LDOS — OVERWEIGHT · rohit gudi

LDOS / RESEARCH · ↑ INDEX 2026-05-03

Leidos didn't start as a defense-IT prime. It started in 1969 as Science Applications Inc., a La Jolla physics shop J. Robert Beyster bootstrapped with stock he sold from General Atomics, structured employee-owned because Beyster wanted scientists who'd act like principals. The Leidos that trades today is the legal successor to that company — the larger half of SAIC's September 2013 split, keeping the pre-2013 stock history while the smaller carve-out walked off with the original name. That's the origin most sell-side decks skip. The inflections are louder. August 2016: a $4.6B Reverse Morris Trust folds in Lockheed's IS&GS — the deal that made LDOS a top-three federal IT prime overnight, with Lockheed shareholders ending up holding ~50.5% of the combined company. 2020: $1.65B for Dynetics — a Huntsville hardware shop nobody underwriting a services multiple wanted on the books. May 2020: $1B cash for L3Harris's airport-screening unit — 24,000 systems across 120 countries. The asymmetry the market keeps mispricing sits inside Dynetics: IFPC Inc. 2, a mobile launcher that defeats cruise missiles, drones, and rockets/artillery/mortars from a single chassis. April 2026 added $617M, taking cumulative awards past $1.2B with up to 317 launchers under the production OTA. The Street still models LDOS as services. The hardware ramp is already in the contract file.

Sources: fundamentals_report, news_report, sentiment_report, backlog_metrics, investment_debate_state.bull_history, final_trade_decision, catalyst_calendar, plus narrative WebSearches on SAIC 1969 founding under Beyster and the September 2013 split, the August 2016 Lockheed IS&GS Reverse Morris Trust, the 2020 Dynetics acquisition and IFPC Inc. 2 OTA, and the May 2020 $1B L3Harris Security Detection & Automation deal.

Confidence: 6 facts | 1 inference | 0 speculative

Gaps: None — all required fields present in upstream JSON; founding history and inflection details supplied via narrative WebSearches.

Portfolio Decision

Build a 3% position in LDOS at $149.23 ahead of the May 5 Q1 2026 earnings print, with 0.5% reserved for post-print response. Hard stop at $135, trim mechanically above $172, target $172-$185 over 6-12 months (forward P/E 14-15x on FY 2026 EPS midpoint $12.25). Clean beat + guide held = upgrade to Buy with 1% size add; in-line + guide unchanged = hold Overweight; miss or guide trim = downgrade to Hold and trim 50%. Time horizon: 6-12 months for the core thesis, with the May 5 print as the immediate gate.

LDOS at $149.23 is a value setup compressed into a binary earnings event with structurally improving fundamentals: $49B backlog covering 2.85x revenue, Q3-Q4 2025 book-to-bill of 1.3x signaling demand re-acceleration, segment exposure (NS&D 44% + Defense Systems 13% = 57%) aligned to the fastest-growing DoD line items (missile defense + homeland security at +8-10% in the FY27 POM cycle), and a forward P/E of 11.3x at a 30-40% discount to peer BAH (19x) and modest discount to SAIC (14x). The MDA SHIELD IDIQ position ($151B 10-year ceiling) and DMEA ATSP V ($24.5B) are structural option-value adds not in consensus models. FY 2025 capital return of $1.155B = 71% of FCF demonstrates management confidence at compressed multiples. Recent contract blitz — IFPC Inc. 2 cumulative $1.2B with 100+ launchers committed, Military OneSource $456M, AF Air Base Air Defense $2.2B 5-year, Analogic JV in security screening — reinforces the demand thesis qualitatively even if quantitative bookings re-acceleration is still pending confirmation.

The bear case is real and bounded: FY 2026 guide of $17.5-17.9B (+1.7-4%) and mid-13% Adj EBITDA margin (-80bps vs FY 2025) is a defensive holding pattern, not a growth story; the 87% US Government revenue concentration creates recurring shutdown risk with the September 30, 2026 fiscal year-end as the next test window (Q4 2025 6-week shutdown cost ~2pp of FY revenue growth); the death-cross technical setup (50 SMA $162 below 200 SMA $178) creates a difficult rally path requiring +9% then +19% climbs against active sellers; and the -28pp YTD underperformance vs ITA suggests name-specific concerns the market has not yet articulated. Historical base rate of similar -25pp+ sector divergences resolving within 9 months is only 2 of 5.

The Overweight rating reflects three judgment calls. First, the bull's specificity bar was cleared on 4 of 5 items cleanly with 1 partial miss on consolidation reference (Analogic JV is 24-36 month forward-looking, not realized) — single full-equivalent miss downgrades from Buy to Overweight per checklist rule. Second, the entry is constructively positioned: 7% above 52-week low, RSI bouncing from 27.5 oversold, MACD histogram crossing positive May 1, suggesting technical capitulation phase complete. Third, the AAPL +3.7% prior cross-ticker lesson reinforces patient-sizing of quality value names with binary catalysts.

The kill-switches are clear: (1) if Q1 2026 trailing book-to-bill prints below 1.10x AND guide is unchanged or trimmed on May 5, downgrade to Hold and trim 50%; (2) if a Q3-Q4 2026 government shutdown materializes for >4 weeks, the FY 2026 low-end guide breaks and position is trimmed 25%; (3) if SHIELD or SHIELD-like task-order conversion shows zero progress by Q3 2026 print (late October), structural-option value evaporates and position cap drops to 2%; (4) if stock breaks $135 (below 52-week low) on any catalyst, position is closed and re-evaluated.

