UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the quarterly period ended April 3, 2026
or
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the transition period from to
Commission file number 001-33072
Leidos Holdings, Inc. | ||||||||
(Exact name of registrant as specified in its charter) | ||||||||
Delaware | 20-3562868 | ||||||||||||||||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||||||||||||||
1750 Presidents Street, | Reston, | Virginia | 20190 | ||||||||||||||
(Address of principal executive offices) | (Zip Code) | ||||||||||||||||
(571) 526-6000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||||||||||||
Common stock, par value $.0001 per share | LDOS | New York Stock Exchange | ||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☒ | Accelerated filer | ☐ | ||||||||||||||||||||||||||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | ||||||||||||||||||||||||||
Emerging growth company | ☐ | ||||||||||||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of shares issued and outstanding of each of the issuer’s classes of common stock as of April 28, 2026, was 125,785,466 shares of common stock ($.0001 par value per share).
LEIDOS HOLDINGS, INC. FORM 10-Q
Table of Contents
Part I | Page | |||||||
Item 1. | ||||||||
Item 2. | ||||||||
Item 3. | ||||||||
Item 4. | ||||||||
Part II | ||||||||
Item 1. | ||||||||
Item 1A. | ||||||||
Item 2. | ||||||||
Item 3. | ||||||||
Item 4. | ||||||||
Item 5. | ||||||||
Item 6. | ||||||||
Part I—Financial Information
Item 1. Financial Statements
LEIDOS HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| (unaudited; in millions, except share and per share data) | April 3, 2026 | January 2, 2026 | ||||||||||||
Assets: | ||||||||||||||
| Cash and cash equivalents | $ | 457 | $ | 1,108 | ||||||||||
| Receivables, net | 3,028 | 2,708 | ||||||||||||
| Inventory, net | 336 | 342 | ||||||||||||
| Other current assets | 582 | 656 | ||||||||||||
| Total current assets | 4,403 | 4,814 | ||||||||||||
| Property, plant and equipment, net | 966 | 961 | ||||||||||||
| Intangible assets, net | 993 | 458 | ||||||||||||
| Goodwill | 8,094 | 6,342 | ||||||||||||
| Operating lease right-of-use assets, net | 553 | 526 | ||||||||||||
Deferred tax assets | 35 | 48 | ||||||||||||
| Other long-term assets | 343 | 344 | ||||||||||||
| Total assets | $ | 15,387 | $ | 13,493 | ||||||||||
| Liabilities: | ||||||||||||||
| Accounts payable and accrued liabilities | $ | 2,145 | $ | 1,988 | ||||||||||
| Accrued payroll and employee benefits | 687 | 819 | ||||||||||||
| Short-term debt and current portion of long-term debt | 320 | 20 | ||||||||||||
| Total current liabilities | 3,152 | 2,827 | ||||||||||||
| Long-term debt, net of current portion | 6,014 | 4,628 | ||||||||||||
| Operating lease liabilities | 610 | 587 | ||||||||||||
Deferred tax liabilities | 280 | 221 | ||||||||||||
| Other long-term liabilities | 267 | 268 | ||||||||||||
| Total liabilities | 10,323 | 8,531 | ||||||||||||
Commitments and contingencies (Note 10) | ||||||||||||||
| Stockholders’ equity: | ||||||||||||||
Common stock, $0.0001 par value, 500,000,000 shares authorized, 125,783,512 and 126,380,657 shares issued and outstanding at April 3, 2026, and January 2, 2026, respectively | — | — | ||||||||||||
| Additional paid-in capital | 117 | 319 | ||||||||||||
| Retained earnings | 4,921 | 4,647 | ||||||||||||
| Accumulated other comprehensive loss | (25) | (50) | ||||||||||||
| Total Leidos stockholders’ equity | 5,013 | 4,916 | ||||||||||||
| Non-controlling interest | 51 | 46 | ||||||||||||
| Total stockholders' equity | 5,064 | 4,962 | ||||||||||||
| Total liabilities and stockholders' equity | $ | 15,387 | $ | 13,493 | ||||||||||
See accompanying notes to condensed consolidated financial statements.
Leidos Holdings, Inc. | 1 | ||||
PART I—FINANCIAL INFORMATION
LEIDOS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| Three Months Ended | ||||||||||||||
| (unaudited; in millions, except per share data) | April 3, 2026 | April 4, 2025 | ||||||||||||
| Revenues | $ | 4,400 | $ | 4,245 | ||||||||||
| Cost of revenues | 3,639 | 3,488 | ||||||||||||
| Selling, general and administrative expenses | 223 | 230 | ||||||||||||
| Acquisition, integration and restructuring costs | 35 | 4 | ||||||||||||
| Equity earnings of non-consolidated subsidiaries | (5) | (7) | ||||||||||||
| Operating income | 508 | 530 | ||||||||||||
Non-operating expense: | ||||||||||||||
| Interest expense, net | (55) | (49) | ||||||||||||
Other expense, net | (24) | (3) | ||||||||||||
| Income before income taxes | 429 | 478 | ||||||||||||
| Income tax expense | (94) | (113) | ||||||||||||
| Net income | 335 | 365 | ||||||||||||
Less: net income attributable to non-controlling interest | 7 | 2 | ||||||||||||
| Net income attributable to Leidos common stockholders | $ | 328 | $ | 363 | ||||||||||
| Earnings per share: | ||||||||||||||
| Basic | $ | 2.60 | $ | 2.79 | ||||||||||
| Diluted | 2.56 | 2.77 | ||||||||||||
See accompanying notes to condensed consolidated financial statements.
2 | Leidos Holdings, Inc. | ||||
PART I—FINANCIAL INFORMATION
LEIDOS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
| Three Months Ended | ||||||||||||||
| (unaudited; in millions) | April 3, 2026 | April 4, 2025 | ||||||||||||
| Net income | $ | 335 | $ | 365 | ||||||||||
Foreign currency translation adjustments | 8 | 28 | ||||||||||||
Unrecognized loss on derivative instruments | — | (1) | ||||||||||||
| Pension adjustments | 17 | — | ||||||||||||
Total other comprehensive income, net of taxes | 25 | 27 | ||||||||||||
| Comprehensive income | 360 | 392 | ||||||||||||
Less: net income attributable to non-controlling interest | 7 | 2 | ||||||||||||
Comprehensive income attributable to Leidos common stockholders | $ | 353 | $ | 390 | ||||||||||
See accompanying notes to condensed consolidated financial statements.
Leidos Holdings, Inc. | 3 | ||||
PART I—FINANCIAL INFORMATION
LEIDOS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
| (unaudited; in millions, except per share data) | Shares of common stock | Additional paid-in capital | Retained earnings | Accumulated other comprehensive income (loss) | Leidos stockholders' equity | Non-controlling interest | Total stockholders' equity | ||||||||||||||||||||||||||||||||||
| Balance at January 2, 2026 | 126 | $ | 319 | $ | 4,647 | $ | (50) | $ | 4,916 | $ | 46 | $ | 4,962 | ||||||||||||||||||||||||||||
| Net income | — | — | 328 | — | 328 | 7 | 335 | ||||||||||||||||||||||||||||||||||
| Other comprehensive income, net of taxes | — | — | — | 25 | 25 | — | 25 | ||||||||||||||||||||||||||||||||||
| Issuances of stock | 1 | 17 | — | — | 17 | — | 17 | ||||||||||||||||||||||||||||||||||
Repurchases of stock and other | (1) | (244) | — | — | (244) | — | (244) | ||||||||||||||||||||||||||||||||||
Dividends of $0.43 per share | — | — | (54) | — | (54) | — | (54) | ||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | 25 | — | — | 25 | — | 25 | ||||||||||||||||||||||||||||||||||
| Net capital distributions to non-controlling interest | — | — | — | — | — | (2) | (2) | ||||||||||||||||||||||||||||||||||
| Balance at April 3, 2026 | 126 | $ | 117 | $ | 4,921 | $ | (25) | $ | 5,013 | $ | 51 | $ | 5,064 | ||||||||||||||||||||||||||||
| (unaudited; in millions, except per share data) | Shares of common stock | Additional paid-in capital | Retained earnings | Accumulated other comprehensive income (loss) | Leidos stockholders' equity | Non-controlling interest | Total stockholders' equity | ||||||||||||||||||||||||||||||||||
| Balance at January 3, 2025 | 131 | $ | 1,112 | $ | 3,410 | $ | (110) | $ | 4,412 | $ | 48 | $ | 4,460 | ||||||||||||||||||||||||||||
Net income | — | — | 363 | — | 363 | 2 | 365 | ||||||||||||||||||||||||||||||||||
Other comprehensive income, net of taxes | — | — | — | 27 | 27 | — | 27 | ||||||||||||||||||||||||||||||||||
| Issuances of stock | 1 | 17 | — | — | 17 | — | 17 | ||||||||||||||||||||||||||||||||||
Repurchases of stock and other | (3) | (531) | — | — | (531) | — | (531) | ||||||||||||||||||||||||||||||||||
Dividends of $0.40 per share | — | — | (52) | — | (52) | — | (52) | ||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | 21 | — | — | 21 | — | 21 | ||||||||||||||||||||||||||||||||||
| Net capital distributions to non-controlling interest | — | — | — | — | — | (5) | (5) | ||||||||||||||||||||||||||||||||||
| Balance at April 4, 2025 | 129 | $ | 619 | $ | 3,721 | $ | (83) | $ | 4,257 | $ | 45 | $ | 4,302 | ||||||||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
4 | Leidos Holdings, Inc. | ||||
PART I—FINANCIAL INFORMATION
LEIDOS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| Three Months Ended | |||||||||||
| (unaudited; in millions) | April 3, 2026 | April 4, 2025 | |||||||||
Cash flows from operations: | |||||||||||
| Net income | $ | 335 | $ | 365 | |||||||
| Adjustments to reconcile net income to net cash provided by operations: | |||||||||||
| Depreciation and amortization | 72 | 69 | |||||||||
| Stock-based compensation | 25 | 21 | |||||||||
| Deferred income taxes | (8) | (24) | |||||||||
Loss on pension plan settlement | 23 | — | |||||||||
| Other | 10 | (1) | |||||||||
| Change in assets and liabilities, net of effects of acquisitions and dispositions: | |||||||||||
| Receivables | (160) | (246) | |||||||||
| Other current assets and other long-term assets | 3 | (27) | |||||||||
| Accounts payable and accrued liabilities and other long-term liabilities | 54 | (72) | |||||||||
| Accrued payroll and employee benefits | (154) | (148) | |||||||||
| Income taxes receivable/payable | 101 | 121 | |||||||||
| Net cash provided by operating activities | 301 | 58 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Acquisition of a business, net of cash acquired | (2,338) | — | |||||||||
| Payments for property, equipment and software | (31) | (22) | |||||||||
Divestiture of a business | 4 | — | |||||||||
| Other | 6 | — | |||||||||
| Net cash used in investing activities | (2,359) | (22) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from debt issuance | 1,397 | 997 | |||||||||
| Net proceeds from commercial paper | 300 | — | |||||||||
| Repayments of borrowings | (5) | (529) | |||||||||
| Payments for debt issuance costs | (15) | (7) | |||||||||
| Dividend payments | (55) | (53) | |||||||||
| Repurchases of stock and other | (243) | (528) | |||||||||
| Proceeds from issuances of stock | 16 | 15 | |||||||||
| Net capital distributions to non-controlling interests | (2) | (5) | |||||||||
| Net cash provided by (used in) financing activities | 1,393 | (110) | |||||||||
| Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash | (1) | 7 | |||||||||
Net decrease in cash, cash equivalents and restricted cash | (666) | (67) | |||||||||
| Cash, cash equivalents and restricted cash at beginning of period | 1,204 | 991 | |||||||||
| Cash, cash equivalents and restricted cash at end of period | 538 | 924 | |||||||||
| Less: restricted cash at end of period | 81 | 82 | |||||||||
| Cash and cash equivalents at end of period | $ | 457 | $ | 842 | |||||||
See accompanying notes to condensed consolidated financial statements.
