Executive Summary

Q2 2026 primary-source materials (8-K 2.02 press release and earnings call transcript) are not yet available; this recap anchors on Leidos’ latest reported quarters (Q3 2025 and Q2 2025) and S&P Global consensus for Q2 2026, noting any unavailability explicitly .
Q3 2025 delivered $4.47B revenue (+7% YoY), GAAP diluted EPS $2.82, adjusted EBITDA $616M (13.8% margin), and strong cash conversion ($711M CFO; $680M FCF), supported by bookings of $5.9B (1.3x book-to-bill) and backlog of $47.7B .
Leidos raised FY25 margin and EPS guidance in Q3 2025 (adjusted EBITDA margin to high-13%; non-GAAP EPS to $11.45–$11.75) while maintaining revenue and cash guidance, signaling confidence despite shutdown and efficiency reviews .
Segment performance was broad-based: National Security & Digital (+8% YoY), Health & Civil margin uplift to 25.2%, Defense Systems (+11% YoY), with Commercial & International slightly down (-1% YoY) on product mix .
Heading into 2026, management emphasized momentum in defense tech (IFPC, hypersonics), energy infrastructure, airport/border modernization, and AI deployment—key catalysts likely to drive estimate revisions and stock narrative as Q2 2026 approaches .

What Went Well and What Went Wrong

What Went Well

Health & Civil achieved record profitability with operating margin of 25.2%, driven by high exam volumes and timing of incentive awards; non-GAAP segment margin reached 25.7% .
Quote: “Medical disability exam volumes helped drive record non-GAAP operating income margin of 25.7%” .
Defense Systems revenue rose 11% YoY on integrated air defense (IFPC) and radar programs; management highlights a robust franchise pipeline tied to Golden Dome, hypersonics, and small cruise missiles .
Strong cash generation and capital deployment: $711M CFO; $680M FCF; $450M term-loan paydown; $102M buybacks; increased dividend to $0.43, underscoring balance sheet flexibility .

What Went Wrong

Commercial & International revenue dipped 1% YoY; margin compressed on security product mix, partially offset by energy infrastructure demand .
National Security & Digital margin modestly decreased to 9.5% (from 10.0%), reflecting integration and program mix; non-GAAP margin declined to 10.0% .
Management noted government shutdown and efficiency headwinds impacting award timing and cash collections risk into 2026, necessitating wider near-term guidance ranges .

Financial Results

Metric	Q2 2025 Actual	Q3 2025 Actual	Q4 2025 Consensus	Q1 2026 Consensus	Q2 2026 Consensus
Revenue ($USD Billions)	$4.253	$4.469	$4.308*	$4.375*	$4.413*
GAAP Diluted EPS ($)	$3.01	$2.82	$2.5817*	$2.9931*	$3.0609*
Adjusted EBITDA ($USD Millions)	$647	$616	$534.0*	$606.0*	$616.8*
Adjusted EBITDA Margin (%)	15.2%	13.8%	—	—	—
Non-GAAP Diluted EPS ($)	$3.21	$3.05	—	—	—

Values retrieved from S&P Global for consensus periods (marked with *).

Segment Breakdown (Q3 2025)

Segment	Revenue ($USD Millions)	Operating Income ($USD Millions)	Operating Margin (%)
National Security & Digital	$2,015	$191	9.5%
Health & Civil	$1,301	$328	25.2%
Commercial & International	$571	$38	6.7%
Defense Systems	$582	$37	6.4%
Total	$4,469	$535	12.0%

KPIs (Q3 2025)

KPI	Value
Net Bookings	$5.9B; Book-to-Bill 1.3x
Backlog (Total/Funded)	$47,656M / $9,064M
Cash From Operations / Free Cash Flow	$711M / $680M
DSO	60 days
Cash / Debt	$974M cash; ~$4.7B debt
Share Repurchases / Dividend	$102M repurchases; $0.43 dividend declared

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenues (B)	FY25	$17.00–$17.25	$17.00–$17.25	Maintained
Adjusted EBITDA Margin	FY25	Mid-13%	High-13%	Raised
Non-GAAP Diluted EPS	FY25	$11.15–$11.45	$11.45–$11.75	Raised
Operating Cash Flow (B)	FY25	~$1.65	~$1.65	Maintained

