GET DAILY SIGNALSLeidos (LDOS) Delivers +19% Non-GAAP EPS Growth in Q3
Key Takeaways
- Leidos reported non-GAAP diluted earnings per share (EPS) of $3.62, up 19% year over year and well above the roughly $3.04 consensus estimate.
- Revenue came in at $4.63 billion, up 4% from a year ago but slightly below the approximately $4.71 billion Wall Street had projected.
- Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) reached $644 million, with the margin improving to 13.9%.
- The company raised its fiscal 2026 non-GAAP EPS guidance to $12.50–$12.70 while lowering its full-year revenue range to $18.00–$18.20 billion.
- Health segment weakness tied to Veterans Benefits Administration (VBA) contract changes weighed on results, and management signaled 2027 will not be a bottom-line growth year.
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Why This Earnings Report Matters
Leidos Holdings is a leading defense, intelligence, and government technology contractor with a fiscal year that ends in early January, making its third-quarter fiscal 2026 report cover the three months ended in early October. This earnings event matters because it tests how well the company is absorbing the previously announced changes to its VBA disability exam contracts, which drive a large share of its Health segment. It also offers a read on demand across defense technology, homeland security, and intelligence programs, areas where Leidos has been winning substantial new awards. Investors are watching whether strong profit conversion and cash generation can offset softer top-line growth, and how updated full-year guidance frames the path into 2027. I also checked this using Tickeron’s AI Screener to see how the stock compares to others in the industry.
Breaking Down the Reported Results
Leidos delivered third-quarter fiscal 2026 revenue of $4.63 billion, a 4% increase from $4.47 billion a year earlier, though slightly below the consensus estimate of about $4.71 billion. Organic growth was roughly 1%, reflecting the impact of the VBA contract changes. On the bottom line, GAAP diluted EPS was $3.28, up from $2.82 in the prior-year quarter, while non-GAAP diluted EPS climbed 19% to $3.62, exceeding the approximately $3.04 consensus estimate. Adjusted EBITDA rose 5% to $644 million, with the adjusted EBITDA margin improving to 13.9% from 13.8%.
Segment results were mixed. Homeland led growth with a 32% revenue increase to $1.02 billion, helped by the ENTRUST Solutions acquisition and strong air traffic management demand. Defense rose 3% to $992 million, and Intelligence & Digital edged up 1% to $1.55 billion. Health was the weak spot, with revenue down 12% to $1.07 billion as expected VBA-related program shifts took hold. Cash generation remained a highlight, with $523 million in operating cash flow and $476 million in free cash flow during the quarter. Net awards totaled $5.5 billion, producing a 1.2x book-to-bill ratio, while total backlog reached $49.6 billion, up 4% year over year. From what I see, the cash flow strength stands out as a key positive here.
Market Reaction and Investor Sentiment
The market's response to Leidos' report was cautious despite a sizable earnings beat. Shares fell after the release, with reports indicating a decline of roughly 4% to 6% in the trading session that followed, leaving the stock well below its 52-week high. The negative reaction likely reflected a combination of factors: the top-line miss against consensus, continued uncertainty around the VBA contract recompete, and management's explicit warning that fiscal 2027 will not be a bottom-line growth year. Investors appeared to weigh those medium-term headwinds against otherwise strong profitability, cash flow, and backlog momentum, producing a mixed sentiment picture heading into the final quarter of the fiscal year.
Forward Outlook and Key Factors to Monitor
Leidos revised its fiscal 2026 outlook, raising its non-GAAP diluted EPS guidance to a range of $12.50 to $12.70, up from $12.20 to $12.50, while lowering its full-year revenue guidance to $18.00 to $18.20 billion from $18.20 to $18.40 billion. The lower revenue range reflects the October 5, 2026 contribution of the Security Enterprise Solutions and Industrial Automation businesses to a newly formed joint venture, in which Leidos retained a 41.5% equity stake. The company also raised its operating cash flow guidance to approximately $1.90 billion from $1.85 billion, while keeping its adjusted EBITDA margin outlook in the mid-13% range.
Looking ahead, investors should monitor the VBA Medical Disability Examination recompete, where management expects a final request for proposals later in November and a likely extension of existing contracts into the first half of 2027. The outcome of this process will be central to the Health segment's trajectory. Management also cautioned that 2027 will not be a bottom-line growth year, attributing the pressure to the VBA contract transition.
Offsetting that headwind, Leidos pointed to accelerating customer procurement activity, a large pipeline of roughly $28 billion awaiting decision, and strong defense book-to-bill momentum of 1.9x in the quarter. Continued wins in defense technology, energy, cyber, and homeland security — alongside disciplined cost control and capital deployment, including $500 million in share repurchases and a dividend increase — will be important signals to watch in coming quarters. These factors do not guarantee any particular outcome, but they help frame the balance between near-term transition pressure and longer-term growth potential. I’m watching the VBA recompete closely as it unfolds.