Leidos Holdings, Inc. | 5 | ||||
PART I—FINANCIAL INFORMATION
LEIDOS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS [CONTINUED]
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS [CONTINUED]
| Three Months Ended | |||||||||||
| (unaudited; in millions) | April 3, 2026 | April 4, 2025 | |||||||||
| Supplementary cash flow information: | |||||||||||
| Cash paid for income taxes, net of refunds | $ | (5) | $ | (4) | |||||||
| Cash paid for interest | 68 | 51 | |||||||||
| Non-cash investing activity: | |||||||||||
| Property, plant and equipment additions | $ | 1 | $ | — | |||||||
| Non-cash financing activity: | |||||||||||
| Finance lease obligations | $ | 1 | $ | — | |||||||
See accompanying notes to condensed consolidated financial statements.
6 | Leidos Holdings, Inc. | ||||
LEIDOS HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1–Basis of Presentation and Summary of Significant Accounting Policies
NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Leidos Holdings, Inc. ("Leidos"), a Delaware corporation, is a holding company whose direct 100%-owned subsidiary and principal operating company is Leidos, Inc. Leidos, is an industry and technology leader serving government and commercial customers with smarter, more efficient digital and mission innovations. Headquartered in Reston, Virginia, with 50,000 global employees, Leidos' customers include the U.S. Department of War (“DoW”), the U.S. Intelligence Community, the U.S. Department of Homeland Security, the Federal Aviation Administration, the Department of Veterans Affairs and many other U.S. civilian, state and local government agencies, foreign government agencies and commercial businesses. Unless indicated otherwise, references to "we," "us" and "our" refer collectively to Leidos Holdings, Inc. and its consolidated subsidiaries.
Beginning fiscal 2026, we completed a realignment of our reporting structure, which resulted in the identification of four reportable segments: Intelligence & Digital, Health, Homeland and Defense. Additionally, we separately present the unallocable costs associated with corporate functions as Corporate. We commenced operating and reporting under the new organizational structure effective the first day of fiscal 2026. As a result of this change, prior year segment results have been recast to reflect the current reportable segment structure.
We have a controlling interest in Hanford Mission Integration Solutions, LLC ("HMIS") and a joint venture with Centerra Group, LLC and Parsons Government Services, Inc. The financial results for HMIS are consolidated into our unaudited condensed consolidated financial statements. The unaudited condensed consolidated financial statements also include the balances of all voting interest entities in which Leidos has a controlling voting interest ("subsidiaries") and a variable interest entity ("VIE") in which Leidos is the primary beneficiary. The consolidated balances of the VIE are not material to the unaudited condensed consolidated financial statements for the periods presented. Intercompany accounts and transactions between consolidated companies have been eliminated in consolidation.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules of the U.S. Securities and Exchange Commission and accounting principles generally accepted in the United States of America ("GAAP"). Certain disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingencies at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. Management evaluates these estimates and assumptions on an ongoing basis, including those relating to estimated profitability of long-term contracts, indirect billing rates, allowances for doubtful accounts, inventories, right-of-use assets and lease liabilities, fair value and impairment of intangible assets and goodwill, income taxes, stock-based compensation expense and contingencies. These estimates have been prepared by management on the basis of the most current and best available information; however, actual results could differ materially from those estimates.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, which consist of normal recurring adjustments, necessary for a fair presentation thereof. The results reported in these unaudited condensed consolidated financial statements are not necessarily indicative of the results that may be expected for the entire year. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K filed on February 17, 2026.
Leidos Holdings, Inc. | 7 | ||||
LEIDOS HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
ACCOUNTING STANDARDS UPDATES ADOPTED
ASU 2025-06 Intangibles - Goodwill and Other-Internal-Use Software
In September 2025, the FASB issued ASU 2025-06, which amends certain aspects of the accounting and disclosure of Internal use software costs. Current guidance requires capitalization of internal-use software development costs depending on the nature of the costs and the project stage during which they occur. The amendments in this update remove references to prescriptive and sequential software development stages and require entities to start capitalizing software development costs when a) management authorizes and commits to funding the software project, and b) it is probable that the project will be completed, and the software will be used to perform the intended function.
The amendments in this update are effective for public business entities for annual periods beginning after December 15, 2027, including interim periods within those annual reporting periods, and may be adopted on a prospective, modified or retrospective basis. Early adoption is permitted. Effective fiscal 2026, we adopted the requirements of ASU 2025-06, using the prospective method. The adoption did not have a material impact on our consolidated financial statements and related disclosures.
ACCOUNTING STANDARDS UPDATES ISSUED BUT NOT YET ADOPTED
ASU 2024-03 Disaggregation of Income Statement Expenses
In November 2024, the FASB issued ASU 2024-03, to enhance the transparency of certain expense disclosures. The update requires disclosure of specific expense categories in the notes to the financial statements at interim and annual reporting periods. The update requires disaggregated information about certain prescribed expense categories underlying any relevant income statement expense caption.
The amendments in this update are effective for public entities for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. The amendments may be adopted either prospectively or retrospectively. Early adoption is permitted. We are currently evaluating the impacts of this update and plan to adopt these amendments for annual disclosures in fiscal 2027 and interim disclosures in fiscal 2028.
CHANGES IN ESTIMATES ON CONTRACTS
Changes in estimates related to contracts accounted for using the cost-to-cost method of accounting are recognized in the period in which such changes are made for the inception-to-date effect of the changes, with the exception of contracts acquired through a business combination, where the adjustment is made for the period commencing from the date of acquisition.
Changes in estimates on contracts were as follows:
| Three Months Ended | ||||||||||||||
| (in millions, except per share data) | April 3, 2026 | April 4, 2025 | ||||||||||||
| Favorable impact | $ | 37 | $ | 53 | ||||||||||
| Unfavorable impact | (46) | (23) | ||||||||||||
| Net impact to income before income taxes | $ | (9) | $ | 30 | ||||||||||
Impact on diluted EPS attributable to Leidos common stockholders | $ | (0.05) | $ | 0.17 | ||||||||||
The impact on diluted earnings per share ("EPS") attributable to Leidos common stockholders is calculated using the statutory tax rate.
Revenue Recognized from Prior Obligations
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. 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.
8 | Leidos Holdings, Inc. | ||||
LEIDOS HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 2–Revenues
REMAINING PERFORMANCE OBLIGATIONS
Remaining performance obligations ("RPO") represent the expected value of exercised contracts, both funded and unfunded, less revenue recognized to date. RPO does not include unexercised option periods and future potential task orders expected to be awarded under indefinite delivery/indefinite quantity ("IDIQ") contracts, General Services Administration Schedule or other master agreement contract vehicles, with the exception of certain IDIQ contracts where task orders are not competitively awarded and separately priced but instead are used as a funding mechanism, and where there is a basis for estimating future revenues and funding on future anticipated task orders.
As of April 3, 2026, we had $19 billion of RPO and expect to recognize approximately 62% and 82% over the next 12 months and 24 months, respectively, with the remainder to be recognized thereafter.
DISAGGREGATION OF REVENUES
We disaggregate revenues by customer-type, contract-type and geographic location for each of our reportable segments.
