Leidos Holdings (LDOS) Earnings Date & Reports

Leidos delivered solid Q1 results, exceeding Wall Street expectations. Revenue rose 4% year-over-year to $4.4 billion (3% organic growth), topping consensus of $4.29 billion. Growth stemmed from intelligence and digital segments (up 7%) and homeland security (up 6%), offset by flat health and slight defense gains.

GAAP net income was $335 million ($2.56 diluted EPS), down from $363 million ($2.77) last year due to higher expenses. Non-GAAP diluted EPS of $3.13 beat estimates of $2.91 and grew 5%, supported by operational efficiencies and a $15 million insurance reimbursement. Adjusted EBITDA increased 2% to $614 million (14.0% margin, vs. 14.2% prior year).

Operating cash flow surged to $301 million from $58 million, with non-GAAP free cash flow at $270 million. Funded backlog jumped 31% to $9.6 billion; total backlog up 4% to $48.4 billion (trailing 12-month book-to-bill 1.1x). Management highlighted ENTRUST acquisition benefits, closed in March for $2.4 billion, already accretive.

FY2026 guidance was raised: revenue $18.0–$18.4 billion (prior $17.5–$17.9 billion), non-GAAP EPS $12.10–$12.50 (prior $12.05–$12.45), cash flow from operations ~$1.8 billion. Mid-teens adjusted EBITDA margin unchanged.

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Market Reaction and Investor Sentiment

Despite beating Q1 estimates and raising guidance, LDOS shares fell sharply post-earnings, dropping 7–8% to around $137–$149 in early trading on May 6. The decline erased over $1 billion in market value, signaling profit-taking after recent gains and caution over Q2 as the "low point" for growth/margins due to pull-forwards and investments. Sentiment remains mixed: positive on beats, backlog strength, and ENTRUST synergies, but tempered by segment divergences (e.g., flat health/defense) and government contract timing risks.

Forward Outlook and Key Factors to Monitor

Leidos' raised FY2026 guidance underscores confidence in its NorthStar 2030 strategy, blending organic growth with accretive M&A (mergers and acquisitions). The ENTRUST deal, integrating ahead of schedule, boosts cyber/digital infrastructure pipelines to $24–$34 billion combined, with $10 billion post-close orders. Expect H2 acceleration as new awards ramp, including defense tech like AGM-190A missiles and health pilots for AI-driven records.

Key metrics to track include quarterly cadence: Q2 may see revenue/margin dips from Q1 pull-forwards, absent one-offs like insurance gains, and growth investments. Backlog conversion remains vital, with $8–10 billion in expected defense/energy awards. Health segment flat this year but poised for digital/rural health gains, targeting 20%+ margins via efficiencies.

Broader dynamics: U.S. defense budget stability, AI/cyber demand, and federal IT modernization. Debt at $6.3 billion (2.6x leverage) supports buybacks/dividends ($298 million returned Q1), but monitor CapEx (~$350 million) and JV (joint venture) closes like SES with Analogic. Long-term pillars—defense tech, managed health, cyber, energy resilience—signal multi-year growth, barring budget delays.

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