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 2025)	Current Period (Q3 2025)	Trend
AI-enabled efficiency and margin	Intelligent austerity; record adj. EBITDA margin 15.2%; Trusted Mission AI savings, proposal/productivity gains	Continued AI deployment across segments; investment ramp for demos in 2H	Sustained; investment increasing
Defense tech (IFPC, hypersonics, small cruise missiles)	Strong DS revenue; IFPC ramp; hypersonics runway; franchise programs pipeline	DS +11% YoY; IFPC multiple systems; maritime autonomy emphasized	Accelerating
Energy infrastructure	Highlighted as growth pillar; $600M annual revenue; AI Skywire cost reduction ~30%	Sector leads growth/profitability in C&I	Strengthening
Airport/Border modernization	FAA ATC modernization; TSA pilots; CBP VACS orders; non-intrusive inspection opportunity	TSA/airport pilots; CBP momentum; funded backlog up 27% seq	Improving
Shutdown/efficiency reviews (macro)	Headwinds; guidance raised despite award delays	Wider ranges; cash timing risk into 2026; modest impact	Stabilizing
Health & Civil exams/VBA	Record volumes; scheduling/tech investments; rural exams	Record margins; sustain robust share despite 4th vendor	Robust; sustaining

Management Commentary

“We are raising our 2025 earnings and margin guidance and holding firm on our 2025 revenue and cash guidance.” – CEO Tom Bell .
“Adjusted EBITDA margin of 13.8%… Non-GAAP diluted EPS grew 4% to $3.05… increased legal reserves by $24M, still generated $616M in adjusted EBITDA.” – CFO Chris Cage .
“We’re tracking ~10 franchise programs… $15B potential over five years… air/base defense, counter-UAS, hypersonics, Black Arrow.” – CEO Tom Bell .
“Energy infrastructure… double-digit growth and margins… Skywire AI platform routinely reduces project costs by ~30%.” – CEO Tom Bell .
“We repurchased another $100M of shares… accelerated payoff of $450M term loan… increased our quarterly dividend to $0.43.” – CEO Tom Bell .

Q&A Highlights

Capital deployment priorities: balanced M&A aligned to North Star 2030, buybacks, and debt reduction; hurdle-rate discipline maintained .
Defense Systems outlook: pivot from R&D to LRIP/programs of record; sustainable double-digit profitability targeted over time .
Health & Civil durability: robust demand from VBA exams; tech-enabled operations and rural expansion; 4th vendor impact minimal so far .
Shutdown assumptions: wider guidance ranges for revenue/EPS; cash at greater risk of timing slippage into 2026 if shutdown extends .
Capex: underspent earlier; capacity investments focused in defense tech (Huntsville), still within envelope; timing linked to customer decisions .

Estimates Context

Street (S&P Global) anticipates continued top-line growth and stable EPS trajectory into Q2 2026. Current consensus for Q2 2026: revenue ~$4.41B, EPS ~$3.06, EBITDA ~$617M; breadth of coverage sits at 9–10 estimates, providing a reasonably robust sample size. Where non-GAAP metrics are referenced (e.g., adjusted EBITDA margin, non-GAAP EPS), note these are company-reported measures not directly comparable to “Primary EPS” consensus [GetEstimates].

Metric	Q4 2025	Q1 2026	Q2 2026
Primary EPS Consensus Mean	2.5817*	2.9931*	3.0609*
Revenue Consensus Mean ($USD Billions)	4.308*	4.375*	4.413*
EBITDA Consensus Mean ($USD Millions)	534.0*	606.0*	616.8*
Primary EPS – # of Estimates	13*	10*	10*
Revenue – # of Estimates	13*	9*	9*

Values retrieved from S&P Global.

Key Takeaways for Investors

Margin resilience plus backlog/booking strength support a constructive setup into 2026 despite macro procurement frictions; FY25 margin/EPS raises reflect execution confidence .
Defense tech is the central growth engine (IFPC, radar, hypersonics, small cruise missiles); expect program ramps to underpin revenue/EBITDA in subsequent quarters .
Health & Civil offers durable high-margin cash-generation (record margins, elevated exam volumes); competitive dynamics (4th vendor) have had limited impact so far .
Energy infrastructure and airport/border modernization are tangible commercial/public-sector growth pillars; AI-enabled offerings (Skywire, Imperium) differentiate Leidos vs peers on cost and speed-to-outcome .
Cash conversion and capital deployment (deleveraging, buybacks, dividend up) provide optionality for M&A aligned to North Star 2030 and shareholder returns .
Estimate revisions risk skew positive near term as shutdown effects abate and funded backlog converts; watch Q4 FY25 delivery and early 2026 awards cadence as catalysts .
Q2 2026 results will hinge on execution across defense program ramps and sustained Health & Civil volumes; until primary docs publish, S&P Global consensus provides baseline expectations (see Estimates Context) [GetEstimates].

Note on availability: As of this recap, Q2 2026 8-K 2.02 press release and earnings call transcript are not yet available in the document catalog; this report uses Q3 2025 and Q2 2025 primary sources and S&P Global consensus for forward periods .

Leidos Holdings, Inc. (LDOS)·Q2 2026 Earnings Summary