Disaggregated revenues by customer-type were as follows:
| Three Months Ended April 3, 2026 | |||||||||||||||||||||||||||||
| (in millions) | Intelligence & Digital | Health | Homeland | Defense | Total | ||||||||||||||||||||||||
| DoW and U.S. Intelligence Community | $ | 1,078 | $ | 249 | $ | 20 | $ | 822 | $ | 2,169 | |||||||||||||||||||
Other U.S. government agencies(1) | 403 | 924 | 272 | 27 | 1,626 | ||||||||||||||||||||||||
Commercial and non-U.S. customers | 16 | 15 | 523 | 34 | 588 | ||||||||||||||||||||||||
| Total | $ | 1,497 | $ | 1,188 | $ | 815 | $ | 883 | $ | 4,383 | |||||||||||||||||||
| Three Months Ended April 4, 2025 | |||||||||||||||||||||||||||||
| (in millions) | Intelligence & Digital | Health | Homeland | Defense | Total | ||||||||||||||||||||||||
| DoW and U.S. Intelligence Community | $ | 958 | $ | 269 | $ | 23 | $ | 809 | $ | 2,059 | |||||||||||||||||||
Other U.S. government agencies(1) | 429 | 898 | 276 | 34 | 1,637 | ||||||||||||||||||||||||
Commercial and non-U.S. customers | 10 | 16 | 470 | 36 | 532 | ||||||||||||||||||||||||
| Total | $ | 1,397 | $ | 1,183 | $ | 769 | $ | 879 | $ | 4,228 | |||||||||||||||||||
(1) Includes federal government agencies other than the DoW and U.S. Intelligence Community, as well as state and local government agencies.
Disaggregated revenues by contract-type were as follows:
| Three Months Ended April 3, 2026 | |||||||||||||||||||||||||||||
| (in millions) | Intelligence & Digital | Health | Homeland | Defense | Total | ||||||||||||||||||||||||
Cost-reimbursement and fixed-price-incentive-fee | $ | 904 | $ | 428 | $ | 174 | $ | 522 | $ | 2,028 | |||||||||||||||||||
| Firm-fixed-price | 344 | 730 | 435 | 274 | 1,783 | ||||||||||||||||||||||||
Time-and-materials and fixed-price-level-of-effort | 249 | 30 | 206 | 87 | 572 | ||||||||||||||||||||||||
| Total | $ | 1,497 | $ | 1,188 | $ | 815 | $ | 883 | $ | 4,383 | |||||||||||||||||||
Leidos Holdings, Inc. | 9 | ||||
| Three Months Ended April 4, 2025 | |||||||||||||||||||||||||||||
| (in millions) | Intelligence & Digital | Health | Homeland | Defense | Total | ||||||||||||||||||||||||
Cost-reimbursement and fixed-price-incentive-fee | $ | 795 | $ | 407 | $ | 169 | $ | 517 | $ | 1,888 | |||||||||||||||||||
| Firm-fixed-price | 343 | 735 | 434 | 257 | 1,769 | ||||||||||||||||||||||||
Time-and-materials and fixed-price-level-of-effort | 259 | 41 | 166 | 105 | 571 | ||||||||||||||||||||||||
| Total | $ | 1,397 | $ | 1,183 | $ | 769 | $ | 879 | $ | 4,228 | |||||||||||||||||||
Disaggregated revenues by geographic location were as follows:
| Three Months Ended April 3, 2026 | |||||||||||||||||||||||||||||
| (in millions) | Intelligence & Digital | Health | Homeland | Defense | Total | ||||||||||||||||||||||||
United States | $ | 1,497 | $ | 1,188 | $ | 466 | $ | 875 | $ | 4,026 | |||||||||||||||||||
International | — | — | 349 | 8 | 357 | ||||||||||||||||||||||||
| Total | $ | 1,497 | $ | 1,188 | $ | 815 | $ | 883 | $ | 4,383 | |||||||||||||||||||
| Three Months Ended April 4, 2025 | |||||||||||||||||||||||||||||
| (in millions) | Intelligence & Digital | Health | Homeland | Defense | Total | ||||||||||||||||||||||||
United States | $ | 1,397 | $ | 1,183 | $ | 433 | $ | 868 | $ | 3,881 | |||||||||||||||||||
International | — | — | 336 | 11 | 347 | ||||||||||||||||||||||||
| Total | $ | 1,397 | $ | 1,183 | $ | 769 | $ | 879 | $ | 4,228 | |||||||||||||||||||
Revenues by customer-type, contract-type and geographic location exclude lease income of $17 million for both the three months ended April 3, 2026, and April 4, 2025.
CONTRACT ASSETS AND LIABILITIES
Performance obligations are satisfied either over time as work progresses or at a point in time. Firm-fixed-price contracts are typically billed to the customer using milestone payments while cost-reimbursable and time and materials contracts are typically billed to the customer on a monthly or bi-weekly basis as indicated by the negotiated billing terms and conditions of the contract. As a result, the timing of revenue recognition, customer billings and cash collections for each contract results in a net contract asset or liability at the end of each reporting period.
Contract assets consist of unbilled receivables, which is the amount of revenue recognized that exceeds the amount billed to the customer. Unbilled receivables exclude amounts billable where the right to consideration is unconditional and not billed. Contract liabilities consist of deferred revenue, which represents cash advances received prior to performance for programs and billings in excess of revenue recognized.
The components of contract assets and contract liabilities consisted of the following:
| (in millions) | Balance sheet line item | April 3, 2026 | January 2, 2026 | |||||||||||||||||
| Contract assets - current: | ||||||||||||||||||||
| Unbilled receivables | Receivables, net | $ | 865 | $ | 894 | |||||||||||||||
| Contract liabilities - current: | ||||||||||||||||||||
Deferred revenue(1) | Accounts payable and accrued liabilities | $ | 411 | $ | 348 | |||||||||||||||
| Contract liabilities - non-current: | ||||||||||||||||||||
Deferred revenue(1) | Other long-term liabilities | $ | 5 | $ | 6 | |||||||||||||||
(1) Certain contracts record revenue net of cost of revenues, and therefore, the respective deferred revenue balance will not fully convert to revenue.
10 | Leidos Holdings, Inc. | ||||
LEIDOS HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The decrease in unbilled receivables was primarily due to the timing of billings on certain contracts, partially offset by revenue recognized on certain contracts. The increase in deferred revenue was primarily due to the acquisition of Entrust (see "Note 3–Acquisitions, Goodwill and Intangible Assets") and timing of advanced payments from customers, partially offset by revenue recognized during the period.
For the three months ended April 3, 2026, $56 million of revenue recognized was included as a contract liability at January 2, 2026. For the three months ended April 4, 2025, $137 million of revenue recognized was included as a contract liability at January 3, 2025.
Note 3–Acquisitions, Goodwill and Intangible Assets
ENTRUST ACQUISITION
On March 27, 2026, ("Acquisition Date"), Leidos, Inc. completed a stock purchase agreement with KENE Holdings, L.P. and KENE Parent Inc. ("Entrust") to acquire all of the shares of Entrust for a purchase price of $2.4 billion in cash, subject to customary adjustments for Entrust’s cash, debt, transaction expenses and net working capital. Entrust is an engineering firm that provides infrastructure design, grid modernization and program management services primarily to electric, gas and pipeline utilities. This acquisition enhances existing energy infrastructure capabilities within our Homeland reportable segment.
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, net | 162 | |||||||
| Other current assets | 19 | |||||||
Property, plant and equipment, net | 12 | |||||||
| Intangible assets, net | 564 | |||||||
Operating lease right-of-use assets, net | 23 | |||||||
| Other long-term assets | 1 | |||||||
Deferred tax liabilities | (75) | |||||||
| Accounts payable and accrued liabilities | (74) | |||||||
| Accrued payroll and employee benefits | (21) | |||||||
| Operating lease liabilities | (21) | |||||||
| Total identifiable net assets acquired | 637 | |||||||
| Goodwill | 1,748 | |||||||
| Purchase price | $ | 2,385 | ||||||
Due to the timing and complexity of the acquisition, the assets acquired and liabilities assumed were recorded at their preliminary estimated fair values. As of April 3, 2026, we had not finalized the determination of fair values for substantially all of the acquired assets and liabilities assumed. The preliminary purchase price allocation is subject to change as we complete our determination of the final working capital and the fair value of the acquired assets and liabilities assumed, the impact of which could be material.
The goodwill represents intellectual capital and the acquired assembled workforce, neither of which qualify for recognition as a separate intangible asset. Of the preliminary goodwill recognized, approximately $119 million is tax deductible.
Leidos Holdings, Inc. | 11 | ||||
The following table summarizes the preliminary fair value of intangible assets acquired at the Acquisition Date and the related weighted average amortization period:
| Weighted Amortization Period | Fair Value | ||||||||||
(in years) | (in millions) | ||||||||||
| Programs | 7 | $ | 530 | ||||||||
| Backlog | 1 | 34 | |||||||||
| Total | $ | 564 | |||||||||
The preliminary fair value and related weighted average amortization period of the intangible assets acquired were based on an industry benchmarking analysis surrounding recent and relevant industry transactions. The difference between the benchmark estimate and ultimate fair value of intangible assets identified may be material.
For the three months ended April 3, 2026, $11 million of revenues related to Entrust were recognized within the Homeland reportable segment.
Acquisition and Integration Costs
For the three months ended April 3, 2026, $29 million of acquisition and integration costs were recorded related to the acquisition of Entrust. These costs were recorded within the Homeland reportable segment and Corporate, and presented in "Acquisition, integration and restructuring costs" and "Interest expense, net" on the condensed consolidated statements of operations.
Pro Forma Financial Information
The following pro forma financial information presents consolidated results of operations as if the acquisition of Entrust had occurred on January 4, 2025. The pro forma financial information was prepared based on historical financial information and has been adjusted to give effect to the events that are directly attributable to the acquisition of Entrust and factually supportable. These adjustments include amortization and interest expense that are directly attributable to the acquisition.
The pro forma results below do not reflect future events that have occurred or may occur after the acquisition, including anticipated synergies or other expected benefits that may be realized from the acquisition. The pro forma information is not intended to reflect the actual results of operations that would have occurred if the acquisition had been completed on January 4, 2025, nor is it intended to be an indication of future operating results.
| Three Months Ended | |||||||||||
| (in millions, except per share amounts) | April 3, 2026 | April 4, 2025 | |||||||||
| Revenues | $ | 4,528 | $ | 4,385 | |||||||
| Net income | 347 | 332 | |||||||||
| Net income attributable to Leidos common stockholders | 340 | 330 | |||||||||
| Earnings per share: | |||||||||||
| Basic | $ | 2.69 | $ | 2.54 | |||||||
| Diluted | 2.65 | 2.52 | |||||||||
The pro forma financial information above includes the following nonrecurring significant adjustment made to account for certain costs incurred as if the acquisition had been completed on January 4, 2025:
uAcquisition-related costs of $29 million for the three months ended April 3, 2026, were excluded from the pro forma financial information for fiscal 2026 and were included in the pro forma financial information for fiscal 2025.