AI Tools in My Research Process
In my view, Tickeron’s AI Daily Buy/Sell Signals has added useful context when reviewing earnings releases like this one. It helps flag potential momentum shifts and compare signals across the sector without replacing core fundamental analysis. I’ve found it a practical way to cross-check my own takeaways on names such as LDOS ahead of guidance updates.
Disclaimer
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Contributor
Sergey Savastiouk, Ph.D. has a degree in Applied Mathematics from Moscow University and has extensive experience as an entrepreneur, investor, manager, and mathematician. His professional expertise is in applied mathematics, mathematical modeling, system and pattern analysis, and software and hardware system integration. He has served as the CEO of several hi-tech start-up companies and nonprofit organizations, which has given him proven capabilities in business strategy for high-tech start-up companies, market assessment, company formation, team building, product development, marketing, and sales. He has published numerous articles in journals and magazines on related fields. As a retail investor, he spent 15 years developing his proprietary trading and quantitative algorithms (now Tickeron’s A.I.), which brought him significant returns in trading the stock market. His current work and goal in founding Tickeron is to bring professional, sophisticated stock market analysis capabilities to retail investors via an easy-to-use interface.
LDOS in upward trend: price rose above 50-day moving average on October 22, 2026
LDOS moved above its 50-day moving average on October 22, 2026 date and that indicates a change from a downward trend to an upward trend. In 22 of 29 similar past instances, the stock price increased further within the following month. The odds of a continued upward trend are 76%.
Technical Analysis (Indicators)
Bullish Trend Analysis
The Momentum Indicator moved above the 0 level on October 15, 2026. You may want to consider a long position or call options on LDOS as a result. In 41 of 70 past instances where the momentum indicator moved above 0, the stock continued to climb. The odds of a continued upward trend are 59%.
The Moving Average Convergence Divergence (MACD) for LDOS just turned positive on October 12, 2026. Looking at past instances where LDOS's MACD turned positive, the stock continued to rise in 28 of 42 cases over the following month. The odds of a continued upward trend are 67%.
The 10-day moving average for LDOS crossed bullishly above the 50-day moving average on October 27, 2026. This indicates that the trend has shifted higher and could be considered a buy signal. In 9 of 13 past instances when the 10-day crossed above the 50-day, the stock continued to move higher over the following month. The odds of a continued upward trend are 69%.
Following a +2.23% 3-day Advance, the price is estimated to grow further. Considering data from situations where LDOS advanced for three days, in 216 of 330 cases, the price rose further within the following month. The odds of a continued upward trend are 65%.
Bearish Trend Analysis
The 10-day RSI Indicator for LDOS moved out of overbought territory on November 03, 2026. This could be a bearish sign for the stock. Traders may want to consider selling the stock or buying put options. Tickeron's A.I.dvisor looked at 40 similar instances where the indicator moved out of overbought territory. In 19 of the 40 cases, the stock moved lower in the following days. This puts the odds of a move lower at 47%.
The Stochastic Oscillator demonstrated that the ticker has stayed in the overbought zone for 13 days. The longer the ticker stays in the overbought zone, the sooner a price pull-back is expected.
Following a 3-day decline, the stock is projected to fall further. Considering past instances where LDOS declined for three days, the price rose further in 50 of 62 cases within the following month. The odds of a continued downward trend are 56%.
LDOS broke above its upper Bollinger Band on October 26, 2026. This could be a sign that the stock is set to drop as the stock moves back below the upper band and toward the middle band. You may want to consider selling the stock or exploring put options.
The Aroon Indicator for LDOS entered a downward trend on October 16, 2026. This could indicate a strong downward move is ahead for the stock. Traders may want to consider selling the stock or buying put options.
Fundamental Analysis (Ratings)
The Tickeron SMR rating for this company is 35 (best 1 - 100 worst), indicating strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron Price Growth Rating for this company is 42 (best 1 - 100 worst), indicating steady price growth. LDOS’s price grows at a higher rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron Valuation Rating of 62 (best 1 - 100 worst) indicates that the company is fair valued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (3.424) is normal, around the industry mean (2.796). P/E Ratio (13.250) is within average values for comparable stocks, (18.242). Projected Growth (PEG Ratio) (0.970) is also within normal values, averaging (2.284). Dividend Yield (0.012) settles around the average of (0.207) among similar stocks. P/S Ratio (0.943) is also within normal values, averaging (139.965).
The Tickeron Profit vs. Risk Rating rating for this company is 69 (best 1 - 100 worst), indicating that the returns do not compensate for the risks. LDOS’s unstable profits reported over time resulted in significant Drawdowns within these last five years. A stable profit reduces stock drawdown and volatility. The average Profit vs. Risk Rating rating for the industry is 93, placing this stock better than average.
The Tickeron PE Growth Rating for this company is 80 (best 1 - 100 worst), pointing to worse than average earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
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a provider of scientific, engineering, systems integration and technical services and solutions
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