was primarily attributable to program wins and increased volumes on existing contracts, partially offset by the completion of certain contracts.
MD&A / Defense / existing-contract volumes and program wins · Filed 04/08/2026
Our principal competitors currently include the following companies: Accenture Federal Systems, Amentum Services Inc., BAE Systems, Booz Allen Hamilton Inc., CACI International Inc., Deloitte, General Dynamics Corporation, GovCIO, IBM, KBR Inc., L3Harris, Lockheed Martin Corporation, ManTech, Northrop Grumman Corporation, Optum, Parsons Corp, Peraton, Raytheon Technologies Corporation and SAIC.
Business / Competition / named principal competitors · Filed 11/02/2025
For U.S. government contracts, continuous transfer of control to the customer is evidenced by clauses in the contract that allow the customer to unilaterally terminate the contract for convenience, pay for costs incurred plus a reasonable profit and take control of any work-in-process.
Revenue recognition / termination and customer control of work-in-process · Filed 17/02/2026
Under a multiple-award IDIQ contract, task orders are competitively bid by the contractors awarded the IDIQ.
Contract Procurement / competitive multiple-award task orders · Filed 17/02/2026
military reservists under a potential 30-month, $325 million contract modification while the DHA finalizes its long-term transition strategy for RHRP.
New Business Awards / temporary RHRP modification and transition · Filed 04/08/2026
25 Table of Contents PART I—FINANCIAL INFORMATION Three Months Ended Six Months Ended Health (dollars in millions) July 3, 2026 July 4, 2025 Percent change July 3, 2026 July 4, 2025 Percent change Revenues $ 1,086 $ 1,175 (7.6 %) $ 2,274 $ 2,363 (3.8 %) Operating income 254 303 (16.2 %) 538 591 (9.0 %) Operating margin 23.4 % 25.8 % 23.7 % 25.0 % The decrease in revenues and operating income for the three and six months ended July 3, 2026, as compared to the three and six months ended July 4, 2025, was primarily attributable to a net decrease in volumes.
MD&A / Health / realized volume and operating-income declines · Filed 04/08/2026
KEY STATISTICS
Headquarters:
47,000+/-
employees worldwide
WORKFORCE
53%
Have a U.S.
Our Company / workforce statistics / security-clearance percentage context · Filed 19/03/2026
Security Clearance
24%
Have Advanced Degrees
19%
Employees Are Military Veterans
38%
Employees Have STEM Degrees
Operation MVP is our Company-wide initiative to hire and support military veterans and spouses.
Our Company / workforce statistics / security clearances and qualifications · Filed 19/03/2026
We compete by offering strong technical expertise, mission understanding, and retaining qualified staff, including those with security clearances.
Business / Competition / mission expertise and cleared staff · Filed 17/02/2026
Generally, the U.S. government may disclose or license such information to third parties, including, in some instances, our competitors.
Intellectual Property Rights / government disclosure and licensing rights · Filed 17/02/2026
defense contractors. Technological advances, including artificial intelligence, autonomy and robotics, changing customer requirements, as well as the ongoing significant reform of the Federal Acquisition Regulation ("FAR") are enabling expanded competition from both traditional and non-traditional competitors.
Business / Competition / technology and procurement reform expanding competition · Filed 17/02/2026
uA failure to attract, retain, and develop talent with critical skills, including our leadership team, would adversely affect our ability to execute our strategy and may disrupt our operations.
Risk Factors / critical workforce retention · Filed 17/02/2026
uTime-and-materials (“T&M”) contracts typically provide for negotiated fixed hourly rates for specified categories of direct labor plus reimbursement of other direct costs.
Contract Payment Types / negotiated fixed hourly rates · Filed 17/02/2026
The price for a FFP contract is often determined through competitive bidding by multiple contractors vying for award of the contract, but the price may also be determined through price negotiations with the customer.
Contract Payment Types / fixed-price bidding and negotiation · Filed 17/02/2026
Contracts with the U.S. government are subject to the Federal Acquisition Regulation (“FAR”) and priced on estimated or actual costs of providing the goods or services.
Revenue recognition / government cost-based pricing · Filed 17/02/2026
government and its agencies. Each contract is competitively priced and bid separately.
Revenue recognition / separately competitive contract pricing · Filed 17/02/2026
The increase in operating income for fiscal 2025 as compared to fiscal 2024, was primarily due to operational efficiencies on certain programs and a net increase in write-ups primarily within the managed health services business, partially offset by increased general and administrative expenses.