KUDU DYNAMICS ACQUISITION
On May 23, 2025 (the "Purchase Date"), we completed the acquisition of Savanna Industries, Inc. ("Kudu Dynamics") for purchase consideration of $293 million, net of $29 million of cash acquired. The Kudu Dynamics business provides artificial intelligence enabled cyber capabilities for defense, intelligence and homeland security customers.
12 | Leidos Holdings, Inc. | ||||
LEIDOS HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The final goodwill recognized of $231 million represents intellectual capital and the acquired assembled workforce, neither of which qualify for recognition as a separate intangible asset. All of the goodwill recognized is tax deductible.
The following table summarizes the final fair value of intangible assets acquired at the Purchase Date and the related weighted average amortization period:
| Weighted Amortization Period | Fair Value | ||||||||||
(in years) | (in millions) | ||||||||||
| Programs | 7 | $ | 60 | ||||||||
| Backlog | 1 | 12 | |||||||||
| Total | $ | 72 | |||||||||
For the three months ended April 3, 2026, $22 million of revenues related to Kudu Dynamics were recognized within the Intelligence & Digital reportable segment.
GOODWILL
Beginning the first day of fiscal 2026, we completed a business realignment, which resulted in new reportable segments (see "Note 9–Business Segments").
Goodwill was allocated to reporting units within the new reportable segments based on a relative fair value approach.
The following table presents changes in the carrying amount of goodwill by reportable segment:
| (in millions) | Intelligence & Digital | Health | Homeland | Defense | Total | ||||||||||||||||||||||||
Goodwill at January 3, 2025(1) | $ | 2,007 | $ | 1,336 | $ | 950 | $ | 1,791 | $ | 6,084 | |||||||||||||||||||
Acquisition of a business | 231 | — | — | — | 231 | ||||||||||||||||||||||||
Divestiture of a business | — | — | (7) | — | (7) | ||||||||||||||||||||||||
| Foreign currency translation adjustments | — | — | 34 | — | 34 | ||||||||||||||||||||||||
Goodwill at January 2, 2026(1) | 2,238 | 1,336 | 977 | 1,791 | 6,342 | ||||||||||||||||||||||||
| Acquisition of a business | — | — | 1,748 | — | 1,748 | ||||||||||||||||||||||||
| Foreign currency translation adjustments | — | — | 4 | — | 4 | ||||||||||||||||||||||||
Goodwill at April 3, 2026(1) | $ | 2,238 | $ | 1,336 | $ | 2,729 | $ | 1,791 | $ | 8,094 | |||||||||||||||||||
(1) Carrying amount includes accumulated impairment loss of $596 million within the Homeland segment.
We evaluate qualitative factors that could cause us to consider whether the estimated fair value of each of our reporting units may be lower than the carrying value, including, but not limited to (i) macroeconomic conditions, (ii) industry and market considerations, (iii) our overall financial performance, including an analysis of our current and projected cash flows, revenues and earnings, (iv) a sustained decrease in share price and (v) other relevant entity-specific events including changes in management, strategy, partners or litigation.
In conjunction with the change in reportable segments in fiscal 2026, the Company evaluated goodwill for impairment immediately before and after the change and determined that goodwill was not impaired.
During the three months ended April 3, 2026, and April 4, 2025, there were no impairments to goodwill.
Leidos Holdings, Inc. | 13 | ||||
INTANGIBLE ASSETS
Intangible assets, net consisted of the following:
| April 3, 2026 | January 2, 2026 | ||||||||||||||||||||||||||||||||||
| (in millions) | Gross carrying value | Accumulated amortization | Net carrying value | Gross carrying value | Accumulated amortization | Net carrying value | |||||||||||||||||||||||||||||
Programs | $ | 2,279 | $ | (1,413) | $ | 866 | $ | 1,748 | $ | (1,391) | $ | 357 | |||||||||||||||||||||||
Software and technology | 264 | (191) | 73 | 264 | (187) | 77 | |||||||||||||||||||||||||||||
Backlog | 46 | (10) | 36 | 12 | (7) | 5 | |||||||||||||||||||||||||||||
Customer relationships | 53 | (35) | 18 | 53 | (34) | 19 | |||||||||||||||||||||||||||||
Total intangible assets | $ | 2,642 | $ | (1,649) | $ | 993 | $ | 2,077 | $ | (1,619) | $ | 458 | |||||||||||||||||||||||
Amortization expense was $30 million for both the three months ended April 3, 2026, and April 4, 2025.
The estimated annual amortization expense as of April 3, 2026, was as follows:
Fiscal year ending (in millions) | |||||
| 2026 (remainder of year) | $ | 166 | |||
| 2027 | 169 | ||||
| 2028 | 152 | ||||
| 2029 | 139 | ||||
| 2030 | 126 | ||||
| 2031 and thereafter | 241 | ||||
| $ | 993 | ||||
Note 4–Fair Value Measurements
The accounting standard for fair value measurements establishes a three-level fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: observable inputs such as quoted prices in active markets (Level 1); inputs other than quoted prices in active markets that are observable, either directly or indirectly, or quoted prices that are not active (Level 2); and unobservable inputs in which there is little or no market data (e.g., discounted cash flow and other similar pricing models), which requires us to develop our own market participant assumptions used in pricing the asset or liability (Level 3).
The carrying amounts of our financial instruments, which include cash equivalents, accounts receivable, accounts payable and accrued expenses, are reasonable estimates of their respective fair values. As of April 3, 2026, and January 2, 2026, the carrying values of our notes receivable of $4 million and $15 million, respectively, approximate fair value as the stated interest rates within the agreements are materially consistent with the current market rates for similar instruments (Level 2 inputs). Our notes receivable are included within “Other current assets” and "Other long-term assets" on the condensed consolidated balance sheets.
As of April 3, 2026, and January 2, 2026, the fair value of debt was $6.3 billion and $4.7 billion, respectively, and the carrying amount was $6.3 billion and $4.6 billion, respectively (see "Note 5–Debt"). The fair value of long-term debt is determined based on current interest rates available for debt with terms and maturities similar to our existing debt arrangements and our credit rating (Level 2 inputs).
The assets and liabilities acquired in connection with the Kudu Dynamics and Entrust acquisitions were measured at fair value on a non-recurring basis using Level 3 inputs (see "Note 3–Acquisitions, Goodwill and Intangible Assets").
14 | Leidos Holdings, Inc. | ||||
Note 5–Debt
Our debt consisted of the following:
| (in millions) | Stated interest rate | Effective interest rate | April 3, 2026 | January 2, 2026 | |||||||||||||||||||
Short-term debt and current portion of long-term debt | |||||||||||||||||||||||
Commercial paper | 4.13%- 4.23% | Various | $ | 300 | $ | — | |||||||||||||||||
Current portion of long-term debt | 20 | 20 | |||||||||||||||||||||
Total short-term debt and current portion of long-term debt | $ | 320 | $ | 20 | |||||||||||||||||||
Long-term debt: | |||||||||||||||||||||||
| Senior unsecured term loan: | |||||||||||||||||||||||
$1,000 million term loan, due March 2028 | 5.02 | % | 5.16 | % | $ | 500 | $ | 500 | |||||||||||||||
| Senior unsecured notes: | |||||||||||||||||||||||
$600 million notes, due March 2029 | 4.10 | % | 4.20 | % | 600 | — | |||||||||||||||||
$750 million notes, due May 2030 | 4.38 | % | 4.50 | % | 750 | 750 | |||||||||||||||||
$1,000 million notes, due February 2031 | 2.30 | % | 2.38 | % | 1,000 | 1,000 | |||||||||||||||||
$500 million notes, due March 2032 | 5.40 | % | 5.42 | % | 500 | 500 | |||||||||||||||||
$250 million notes, due July 2032 | 7.13 | % | 7.43 | % | 250 | 250 | |||||||||||||||||
$750 million notes, due March 2033 | 5.75 | % | 5.81 | % | 750 | 750 | |||||||||||||||||
$300 million notes, due July 2033 | 5.50 | % | 5.88 | % | 161 | 161 | |||||||||||||||||
$500 million notes, due March 2035 | 5.50 | % | 5.55 | % | 500 | 500 | |||||||||||||||||
$800 million notes, due March 2036 | 5.00 | % | 5.03 | % | 800 | — | |||||||||||||||||
$300 million notes, due December 2040 | 5.95 | % | 6.03 | % | 218 | 218 | |||||||||||||||||
| Finance leases due on various dates through fiscal 2032 | Various | 2.28%-6.31% | 49 | 54 | |||||||||||||||||||
| Less: unamortized debt discounts and deferred debt issuance costs | (44) | (35) | |||||||||||||||||||||
| Total long-term debt | 6,034 | 4,648 | |||||||||||||||||||||
Less: current portion | (20) | (20) | |||||||||||||||||||||
| Total long-term debt, net of current portion | $ | 6,014 | $ | 4,628 | |||||||||||||||||||
REVOLVING CREDIT FACILITY
On February 12, 2026, we amended and restated our existing senior unsecured revolving credit facility (the “Revolving Facility”) to increase the borrowing capacity from $1.0 billion to $1.5 billion. The Revolving Facility will mature in February 2031 and permits two additional one-year extensions subject to lender consent. Borrowings under the Revolving Facility will bear interest at a rate determined, at the Company's option, based on either an alternate base rate or term SOFR rate, plus an applicable margin and is subject to an annual commitment fee rate of 0.11% on the unused credit availability. As of April 3, 2026, and January 2, 2026, there were no borrowings outstanding under the Revolving Facility.
