AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-3: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 5/6 · 31/10/2026
Moat63
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
structural advantage · 3/4 · Installed FAA automation systems, decade-plus extensions and repeat cyber and aircraft-support awards demonstrate strong program-specific incumbency. Disclosed technical expertise explains a plausible source of that position. Replacement costs and technological exclusivity remain unquantified, so this supports a narrow advantage rather than broad customer lock-in.
durability · 3/4 · FAA extensions exceeding ten years demonstrate persistence on selected programs, supplemented by subsequent cyber renewals and an aircraft-support follow-on. Competitive task orders and government licensing and termination rights constrain extrapolation across the portfolio. The evidence supports durable selected relationships, without guaranteeing their continuation.
customer dependency · 2/4 · Leidos supplies key FAA operational systems, and repeat awards demonstrate meaningful customer reliance. Dependency remains mixed because government customers can control work-in-process and terminate contracts. The RHRP modification explicitly accompanies a long-term transition strategy, illustrating that continued service can coexist with preparations for change.
erosion resilience · 2/4 · Renewals, a follow-on award and 4% second-quarter 2026 organic growth show continuing demand. Health volume contraction and fixed-price development delays demonstrate actual vulnerabilities. Technological and procurement changes introduce additional competitive risk, but the risk disclosure alone does not establish realized share loss.
Pricing power—
Insufficient evidence for every rubric criterion; no category score is inferred.
realized pricing · — · The catalog discloses modest annual escalations included in bids and limited pricing leverage, but does not show realized comparable-service prices or isolate price from volume and mix. Health contraction is attributed to volumes. These passages establish constraints, not an observed pricing outcome sufficient for this criterion.
retention · 3/4 · Decade-plus FAA extensions, renewal of two cyber task orders and the AIS PIS follow-on directly demonstrate repeat demand across selected activities. This is strong contractual evidence without an inferred retention rate. Health volume contraction and the RHRP transition disclosure limit the breadth of the conclusion.
margin resilience · 2/4 · Fiscal 2025 operating-income improvement reflected efficiencies and contract write-ups, but first-half 2026 revenue increased while operating income declined. Health volumes, fixed-price requirement changes and development delays show mixed resilience. Prior-year insurance reimbursement also affects comparisons. These operating results do not independently establish pricing power.
contractual freedom · 1/4 · Negotiated fixed hourly rates, competitive fixed-price awards and government cost-based pricing rules materially restrict discretion. Leidos explicitly discloses limited pricing leverage and power to renegotiate multi-year contracts. Some negotiation remains possible, but termination rights and competitive procurement favor the customer.
Predictability100
5 consecutive published 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
- observedAnnualPeriods
- 5.00
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, an original issuer-reported unadjusted EBIT reconciled to net income, income tax and signed net interest, or reported pretax profit plus reported gross interest expense. Reported EBIT is distinct from GAAP operating income and gross interest. 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, an original issuer-reported unadjusted EBIT reconciled to net income, income tax and signed net interest, or EBIT calculated from reported pretax profit plus reported gross interest expense; the issuer-reported EBIT is distinct from GAAP operating income and gross interest; 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. ROIC remains undefined for nonpositive invested capital; the explicit asset-return alternative does not change the ROIC chart. Missing financial inputs alone never trigger an alternative. 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 2026 operating cash flow of $1.094 billion exceeded $63 million of capital spending, and diluted weighted average shares declined. However, $2.338 billion of acquisition spending accompanied debt growth and continued distributions. Cash improvement partly reflected working-capital and payment timing; acquisition returns remain unproven.
incentive alignment · 3/4 · Actual 2025 equity grants, three-year performance targets, cash-flow incentives, acquired-revenue exclusions and a negative-TSR payout cap support alignment. First-year PRSU hurdles and adjusted metrics limit strength. Aggregate beneficial ownership was approximately 0.77% on February 27, 2026. Subsequent plan approval establishes authorization, not grants or vesting.
execution · 2/4 · Named renewals, the aircraft-support follow-on, organic growth and cash generation demonstrate commercial and operating achievements, partly through indirect evidence of delivery. Health contraction, fixed-price requirement changes and development delays offset that progress. Execution is mixed; favorable management characterizations do not establish exceptional performance.
governance · 3/4 · Disclosed independent leadership, fully independent key committees, shareholder rights and actual annual director elections support strong governance structures. October's new-director independence determination provides additional current evidence. The ratified one-share authorization overrun is a minor realized control lapse. Structures alone do not demonstrate 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.