MD&A / Health & Civil / efficiencies and contract write-ups · Filed 17/02/2026
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Six Months Ended July 3, 2026 (in millions) Intelligence & Digital Health Homeland Defense Total Revenues $ 3,012 $ 2,274 $ 1,834 $ 1,838 $ 8,958 Less: Direct labor 786 397 400 438 2,021 Amortization of intangible assets 15 7 26 22 70 Other segment expense 1,923 1,332 1,283 1,232 5,770 Segment operating income $ 288 $ 538 $ 125 $ 146 $ 1,097 Corporate expense 75 Total operating income $ 1,022 Six Months Ended July 4, 2025 (in millions) Intelligence & Digital Health Homeland Defense Total Revenues $ 2,816 $ 2,363 $ 1,541 $ 1,778 $ 8,498 Less: Direct labor 757 405 323 412 1,897 Amortization of intangible assets 12 12 14 24 62 Other segment expense 1,780 1,355 1,079 1,190 5,404 Segment operating income $ 267 $ 591 $ 125 $ 152 $ 1,135 Corporate expense 34 Total operating income $ 1,101 The statement of operations performance measures used to evaluate segment performance are revenues and operating income.
Note 10 / six-month segment and consolidated operating results · Filed 04/08/2026
The increase in revenues for the six months ended July 3, 2026, as compared to the six months ended July 4, 2025, was primarily attributable to a net increase in volumes, program wins, $152 million recognized from the acquisition of Entrust and a $37 million favorable impact from exchange rate movements, partially offset by the completion of certain contracts and write-downs on certain programs.
MD&A / Homeland / growth drivers and program write-downs · Filed 04/08/2026
The decrease in operating income for the six months ended July 3, 2026, as compared to the six months ended July 4, 2025, was primarily attributable to the completion of higher-margin contracts, partially offset by program wins.
MD&A / Defense / completion of higher-margin contracts · Filed 04/08/2026
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended (unaudited; in millions) July 3, 2026 July 4, 2025 Cash flows from operations: Net income $ 691 $ 758 Adjustments to reconcile net income to net cash provided by operations: Depreciation and amortization 153 141 Stock-based compensation 51 46 Deferred income taxes (2) 200 Net loss on pension plan settlement 20 — Other 14 — Change in assets and liabilities, net of effects of acquisitions and dispositions: Receivables (193) (236) Other current assets and other long-term assets 38 (34) Accounts payable and accrued liabilities and other long-term liabilities 97 (260) Accrued payroll and employee benefits 34 7 Income taxes receivable/payable 191 (78) Net cash provided by operating activities 1,094 544 Cash flows from investing activities: Acquisition of a business, net of cash acquired (2,338) (285) Payments for property, equipment and software (63) (51) Divestiture of a business 4 — Net proceeds from sale of assets 4 — Other (4) — Net cash used in investing activities (2,397) (336) Cash flows from financing activities: Proceeds from debt issuance 1,397 997 Repayments of borrowings (10) (559) Payments for debt issuance costs (15) (7) Dividend payments (110) (105) Repurchases of stock and other (315) (537) Proceeds from issuances of stock 33 31 Net capital distributions to non-controlling interests (3) (7) Other (7) (6) Net cash provided by (used in) financing activities 970 (193) Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash — 14 See accompanying notes to condensed consolidated financial statements.
Condensed Consolidated Statements of Cash Flows / six months · Filed 04/08/2026
We had outstanding debt of $6.0 billion and $4.6 billion at July 3, 2026, and January 2, 2026, respectively.
Liquidity and Capital Resources / outstanding debt · Filed 04/08/2026
The preliminary fair values of the assets acquired and liabilities assumed at the Acquisition Date were as follows (in millions): Cash and cash equivalents $ 47 Receivables 162 Other current assets 18 Property, plant and equipment 12 Intangible assets 664 Operating lease right-of-use assets 22 Deferred tax liabilities (75) Accounts payable and accrued liabilities (75) Accrued payroll and employee benefits (21) Operating lease liabilities (18) Total identifiable net assets acquired 736 Goodwill 1,652 Purchase price $ 2,388 Due to the timing and complexity of the acquisition, the assets acquired and liabilities assumed were recorded at their preliminary estimated fair values.
Note 3 / Entrust preliminary purchase-price allocation · Filed 04/08/2026
Note 8–Earnings Per Share The following table provides a reconciliation of the weighted average number of shares outstanding used to compute basic and diluted EPS for the periods presented: Three Months Ended Six Months Ended (in millions) July 3, 2026 July 4, 2025 July 3, 2026 July 4, 2025 Basic weighted average number of shares outstanding 126 129 126 129 Dilutive common share equivalents—stock options and other stock awards — 1 1 1 Diluted weighted average number of shares outstanding 126 130 127 130 Anti-dilutive stock-based awards are excluded from the weighted average number of shares outstanding used to compute diluted EPS.
Note 8 / weighted average diluted shares · Filed 04/08/2026
For fiscal 2025, each named executive officer received a mix of long-term incentive awards composed of PSUs (50%), PRSUs (30%) and stock options (20%).