SENIOR NOTES
On March 2, 2026, we issued and sold $600 million senior notes maturing in March 2029 (the "2029 Notes") and $800 million senior notes maturing in March 2036 (the "2036 Notes", and together with the 2029 Notes, the "Notes"). The Notes are senior unsecured obligations issued by Leidos, Inc. and guaranteed by Leidos Holdings, Inc. The annual interest rates for the 2029 Notes and the 2036 Notes are 4.10% and 5.00%, respectively, and the interest is payable on a semi-annual basis. In connection with the issuance of the Notes, $10 million of debt issuance costs and discount were recognized, which were
Leidos Holdings, Inc. | 15 | ||||
LEIDOS HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
recorded as an offset against the carrying value of debt. The proceeds from the Notes were used to fund a portion of the consideration payable in connection with the acquisition of Entrust and for general corporate purposes.
BRIDGE FACILITY
In connection with the acquisition of Entrust, we entered into an agreement with Citigroup Global Markets Inc., which provides for a senior unsecured 364-day bridge loan facility in an aggregate principal amount of $1.4 billion (the "Bridge Facility"). The Bridge Facility was undrawn and was terminated following the issuance of the Notes. As a result, we recognized $5 million of fees which were recorded within "Interest expense, net" on the condensed consolidated statements of operations.
COMMERCIAL PAPER
We have a commercial paper program in which the Company may issue short-term unsecured commercial paper notes ("Commercial Paper Notes"). The proceeds will be used for general corporate purposes, including working capital, capital expenditures, acquisitions and share repurchases.
The Commercial Paper Notes are issued in minimum denominations of $0.25 million and have maturities of up to 397 days from the date of issuance. The Commercial Paper Notes either bear a stated or floating interest rate, if interest bearing, or will be sold at a discount from the face amount. As of April 3, 2026, we had $300 million of Commercial Paper Notes outstanding. As of January 2, 2026, we did not have any Commercial Paper Notes outstanding.
COVENANTS
The Commercial Paper Notes, senior unsecured term loan, senior unsecured notes and Revolving Facility are fully and unconditionally guaranteed and contain certain customary restrictive covenants, including among other things, restrictions on our ability to create liens and enter into sale and leaseback transactions under certain circumstances.
The financial covenants in the Revolving Facility and the senior unsecured term loan require that we maintain, as of the last day of each fiscal quarter, a ratio of adjusted consolidated total debt to consolidated EBITDA of not more than 3.75 to 1.00, subject to increases to 4.50 to 1.00 for four fiscal quarters following a material acquisition, and a ratio of EBITDA to consolidated interest expense of not less than 3.50 to 1.00.
We were in compliance with all financial covenants as of April 3, 2026.
PRINCIPAL PAYMENTS
Future minimum payments of long-term debt are as follows:
Fiscal year ending (in millions) | ||||||||
| 2026 (remainder of year) | $ | 15 | ||||||
| 2027 | 14 | |||||||
| 2028 | 504 | |||||||
| 2029 | 605 | |||||||
| 2030 | 755 | |||||||
| 2031 and thereafter | 4,185 | |||||||
| Total principal payments | 6,078 | |||||||
| Less: unamortized debt discount and issuance costs | (44) | |||||||
| Total long-term debt | $ | 6,034 | ||||||
16 | Leidos Holdings, Inc. | ||||
Note 6–Accumulated Other Comprehensive Income (Loss)
Changes in the components of Accumulated Other Comprehensive Income (Loss) ("AOCI") were as follows:
| (in millions) | Foreign currency translation adjustments | Unrecognized gain (loss) on derivative instruments | Pension adjustments | Total AOCI | |||||||||||||||||||
| Balance at January 3, 2025 | $ | (98) | $ | 1 | $ | (13) | $ | (110) | |||||||||||||||
| Other comprehensive income (loss) | 74 | 1 | (3) | 72 | |||||||||||||||||||
| Taxes | (8) | (1) | 1 | (8) | |||||||||||||||||||
| Reclassification from AOCI | — | (4) | — | (4) | |||||||||||||||||||
| Balance at January 2, 2026 | (32) | (3) | (15) | (50) | |||||||||||||||||||
| Other comprehensive income (loss) | 9 | — | 23 | 32 | |||||||||||||||||||
| Taxes | (1) | — | (6) | (7) | |||||||||||||||||||
| Balance at April 3, 2026 | $ | (24) | $ | (3) | $ | 2 | $ | (25) | |||||||||||||||
Reclassifications from unrecognized gain (loss) on derivative instruments are recorded in "Interest expense, net" in the condensed consolidated statements of operations.
On May 20, 2022, the trustee of our UK defined benefit pension plan (the “Plan”) invested the assets of the Plan in a bulk purchase annuity policy to fully insure the benefits payable to the members of the Plan. The transaction was structured to enable a full buy-out, at which time the insurer would assume direct responsibility for all future pension obligations.
On February 11, 2026, the Plan completed a full buy-out, thus relieving the Company of future pension obligations. As a result we recognized a $23 million settlement loss primarily related to the unamortized loss previously recorded within AOCI. The settlement loss was recorded in "Other expense, net" in the condensed consolidated statements of operations.
Note 7–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 | ||||||||||||||
| (in millions) | April 3, 2026 | April 4, 2025 | ||||||||||||
| Basic weighted average number of shares outstanding | 126 | 130 | ||||||||||||
Dilutive common share equivalents—stock options and other stock awards | 2 | 1 | ||||||||||||
| Diluted weighted average number of shares outstanding | 128 | 131 | ||||||||||||
Anti-dilutive stock-based awards are excluded from the weighted average number of shares outstanding used to compute diluted EPS. The total outstanding stock options and vesting stock awards that were anti-dilutive were less than 0.5 million for both the three months ended April 3, 2026, and April 4, 2025.
During the three months ended April 3, 2026, we made open market repurchases of our common stock for an aggregate purchase price of $200 million. All repurchased shares were immediately retired. There were no open market repurchases during the three months ended April 4, 2025.
Note 8–Income Taxes
For the three months ended April 3, 2026, the effective tax rate was 21.9% compared to 23.6% for the three months ended April 4, 2025. The decrease to the effective tax rate was primarily due to an increase in net excess tax benefits related to employee stock-based payment transactions and a decrease in unrecognized tax benefits.
Leidos Holdings, Inc. | 17 | ||||
LEIDOS HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 9–Business Segments
Our operations and reportable segments are organized around the customers and markets we serve. We define our reportable segments based on the way the chief operating decision maker ("CODM"), currently our Chief Executive Officer, manages operations for the purposes of allocating resources and assessing performance. The CODM considers segment revenue and operating income to assist with the evaluation of strategic business decisions, including potential acquisitions or divestitures, whether to invest in certain products or services, share repurchases and the declaration of dividends.
Beginning in fiscal 2026, we realigned our business to report in five operating segments, which are aggregated into four reportable segments in accordance with the criteria established under ASC 280: Intelligence & Digital, Health, Homeland and Defense. Our reportable segments are focused on specific, defined capability sets that we bring to our customers. Additionally, we separately present the unallocable costs associated with corporate functions as Corporate. As a result of this change, prior year segment results have been recast to reflect the current reportable segment structure.
Our Intelligence & Digital business delivers mission-focused capabilities to the U.S. federal government and the U.S. Intelligence Community. The business integrates intelligence tradecraft, full-spectrum cyber capabilities, and advanced technical solutions at scale to improve decision-making across large, distributed mission networks and classified environments. We conduct technological research and development, software engineering, modeling and simulation, advanced analytics, network modernization, artificial intelligence development, and IT service management, modernizing critical systems and enabling resilient, high-performing mission operations.
Our Health business delivers services and solutions to federal and commercial customers in areas of public health, care coordination, and life and environmental sciences. Our offerings include IT infrastructure modernization, software development, research and implementation, response to hazardous material incidents, mission software solutions and wellness exams.
Our Homeland business serves five markets: air traffic, airports and borders, security equipment, commercial energy engineering and international. We provide safety critical software for the automation of air traffic both domestically and internationally. Additionally, we provide protection of the borders and airports through software and logistics programs. We provide security equipment for various end users. Internationally, we support defense and other government customers with software development programs, data analytics, information technology and intelligence operations.
Our Defense business develops and produces advanced space, aerial, surface, and sub-surface manned and un-manned defense systems. Our offerings include manufacturing, prototyping, weapons development, analytics and other advanced defense services.
Corporate includes the operations of various corporate activities, certain corporate expense items that are not reimbursed by our U.S. government customers and certain other expense items excluded from a reportable segment's performance.
The following table summarizes business segment information for the periods presented:
| Three Months Ended April 3, 2026 | ||||||||||||||||||||||||||||||||
| (in millions) | Intelligence & Digital | Health | Homeland | Defense | Total | |||||||||||||||||||||||||||
| Revenues | $ | 1,513 | $ | 1,188 | $ | 816 | $ | 883 | $ | 4,400 | ||||||||||||||||||||||
| Less: | ||||||||||||||||||||||||||||||||
| Direct labor | 400 | 200 | 178 | 224 | 1,002 | |||||||||||||||||||||||||||
| Amortization of intangible assets | 8 | 4 | 7 | 11 | 30 | |||||||||||||||||||||||||||
| Other segment expense | 959 | 700 | 598 | 586 | 2,843 | |||||||||||||||||||||||||||
| Segment operating income | $ | 146 | $ | 284 | $ | 33 | $ | 62 | $ | 525 | ||||||||||||||||||||||
| Corporate expense | 17 | |||||||||||||||||||||||||||||||
| Total operating income | $ | 508 | ||||||||||||||||||||||||||||||
18 | Leidos Holdings, Inc. | ||||
| Three Months Ended April 4, 2025 | ||||||||||||||||||||||||||||||||
| (in millions) | Intelligence & Digital | Health | Homeland | Defense | Total | |||||||||||||||||||||||||||
| Revenues | $ | 1,408 | $ | 1,188 | $ | 770 | $ | 879 | $ | 4,245 | ||||||||||||||||||||||
| Less: | ||||||||||||||||||||||||||||||||
Direct labor | 383 | 206 | 162 | 208 | 959 | |||||||||||||||||||||||||||
| Amortization of intangible assets | 5 | 6 | 7 | 12 | 30 | |||||||||||||||||||||||||||
| Other segment expense | 888 | 688 | 540 | 585 | 2,701 | |||||||||||||||||||||||||||
Segment operating income | $ | 132 | $ | 288 | $ | 61 | $ | 74 | $ | 555 | ||||||||||||||||||||||
Corporate expense | 25 | |||||||||||||||||||||||||||||||
| Total operating income | $ | 530 | ||||||||||||||||||||||||||||||
The statement of operations performance measures used to evaluate segment performance are revenues and operating income. As a result, "Interest expense, net," "Other expense, net" and "Income tax expense" as reported in the condensed consolidated statements of operations are not allocated to our segments.