2024 Form 10-K, filed 2025-02-11: business, FAA contract extensions · Filed 11/02/2025
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.
2024 Form 10-K, filed 2025-02-11: business, installed FAA automation systems · 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.
First-quarter 2026 earnings release, filed 2026-05-05: new business awards, cyber 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.
Second-quarter 2026 earnings release, filed 2026-08-04: new business awards, AIS PIS follow-on · Filed 04/08/2026
We compete by offering strong technical expertise, mission understanding, and retaining qualified staff, including those with security clearances.
2025 Form 10-K, filed 2026-02-17: competition, expertise and qualified staff · Filed 17/02/2026
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.
2024 Form 10-K, filed 2025-02-11: principal competitors · Filed 11/02/2025
Under a multiple-award IDIQ contract, task orders are competitively bid by the contractors awarded the IDIQ.
2025 Form 10-K, filed 2026-02-17: competitive multiple-award IDIQ task orders · Filed 17/02/2026
Generally, the U.S. government may disclose or license such information to third parties, including, in some instances, our competitors.
2025 Form 10-K, filed 2026-02-17: government disclosure and licensing rights · Filed 17/02/2026
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.
2025 Form 10-K, filed 2026-02-17: revenue recognition, termination and work-in-process 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.
2025 Form 10-K, filed 2026-02-17: competition from technological and procurement changes · Filed 17/02/2026
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.
Second-quarter 2026 Form 10-Q, filed 2026-08-04: Health results and volume contraction · Filed 04/08/2026
The lower profitability resulted from schedule delays on a fixed price development program.
First-quarter 2026 earnings release, filed 2026-05-05: Defense fixed-price development delays · Filed 05/05/2026
Revenues for the quarter were $4.56 billion, up 7% compared to the second quarter of 2025, including 4% organically.
Second-quarter 2026 earnings release, filed 2026-08-04: reported and organic revenue growth · Filed 04/08/2026
Organic revenues capture the revenue that is inherent in the underlying business excluding the impact of acquisitions and divestitures made within the prior year; it is computed as current revenues excluding revenues from acquisitions within the last 12 months and divestitures within the current and year-ago periods.
Second-quarter 2026 earnings release, filed 2026-08-04: organic revenue definition · Filed 04/08/2026
military reservists under a potential 30-month, $325 million contract modification while the DHA finalizes its long-term transition strategy for RHRP.
Second-quarter 2026 earnings release, filed 2026-08-04: RHRP modification and customer transition strategy · Filed 04/08/2026
However, our approach to include modest annual price escalations in our bids for multi-year work may be insufficient to account for and mitigate inflationary cost pressures, which may result in cost overruns on contracts.
2025 Form 10-K, filed 2026-02-17: bid escalations and inflation risk · Filed 17/02/2026
In the competitive environment in which we operate as a government contractor, the lack of pricing leverage and power to renegotiate long-term, multi-year contracts, coupled with reduced customer buying power as a result of inflation, could reduce our profits, disrupt our business or otherwise materially adversely affect our results of operations.
2025 Form 10-K, filed 2026-02-17: limited pricing leverage and renegotiation power · 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.
2025 Form 10-K, filed 2026-02-17: 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.
2025 Form 10-K, filed 2026-02-17: competitive and negotiated fixed-price contracts · 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.
2025 Form 10-K, filed 2026-02-17: government cost-based pricing rules · 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.
2025 Form 10-K, filed 2026-02-17: operating-income improvement drivers · 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.
Second-quarter 2026 Form 10-Q, filed 2026-08-04: six-month consolidated and segment operating results · Filed 04/08/2026
The increase in operating loss for the three months ended July 3, 2026, as compared to the three months ended July 4, 2025, was primarily attributable to the receipt of a $25 million insurance reimbursement in the prior year for legal costs primarily incurred prior to fiscal year 2025, and increased acquisition and integration costs in the current year.