Compensation Discussion and Analysis / actual 2025 long-term grants · Filed 19/03/2026
2025 Long-Term Incentive Plan Metric Weight Cumulative Adjusted EBITDA ($) 50% Relative Total Shareholder Return 50% The chart below shows our performance share plan payout scale: Payout Cumulative Adjusted EBITDA ($) Relative TSR Achievement Threshold 50% 80% of 3-Year Target 30th Percentile of Peer Group Target 100% 3-Year Target 50th Percentile of Peer Group Maximum 200% 120% of 3-Year Target 75th Percentile of Peer Group We utilize a negative Total Shareholder Return (TSR) cap.
2025 Long-Term Incentive Plan / metrics, targets and payout scale · Filed 19/03/2026
One-year performance period Financial uAdjusted EBITDA Margin (%) (40%) uOperating Cash Flow (30%) uRevenue (30%) uDesigned to reward executives for annual performance on key operational and financial measures.
2025 executive compensation / annual incentive metrics · Filed 19/03/2026
For purposes of our compensation program, we exclude revenues from acquired companies that were not originally included in the calculation of compensation targets.
Compensation Discussion and Analysis / acquired-revenue exclusions · Filed 19/03/2026
Adjusted earnings per share hurdle must be met with respect to the first year following the date of grant for units to be eligible for vesting.
2025 executive compensation / PRSU first-year performance hurdle · Filed 19/03/2026
The following table highlights certain of our corporate governance practices and policies: uIndependent Chair with robust and well-defined responsibilities uExecutive session during every Board meeting led by the Independent Chair without management present uNo supermajority stockholder voting requirements in our charter or bylaws uProxy access right for stockholders uAnnual election of all directors uMajority voting with resignation policy for directors in uncontested elections uAnnual Board and Committee evaluations and periodic, third-party facilitated evaluations uRisk oversight by Board and Committees uIndependent directors focus on executive succession planning uIndependent Committee chairs uAnnual advisory vote on executive compensation uMeaningful stock ownership requirements for directors and executives uRobust board refreshment process uAnnual review of Committee charters and Corporate Governance Guidelines uRight of stockholders to call special meetings LEIDOS 9 PROXY SUMMARY STOCKHOLDER ENGAGEMENT Throughout the year, members of our Investor Relations team and our business leaders have engaged with many of our top stockholders to seek their input and feedback, remain well-informed regarding their perspectives, and help increase their understanding of our business.
Corporate Governance Highlights / existing shareholder and board practices · Filed 19/03/2026
The Board’s Audit & Finance, Human Resources & Compensation and Corporate Governance & Ethics Committees are each led by and composed entirely of independent directors.
Corporate Governance / independent committee composition · Filed 19/03/2026
(3)On July 31, 2026, our Board of Directors ratified the purchase of one share of common stock inadvertently purchased in excess of the previously authorized share repurchase program.
Issuer Purchases / ratification of excess one-share purchase · Filed 04/08/2026
Revenues for the quarter were $4.56 billion, up 7% compared to the second quarter of 2025, including 4% organically.
Quarterly results / reported and organic revenue growth · Filed 04/08/2026
The increases were primarily due to favorable changes in working capital, excess tax payments made in the prior year and the timing of payroll and employee benefit payments.
Liquidity / working-capital and tax timing contributions to cash growth · Filed 04/08/2026
The lower profitability resulted from schedule delays on a fixed price development program.
Defense results / fixed-price development schedule delays · Filed 05/05/2026
As of July 3, 2026, we had $20 billion of RPO and expect to recognize approximately 63% and 82% over the next 12 months and 24 months, respectively, with the remainder to be recognized thereafter.
Note 2 / remaining performance obligations and expected recognition · Filed 04/08/2026
BOOKINGS AND BACKLOG
Effective fiscal 2025, we changed our backlog policy to include estimated future revenue on task orders expected to be awarded under sole source indefinite delivery/indefinite quantity ("IDIQ") contracts in our reported backlog.
Bookings and Backlog / expanded backlog definition · Filed 17/02/2026
As a result, unfunded backlog increased $4,836 million from our prior year annual report amounts.
Bookings and Backlog / prior-year unfunded backlog recast · Filed 17/02/2026
We reduced revenue by $8 million and recognized revenue of $27 million from performance obligations satisfied in previous periods for three months ended April 3, 2026, and April 4, 2025, respectively.
Revenue accounting / revisions to prior-period performance obligations · Filed 05/05/2026
The changes primarily relate to revisions of variable consideration including award and incentive fees, and revisions to estimates at completion resulting from changes in contract scope, mitigation of contract risks or true-ups of contract estimates at the end of contract performance.
Revenue accounting / variable consideration and estimate revisions · Filed 05/05/2026
Profitability in the current quarter reflected excellent program execution and disciplined cost management across the portfolio; profitability in the year-ago quarter benefited from several one-time, non-operational gains, including a $25 million insurance reimbursement for legal costs.
Quarterly profitability / management execution claims and prior-year insurance benefit · Filed 04/08/2026
This award will align to the Leidos Security Enterprise Solutions and Analogic Corporation joint venture upon its formation.
New Business Awards / intended security-products joint-venture alignment · Filed 04/08/2026