Other segment expenses include direct program costs such as material and subcontractor expenses, as well as allocable indirect costs such as depreciation and Corporate compensation expenses, but excludes direct labor which is separately presented above. The Health and Defense segments also include equity earnings of non-consolidated subsidiaries within operating income.
Under U.S. Government Cost Accounting Standards, indirect costs including depreciation expense are collected in indirect cost pools, which are then collectively allocated to the reportable segments based on a representative causal or beneficial relationship of the costs in the pool to the costs in the base. As such, depreciation expense is not separately disclosed on the condensed consolidated statements of operations.
Asset information by segment is not a key measure of performance used by the CODM.
Note 10–Commitments and Contingencies
LEGAL PROCEEDINGS
We are involved in various claims and lawsuits arising in the normal conduct of our business, none of which, in the opinion of management, based upon current information, will likely have a material adverse effect on our financial position, results of operations or cash flows.
CONTINGENCIES
Government Investigations and Reviews
We are routinely subject to investigations and reviews relating to compliance with various laws and regulations with respect to our role as a contractor to federal, state and local government customers and in connection with performing services in countries outside of the United States. Adverse findings could have a material effect on our business, financial position, results of operations and cash flows due to our reliance on government contracts.
Defense Contract Audit Agency
As of April 3, 2026, active indirect cost audits by the Defense Contract Audit Agency remain open for fiscal 2024 and subsequent fiscal years. Although we have recorded contract revenues based upon an estimate of costs that we believe will be approved upon final audit or review, we cannot predict the outcome of any ongoing or future audits or reviews and adjustments, and if future adjustments exceed estimates, our profitability may be adversely affected. As of April 3, 2026, we believe we have adequately reserved for potential adjustments from audits or reviews of contract costs.
Leidos Holdings, Inc. | 19 | ||||
LEIDOS HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Other Government Investigations and Reviews
In August 2022, the Company received a Federal Grand Jury Subpoena in connection with a criminal investigation being conducted by the U.S. Department of Justice Antitrust Division. The subpoena requests that the Company produce a broad range of documents related to three U.S. Government procurements associated with the Company’s Intelligence Group in 2021 and 2022. We are fully cooperating with the investigation, and we are conducting our own internal investigation with the assistance of outside counsel. It is not possible at this time to determine whether we will incur, or to reasonably estimate the amount of, any fines, penalties, or further liabilities in connection with the investigation pursuant to which the subpoena was issued.
COMMITMENTS
As of April 3, 2026, we have outstanding letters of credit of $114 million, principally related to performance guarantees on contracts and outstanding surety bonds with a notional amount of $153 million, principally related to performance and subcontractor payment bonds on contracts. The value of the surety bonds may vary due to changes in the underlying project status and/or contractual modifications.
As of April 3, 2026, we invested $6 million in an investment fund as a limited partner and have committed to invest an additional $94 million over the next five years. The timing of our capital contributions is uncertain.
As of April 3, 2026, the future expirations of the outstanding letters of credit and surety bonds were as follows:
Fiscal year ending (in millions) | |||||
| 2026 (remainder of year) | $ | 136 | |||
| 2027 | 46 | ||||
| 2028 | 74 | ||||
| 2029 | 9 | ||||
| 2030 | — | ||||
| 2031 and thereafter | 2 | ||||
| $ | 267 | ||||
Note 11–Subsequent Events
On April 14, 2026, Leidos, Inc. entered into a Contribution and Equity Purchase Agreement with certain affiliates of Altaris, LLC to form a new joint venture combining the Security Enterprise Solutions and Industrial Automation businesses (“SES Business”) of Leidos with Analogic Corporation, a portfolio company of Altaris, LLC. Upon close, Leidos will contribute the SES Business to the joint venture in exchange for a 41.5% equity interest in the new joint venture. The transaction is expected to close in the second half of fiscal 2026, subject to the satisfaction or waiver of customary closing conditions.
20 | Leidos Holdings, Inc. | ||||
PART I—FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of Leidos Holdings, Inc.'s ("Leidos") financial condition, results of operations, and quantitative and qualitative discussion about business environment and trends should be read in conjunction with Leidos' condensed consolidated financial statements and related notes.
The following discussion contains forward-looking statements, including statements regarding our intent, belief or current expectations with respect to, among other things, trends affecting our financial condition or results of operations, backlog, our industry, the impact of our merger and acquisition activity, government budgets and spending, our business contingency plans, interest rates and uncertainties in tax due to new tax legislation or other regulatory developments. In some cases, forward-looking statements can be identified by words such as “will,” “expect,” “estimate,” “plan,” “potential,” “continue” or similar expressions. Such statements are not guarantees of future performance and involve risks and uncertainties and actual results may differ materially from those in the forward-looking statements as a result of various factors. Some of these factors include, but are not limited to, the risk factors set forth in our Annual Report on Form 10-K, as updated by the risk factor in this report under Part II, Item 1A. "Risk Factors" and as may be further updated in subsequent filings with the U.S. Securities and Exchange Commission. Due to such uncertainties and risks, you are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date hereof. We do not undertake any obligation to update these factors or to publicly announce the results of any changes to our forward-looking statements due to future events or developments.
Unless indicated otherwise, references in this report to "we," "us" and "our" refer collectively to Leidos and its consolidated subsidiaries.
OVERVIEW
Leidos is an industry and technology leader serving government and commercial customers with smarter, more efficient digital and mission innovations. Headquartered in Reston, Virginia, with 50,000 global employees, we pursue strategic growth across five pillars: space and maritime; energy infrastructure; digital modernization and cyber; mission software; and managed health services. Our customers include the U.S. Department of War (“DoW”), the U.S. Intelligence Community, the U.S. Department of Homeland Security, the Federal Aviation Administration, the Department of Veterans Affairs, and many other U.S. civilian, state and local government agencies, foreign government agencies and commercial businesses.
Beginning in fiscal 2026, we realigned our business and operate in four reportable segments that are focused on specific, defined capability sets we bring to our customers. As a result of this change, prior year segment results and disclosures have been recast to reflect the current reportable segment structure. We now operate in the following reportable segments: Intelligence & Digital, Health, Homeland and Defense. We also separately present the unallocable costs associated with corporate functions as Corporate (see "Note 9–Business Segments").
BUSINESS ENVIRONMENT AND TRENDS
U.S. GOVERNMENT MARKETS
During the three months ended April 3, 2026, and April 4, 2025, we generated approximately 86% and 87% respectively, of total revenues from contracts with the U.S. government. Accordingly, our business performance is affected by the overall level of U.S. government spending, especially national security, homeland security and intelligence spending, and the alignment of our service and product offerings and capabilities with current and future budget priorities of the U.S. government.
On April 30, 2026, Congress passed legislation to fund all non-immigration agencies and offices within the Department of Homeland Security agencies ending the government shutdown.
Leidos Holdings, Inc. | 21 | ||||
PART I—FINANCIAL INFORMATION
INTERNATIONAL MARKETS
Sales to customers in international markets represented approximately 8% of total revenues for both the three months ended April 3, 2026, and April 4, 2025. Our international customers include foreign governments and their agencies. Our international business increases our exposure to international markets and the associated international regulatory, foreign currency exchange rate and geopolitical risks.
Changes in international trade policies, including higher tariffs on imported goods and materials, may increase the cost of certain goods necessary to fulfill our contractual requirements and for internal purposes. We expect to recover certain portions of the increase to the cost of goods through contractual measures. While we continue to evaluate the tariff environment and potential impacts of higher tariffs, we currently do not expect them to have a significant effect on our business.
RESULTS OF OPERATIONS
The following table summarizes our condensed consolidated results of operations for the periods presented:
| Three Months Ended | |||||||||||||||||
| (dollars in millions) | April 3, 2026 | April 4, 2025 | Percent change | ||||||||||||||
| Revenues | $ | 4,400 | $ | 4,245 | 3.7 | % | |||||||||||
Operating income | 508 | 530 | (4.2 | %) | |||||||||||||
Non-operating expense, net | (79) | (52) | 51.9 | % | |||||||||||||
| Income before income taxes | 429 | 478 | (10.3 | %) | |||||||||||||
| Income tax expense | (94) | (113) | (16.8 | %) | |||||||||||||
| Net income | 335 | 365 | (8.2 | %) | |||||||||||||
| Net income attributable to Leidos common stockholders | $ | 328 | $ | 363 | (9.6 | %) | |||||||||||
| Operating margin | 11.5 | % | 12.5 | % | |||||||||||||
SEGMENT AND CORPORATE RESULTS
| Three Months Ended | |||||||||||||||||
Intelligence & Digital (dollars in millions) | April 3, 2026 | April 4, 2025 | Percent change | ||||||||||||||
| Revenues | $ | 1,513 | $ | 1,408 | 7.5 | % | |||||||||||
| Operating income | 146 | 132 | 10.6 | % | |||||||||||||
| Operating margin | 9.6 | % | 9.4 | % | |||||||||||||
The increase in revenues for the three months ended April 3, 2026, as compared to the three months ended April 4, 2025, was primarily attributable to program wins and $22 million recognized from the acquisition of Kudu Dynamics, partially offset by the completion of programs and a net decrease in volumes.