Second-quarter 2026 Form 10-Q, filed 2026-08-04: Corporate operating-loss comparison and prior-year insurance reimbursement · Filed 04/08/2026
Non-GAAP operating margin decreased to 8.5% from 9.4% in the prior year quarter as the result of changing customer requirements on a fixed price program.
First-quarter 2026 earnings release, filed 2026-05-05: changing requirements on a fixed-price program · Filed 05/05/2026
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.
Second-quarter 2026 Form 10-Q, filed 2026-08-04: six-month cash flows, acquisitions, capital spending and distributions · 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.
Second-quarter 2026 Form 10-Q, filed 2026-08-04: operating-cash-flow growth drivers · Filed 04/08/2026
We had outstanding debt of $6.0 billion and $4.6 billion at July 3, 2026, and January 2, 2026, respectively.
Second-quarter 2026 Form 10-Q, filed 2026-08-04: outstanding debt · Filed 04/08/2026
Note 8–Earnings Per Share The following table provides a reconciliation of the weighted average number of shares outstanding used to compute basic and diluted EPS for the periods presented: Three Months Ended Six Months Ended (in millions) July 3, 2026 July 4, 2025 July 3, 2026 July 4, 2025 Basic weighted average number of shares outstanding 126 129 126 129 Dilutive common share equivalents—stock options and other stock awards — 1 1 1 Diluted weighted average number of shares outstanding 126 130 127 130 Anti-dilutive stock-based awards are excluded from the weighted average number of shares outstanding used to compute diluted EPS.
Second-quarter 2026 Form 10-Q, filed 2026-08-04: weighted average shares and dilution · Filed 04/08/2026
For fiscal 2025, each named executive officer received a mix of long-term incentive awards composed of PSUs (50%), PRSUs (30%) and stock options (20%).
2026 proxy statement, filed 2026-03-19: actual fiscal 2025 executive equity award mix · Filed 19/03/2026
2025 Long-Term Incentive Plan Metric Weight Cumulative Adjusted EBITDA ($) 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.
2026 proxy statement, filed 2026-03-19: performance-share metrics, three-year targets and payout scale · 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.
2026 proxy statement, filed 2026-03-19: exclusion of acquired revenue from compensation calculations · 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.
2026 proxy statement, filed 2026-03-19: first-year adjusted EPS vesting hurdle · Filed 19/03/2026
As a group, our directors and executive officers beneficially own approximately 0.77% of our common stock.
2026 proxy statement, filed 2026-03-19: aggregate director and executive beneficial ownership · Filed 19/03/2026
The following table sets forth, as of February 27, 2026, the beneficial ownership of our common stock by our directors and the named executive officers, and all of our directors and executive officers as a group.
2026 proxy statement, filed 2026-03-19: beneficial ownership measurement date, February 27, 2026 · 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.
2026 proxy statement, filed 2026-03-19: governance practices and shareholder rights · 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.
2026 proxy statement, filed 2026-03-19: independence of key board committees · 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.
Second-quarter 2026 Form 10-Q, filed 2026-08-04: July 31 ratification of one-share repurchase authorization overrun · Filed 04/08/2026
(the "Company"), the Company's stockholders approved (i) the Company's 2026 Omnibus Incentive Plan (the "2026 Plan") and (ii) the Company's 2026 Employee Stock Purchase Plan (the "2026 ESPP").
Form 8-K, filed 2026-05-06: stockholder approval of 2026 incentive and employee stock purchase plans · Filed 06/05/2026
1. The nominees for election to the Company's Board set forth in Proposal 1 to the Company’s Proxy Statement, were elected, each for a one-year term, based upon the following votes:
Nominee
For
Against
Abstentions
Broker Non-Votes
Thomas A.
Form 8-K, filed 2026-05-06: actual election of directors for one-year terms · Filed 06/05/2026
The Board has determined that Mr. McElfresh is independent and meets the applicable independence requirements of the New York Stock Exchange.
Form 8-K, filed 2026-10-01: board determination of new director independence · Filed 01/10/2026
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.
2026 proxy statement, filed 2026-03-19: annual incentive financial metrics and weights · Filed 19/03/2026
This means that if the Company’s absolute TSR is negative, the payout will be limited to 100%.
2026 proxy statement, filed 2026-03-19: payout cap when absolute shareholder return is negative · Filed 19/03/2026