The increase in operating income for the three months ended April 3, 2026, as compared to the three months ended April 4, 2025, was primarily attributable to program wins and improved efficiencies, partially offset by a net decrease in volumes and the completion of programs.
22 | Leidos Holdings, Inc. | ||||
PART I—FINANCIAL INFORMATION
| Three Months Ended | |||||||||||||||||
Health (dollars in millions) | April 3, 2026 | April 4, 2025 | Percent change | ||||||||||||||
| Revenues | $ | 1,188 | $ | 1,188 | — | % | |||||||||||
| Operating income | 284 | 288 | (1.4 | %) | |||||||||||||
| Operating margin | 23.9 | % | 24.2 | % | |||||||||||||
Revenues remained consistent while operating income slightly decreased for the three months ended April 3, 2026, as compared to the three months ended April 4, 2025. This was primarily attributable to a net decrease in volumes, offset by net write-ups on certain programs within the managed health services business.
| Three Months Ended | |||||||||||||||||
Homeland (dollars in millions) | April 3, 2026 | April 4, 2025 | Percent change | ||||||||||||||
| Revenues | $ | 816 | $ | 770 | 6.0 | % | |||||||||||
| Operating income | 33 | 61 | (45.9 | %) | |||||||||||||
| Operating margin | 4.0 | % | 7.9 | % | |||||||||||||
The increase in revenues for the three months ended April 3, 2026, as compared to the three months ended April 4, 2025, was primarily attributable to a net increase in volumes, $23 million favorable impact from exchange rate movements, program wins and $11 million recognized from the acquisition of Entrust. The increase was partially offset by net write-downs on certain programs.
The decrease in operating income for the three months ended April 3, 2026, as compared to the three months ended April 4, 2025, was primarily attributable to an increase of $25 million in acquisition, integration and restructuring costs, driven by the Entrust transaction and net write-downs on certain programs. The decrease was partially offset by a net increase in volumes.
| Three Months Ended | |||||||||||||||||
Defense (dollars in millions) | April 3, 2026 | April 4, 2025 | Percent change | ||||||||||||||
| Revenues | $ | 883 | $ | 879 | 0.5 | % | |||||||||||
| Operating income | 62 | 74 | (16.2 | %) | |||||||||||||
| Operating margin | 7.0 | % | 8.4 | % | |||||||||||||
The increase in revenues for the three months ended April 3, 2026, as compared to the three months ended April 4, 2025, was primarily attributable to program wins, partially offset by completion of certain contracts.
The decrease in operating income for the three months ended April 3, 2026, as compared to the three months ended April 4, 2025, was primarily attributable to the completion of contracts and write-downs on certain programs in the current year, partially offset by program wins.
| Three Months Ended | |||||||||||||||||
Corporate (dollars in millions) | April 3, 2026 | April 4, 2025 | Percent change | ||||||||||||||
| Operating loss | $ | (17) | $ | (25) | (32.0 | %) | |||||||||||
The decrease in operating loss for the three months ended April 3, 2026, as compared to the three months ended April 4, 2025, was primarily attributable to a $15 million insurance reimbursement for legal costs incurred prior to fiscal 2026, partially offset by an increase in acquisition and integration costs.
NON-OPERATING EXPENSE, NET
Non-operating expense, net for the three months ended April 3, 2026, was $79 million as compared to $52 million for the three months ended April 4, 2025. The increase was primarily driven by a $23 million settlement loss from the buy-out of our UK defined benefit pension plan and increased interest expense from the termination of our senior unsecured bridge loan facility and issuance of our $600 million and $800 million senior notes.
Leidos Holdings, Inc. | 23 | ||||
PART I—FINANCIAL INFORMATION
PROVISION FOR INCOME TAXES
For the three months ended April 3, 2026, our effective tax rate was 21.9% compared to 23.6% for the three months ended April 4, 2025. The decrease to the effective tax rate was primarily due to an increase in net excess tax benefits related to employee stock-based payment transactions and a decrease in unrecognized tax benefits.
BOOKINGS AND BACKLOG
We recorded net bookings worth an estimated $3.3 billion during the three months ended April 3, 2026, as compared to $2.1 billion for the three months ended April 4, 2025.
The estimated value of our total backlog was as follows:
| April 3, 2026 | April 4, 2025 | ||||||||||||||||||||||||||||||||||
| (in millions) | Funded | Unfunded | Total | Funded | Unfunded | Total | |||||||||||||||||||||||||||||
| Intelligence & Digital | $ | 1,882 | $ | 17,453 | $ | 19,335 | $ | 1,745 | $ | 15,603 | $ | 17,348 | |||||||||||||||||||||||
| Health | 1,760 | 4,800 | 6,560 | 832 | 7,431 | 8,263 | |||||||||||||||||||||||||||||
| Homeland | 3,304 | 6,580 | 9,884 | 2,617 | 7,357 | 9,974 | |||||||||||||||||||||||||||||
| Defense | 2,652 | 9,938 | 12,590 | 2,135 | 8,576 | 10,711 | |||||||||||||||||||||||||||||
| Total | $ | 9,598 | $ | 38,771 | $ | 48,369 | $ | 7,329 | $ | 38,967 | $ | 46,296 | |||||||||||||||||||||||
Backlog at April 3, 2026, includes $371 million acquired through the acquisition of Entrust within the Homeland reportable segment.
Backlog represents the revenues we expect to recognize under negotiated contracts and unissued task orders on sole source IDIQ contracts, to the extent we believe their execution and funding to be probable. Backlog does not include potential task orders expected to be awarded under multiple award IDIQ contracts.
Backlog estimates are subject to change and may be affected by factors including modifications of contracts and foreign currency movements.
LIQUIDITY AND CAPITAL RESOURCES
OVERVIEW OF LIQUIDITY
As of April 3, 2026, we had $457 million in cash and cash equivalents. We have a senior unsecured revolving credit facility which can provide up to $1.5 billion in additional borrowing, if required. As of April 3, 2026, and January 2, 2026, there were no borrowings outstanding under the revolving credit facility.
We had outstanding debt of $6.3 billion and $4.6 billion at April 3, 2026, and January 2, 2026 respectively. In March 2026, we issued and sold $600 million 4.10% and $800 million 5.00% senior unsecured notes maturing in March 2029 and March 2036, respectively. The annual interest rate is payable on a semi-annual basis. The proceeds from the notes were used to fund a portion of the consideration payable in connection with the acquisition of Entrust and for general corporate purposes.
We have a commercial paper program in which we may issue short-term unsecured commercial paper notes ("Commercial Paper Notes") and have maturities of up to 397 days from the date of issuance. As of April 3, 2026, we had $300 million of Commercial Paper Notes outstanding. As of January 2, 2026, we did not have any Commercial Paper Notes outstanding.
We made $5 million and $529 million principal payments on our long-term debt during the three months ended April 3, 2026 and April 4, 2025, respectively. The activity for the three months ended April 4, 2025, included a $500 million payment to discharge the $500 million notes due May 2025.
Our senior unsecured revolving credit facility, Commercial Paper Notes, senior unsecured term loan and notes outstanding as of April 3, 2026, contain financial covenants and customary restrictive covenants. We were in compliance with all financial covenants as of April 3, 2026.
We paid dividends of $55 million and $53 million during the three months ended April 3, 2026, and April 4, 2025, respectively.
24 | Leidos Holdings, Inc. | ||||
PART I—FINANCIAL INFORMATION
We may from time to time seek to retire or purchase our outstanding debt through cash purchases in the open market, privately negotiated transactions or otherwise. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
Stock repurchases of Leidos common stock may be made on the open market or in privately negotiated transactions with third parties including through accelerated share repurchase agreements. Whether repurchases are made and the timing and actual number of shares repurchased depends on a variety of factors including price, corporate capital requirements, other market conditions and regulatory requirements. The repurchase program may be accelerated, suspended, delayed or discontinued at any time.
We made open market repurchases of our common stock for an aggregate purchase price of $200 million during the three months ended April 3, 2026. During the three months ended April 4, 2025, we did not make any open market repurchases; however, we repurchased $500 million of shares under an accelerated share repurchase agreement.
During the three months ended April 3, 2026, we invested $6 million in an investment fund as a limited partner, In connection with this investment, we have committed to invest an additional $94 million over the next five years. We expect to fund this investment with cash on hand and cash generated through our operations.
For the next 12 months, we anticipate that we will be able to meet our liquidity needs, including servicing our debt, through cash generated from operations, available cash balances, borrowings from our commercial paper program and, if needed, sales of accounts receivable and borrowings from our revolving credit facility.
SUMMARY OF CASH FLOWS
The following table summarizes cash flow information for the periods presented:
| Three Months Ended | |||||||||||
| (in millions) | April 3, 2026 | April 4, 2025 | |||||||||
Net cash provided by operating activities | $ | 301 | $ | 58 | |||||||
| Net cash used in investing activities | (2,359) | (22) | |||||||||
Net cash provided by (used in) financing activities | 1,393 | (110) | |||||||||
Net cash provided by operating activities increased $243 million during the three months ended April 3, 2026, when compared to the prior year quarter. The increase was primarily due to favorable changes in working capital.
Net cash used in investing activities increased $2,337 million for the three months ended April 3, 2026, when compared to the prior year quarter. The increase was primarily due to $2,338 million of net cash paid in connection with the acquisition of Entrust.
Net cash provided by financing activities increased $1,503 million for the three months ended April 3, 2026, when compared to the prior year quarter. The increase was primarily due a net increase of $1,216 million in cash inflows from debt activity, consisting of proceeds from debt issuances and payments for borrowings and debt issuance costs. The increase was also related to a $300 million net decrease in stock repurchases primarily attributable to the prior year accelerated share repurchase activities.
OFF-BALANCE SHEET ARRANGEMENTS
We have outstanding performance guarantees and cross-indemnity agreements in connection with certain aspects of our business and future commitments related to an investment fund. We also have letters of credit outstanding principally related to performance guarantees on contracts and surety bonds outstanding principally related to performance and subcontractor payment bonds as described in "Note 10–Commitments and Contingencies" of the notes to the condensed consolidated financial statements contained within this Quarterly Report on Form 10-Q. These arrangements have not had, and management does not believe it is likely that they will in the future have, a material effect on our liquidity, capital expenditures or capital resources, operations or financial condition.
Leidos Holdings, Inc. | 25 | ||||
PART I—FINANCIAL INFORMATION
GUARANTOR AND ISSUER OF GUARANTEED SECURITIES
Leidos Holdings, Inc. (“Guarantor”) has fully and unconditionally guaranteed the debt securities of its subsidiary, Leidos, Inc. (“Issuer”), that were issued pursuant to transactions that were registered under the Securities Act of 1933, as amended (collectively, the “Registered Notes”). The following is a list of the Registered Notes guaranteed by Leidos Holdings, Inc.
| Senior unsecured Registered Notes issued by Leidos, Inc.: | ||
$600 million 4.100% notes, due March 2029 | ||
$750 million 4.375% notes, due May 2030 | ||
$1,000 million 2.300% notes, due February 2031 | ||
$500 million 5.400% notes, due March 2032 | ||
$750 million 5.750% notes, due March 2033 | ||
$500 million 5.500% notes, due March 2035 | ||
$800 million 5.000% notes, due March 2036 | ||
Leidos Holdings, Inc. has also fully and unconditionally guaranteed debt securities of Leidos, Inc. that were issued pursuant to transactions that were not registered under the Securities Act of 1933, as amended. The following is a list of unregistered debt securities guaranteed by Leidos Holdings, Inc.
| Senior unsecured unregistered debt securities issued by Leidos, Inc.: | ||
$250 million 7.125% notes, due July 2032 | ||
$300 million 5.500% notes, due July 2033 | ||
Additionally, Leidos, Inc. has fully and unconditionally guaranteed debt securities of Leidos Holding, Inc. that were issued pursuant to transactions that programs were not registered under the Securities Act of 1933, as amended. The following is a list of unregistered debt securities guaranteed by Leidos, Inc.
| Senior unsecured unregistered debt securities issued by Leidos Holdings, Inc.: | ||
| $300 million 5.950% notes, due December 2040 | ||
The following summarized financial information includes the assets, liabilities and results of operations for the Guarantor and Issuer of the Registered Notes described above. Intercompany balances and transactions between the Issuer and Guarantor have been eliminated from the financial information below. Investments in the consolidated subsidiaries of the Issuer and Guarantor that do not guarantee the senior unsecured notes have been excluded from the financial information. Intercompany payables represent amounts due to non-guarantor subsidiaries of the Issuer.
BALANCE SHEET INFORMATION FOR THE GUARANTOR AND ISSUER OF REGISTERED NOTES
| (in millions) | April 3, 2026 | January 2, 2026 | ||||||||||||
| Total current assets | $ | 2,348 | $ | 3,036 | ||||||||||
| Goodwill | 5,666 | 5,666 | ||||||||||||
| Other long-term assets | 1,224 | 1,250 | ||||||||||||
| Total assets | $ | 9,238 | $ | 9,952 | ||||||||||
| Total current liabilities | $ | 2,184 | $ | 1,954 | ||||||||||
| Long-term debt, net of current portion | 6,014 | 4,628 | ||||||||||||
| Intercompany payables | 5,020 | 4,706 | ||||||||||||
| Other long-term liabilities | 949 | 942 | ||||||||||||
| Total liabilities | $ | 14,167 | $ | 12,230 | ||||||||||
26 | Leidos Holdings, Inc. | ||||
PART I—FINANCIAL INFORMATION
STATEMENT OF OPERATIONS INFORMATION FOR THE GUARANTOR AND ISSUER OF REGISTERED NOTES
| Three Months Ended | ||||||||
| (in millions) | April 3, 2026 | |||||||
| Revenues, net | $ | 2,702 | ||||||
| Operating income | 190 | |||||||
Net loss attributable to Leidos common stockholders | (18) | |||||||
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
We are subject to a number of reviews, investigations, claims, lawsuits, other uncertainties and future obligations related to our business. For a discussion of these items, see "Note 10–Commitments and Contingencies" of the notes to the condensed consolidated financial statements contained within this Quarterly Report on Form 10-Q.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
There were no material changes to our critical accounting policies, estimates or judgments that would have a significant impact on earnings during the period covered by this report from those discussed in our Annual Report on Form 10-K for the year ended January 2, 2026.
RECENTLY ADOPTED AND ISSUED ACCOUNTING STANDARDS
For a discussion of these items, see "Note 1–Basis of Presentation and Summary of Significant Accounting Policies" of the notes to the condensed consolidated financial statements contained within this Quarterly Report on Form 10-Q.
Leidos Holdings, Inc. | 27 | ||||
PART I—FINANCIAL INFORMATION
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There were no material changes in our market risk exposure from those discussed in our Annual Report on Form 10-K for the year ended January 2, 2026.
Item 4. Controls and Procedures
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Our management, with the participation of our principal executive officer (our Chief Executive Officer) and principal financial officer (our Executive Vice President and Chief Financial Officer), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of April 3, 2026. Based upon that evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the U.S. Securities and Exchange Commission. These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
On May 23, 2025, and March 27, 2026, we completed the acquisitions of Kudu Dynamics and Entrust, respectively. We are in the process of integrating Entrust into our system of internal control over financial reporting. As of April 3, 2026, we completed the integration of Kudu Dynamics into our controls over financial reporting.
Other than the foregoing, there have been no changes in our internal control over financial reporting during the quarter ended April 3, 2026, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
28 | Leidos Holdings, Inc. | ||||
Part II—Other Information
Item 1. Legal Proceedings
We have furnished information relating to legal proceedings, and any investigations and reviews that we are involved with in "Note 10–Commitments and Contingencies" of the notes to the condensed consolidated financial statements contained within this Quarterly Report on Form 10-Q.
Item 1A. Risk Factors
There were no material changes to the risks described in Part I, Item 1A "Risk Factors" in our Annual Report on Form 10-K for the year ended January 2, 2026.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a)None
(b)None
(c)Purchases of Equity Securities by the Issuer
The following table presents information related to the repurchases of our common stock during the quarter ended April 3, 2026.
| Period | Total Number of Shares(1) (or Units) Purchased | Average Price Paid per Share (or Unit) | Total Number of Shares (or Units) Purchased as Part of Publicly Announced Repurchase Plans or Programs(2) | Maximum Number of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs(2) | |||||||||||||||||||
| January 3, 2026 - January 31, 2026 | — | $ | — | — | 1,655,694 | ||||||||||||||||||
| February 1, 2026 - February 28, 2026 | 425,634 | 173.13 | 425,634 | 1,230,060 | |||||||||||||||||||
| March 1, 2026 - March 31, 2026 | 717,592 | 176.02 | 717,592 | 512,468 | |||||||||||||||||||
| April 1, 2026 - April 3, 2026 | — | — | — | 512,468 | |||||||||||||||||||
| Total | 1,143,226 | $ | 174.94 | 1,143,226 | |||||||||||||||||||
(1)The total number of shares purchased includes shares surrendered to satisfy statutory tax withholding obligations related to vesting of restricted stock units.
(2)In February 2022, our Board of Directors authorized a share repurchase program of up to 20 million shares of our outstanding common stock. The shares may be repurchased from time to time in one or more open market repurchases or privately negotiated transactions, including accelerated share repurchase transactions. The actual timing, number and value of shares repurchased under the program will depend on a number of factors, including the market price of our common stock, general market and economic conditions, applicable legal requirements, compliance with the terms of our outstanding indebtedness and other considerations. There is no assurance as to the number of shares that will be repurchased, and the repurchase program may be suspended or discontinued at any time at our Board of Directors' discretion. This share repurchase authorization replaces the previous share repurchase authorization announced in February 2018.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Leidos Holdings, Inc. | 29 | ||||
PART II—OTHER INFORMATION
Item 5. Other Information
RULE 10B5-1 TRADING ARRANGEMENT
During the three months ended April 3, 2026, no director or officer of the Company adopted, modified or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(c) of Regulation S-K.
30 | Leidos Holdings, Inc. | ||||
PART II—OTHER INFORMATION
Item 6. Exhibits
| Exhibit Number | Description of Exhibit | ||||
| 4.1 | |||||
| 4.2 | Form of Global Note representing Leidos, Inc.'s 4.100% Notes due 2029. Included in Exhibit 4.1 and incorporated by reference to Exhibit 4.2 to our Current Report on Form 8-K filed with the SEC on March 3, 2026. | ||||
| 4.3 | Form of Global Note representing Leidos, Inc.'s 5.000% Notes due 2036. Included in Exhibit 4.1 and incorporated by reference to Exhibit 4.3 to our Current Report on Form 8-K filed with the SEC on March 3, 2026. | ||||
| 10.1 | |||||
| 10.2 | Restatement Agreement, dated as of February 12, 2026, by and among Leidos Holdings, Inc., Leidos, Inc., the guarantors party thereto, the lenders party thereto and Citibank, N.A., as administrative agent. Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on February 17, 2026. | ||||
| 22 | |||||
| 31.1 | |||||
| 31.2 | |||||
| 32.1 | |||||
| 32.2 | |||||
| 101 | Interactive Data File. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | ||||
| 104 | Cover Page Interactive Data File. The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | ||||
Leidos Holdings, Inc. | 31 | ||||
PART II—OTHER INFORMATION
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: May 5, 2026
Leidos Holdings, Inc.
/s/ Christopher R. Cage | ||
Christopher R. Cage Executive Vice President and Chief Financial Officer and as a duly authorized officer | ||
32 | Leidos Holdings, Inc. | ||||