Quantitative Lane

Customer Concentration

Customer concentration (FY 2025, from 10-K Item 1A):

Customer Type	% of FY 2025 Revenue	Notes
U.S. Government (total)	87%	Dominant single-event risk
International	~8%	UK, Australia, NATO
Commercial	~5%	Health, financial services

By segment exposure (implies agency mix):

Segment	% of Revenue	Primary Customers
National Security & Digital	44%	DoD, Intelligence Community
Health & Civil	30%	VA, FAA, NSF, DoE, DHS
Defense Systems	13%	Army, Navy, Air Force, MDA
Commercial & International	13%	UK MOD, Australia DoD, commercial

Implied agency concentration: DoD/IC ~57% (NS&D + Defense Systems), Civilian agencies ~30% (Health & Civil), International + Commercial ~13%.

Customer concentration interpretation:

87% federal revenue concentration is the dominant single-event risk
Recent contract wins (SHIELD IDIQ $151B ceiling, IFPC Inc. 2 $1.2B cumulative, Military OneSource $456M, AF Air Base Air Defense $2.2B 5-year) reinforce DoD concentration
Cleared workforce (~25,000 employees) creates structural switching cost moat for federal customers
Specific top-customer disclosures by agency are not provided in 10-K
LDOS' 87% federal concentration is actually the LEAST concentrated among pure-play comps (BAH 95%, SAIC 95%+, CACI 95%+)

Backlog & Book-to-Bill

Backlog and book-to-bill (FY 2025, from Q4 2025 earnings release Feb 17, 2026):

Period	Revenue ($M)	Net Bookings ($M)	Book-to-Bill
Q1 2025	4,245	~3,900	0.92x
Q2 2025	4,253	~3,200	0.75x
Q3 2025	4,469	~5,800	1.30x
Q4 2025	4,207	5,600	1.33x
FY 2025	17,174	17,500	1.02x
FY 2024	16,664	~17,800	1.07x

End of FY 2025 backlog: $49.0B total, $9.7B funded.

End of FY 2024 backlog: $43.6B total.

Funded backlog growth: +15% YoY.

Total backlog growth: +12.4% YoY.

Pending awards (per Q4 2025 call): ~$20B.

Slipped from Q4 2025 to Q1 2026: ~$7B of awards.

Key qualitative observations:

1.0x annual book-to-bill is below peer 1.05-1.10x
Back-half-loaded pattern (1.3x Q3 + Q4 2025) signals re-acceleration
$7B of slipped awards into Q1 2026 will boost the trailing book-to-bill if they convert
$49B / $17.2B = 2.85x revenue coverage = ~3 years booked
Q1 2026 trailing 4-quarter book-to-bill expected to print 1.10-1.15x if Q4 momentum continues

IDIQ ceiling vehicles (NOT in backlog until task orders awarded):

MDA SHIELD ($151B 10-year ceiling, "Golden Dome")
DMEA ATSP V ($24.5B)
These represent structural option-value not in consensus models

Research Manager

Investment Plan — Overweight

Rationale:

The bull case is anchored in a defensible value setup: forward P/E 11.3x at a 30-40% discount to peer BAH (19x), backlog $49B = 2.85x revenue coverage, Q3-Q4 2025 book-to-bill of 1.3x signaling demand re-acceleration, FY 2025 capital return of $1.155B = 71% of FCF, and segment exposure (NS&D + Defense Systems = 57%) skewed to fast-growing DoD line items growing +8-10%. The bear case is also defensible: FY 2026 guide of +1.7-4% revenue and mid-13% Adj EBITDA margin (-80bps) is a defensive holding pattern, the 87% federal revenue concentration creates exposure to recurring shutdown risk, and the death-cross technical setup creates a difficult rally path.

The fight is won and lost on the May 5 earnings print. With 2 trading days to print and stock 7% above 52-week low, risk-reward is asymmetric: ~6-13% downside vs ~24-34% upside. The Analogic JV's forward-looking nature warrants the 1-tier downgrade from Buy.

Strategic Actions:

Build core position before May 5 print: 50% of intended size at $149.23 spot.
Reserve 30% for post-print confirmation, 20% for further weakness.
Trim aggressively: above $172 trim 25%, above $185 trim additional 25%, exit above $200.
Hard stop: $135 (below 52-week low + buffer).
Position sizing: 3-4% of portfolio. Tier 2.
Re-rating: clean beat + raise = upgrade Buy + add 1%; in-line + guide held = hold Overweight; miss = downgrade Hold + trim 50%.

Trader

Transaction Proposal — Buy

Action: Buy

Reasoning: LDOS at $149.23 trades at 11.3x forward EPS midpoint $12.25, a 30-40% discount to defense IT peers despite $49B backlog (2.85x revenue), Q3-Q4 2025 book-to-bill 1.3x, and segment exposure (NS&D + Defense Systems = 57%) aligned to +8-10% growing missile defense / homeland security DoD categories. The Q1 2026 print on May 5 is the asymmetric catalyst: ~6-13% downside vs ~24-34% upside, with Zacks ESP +0.41%. Technical setup oversold (RSI bouncing from 27.5, MACD histogram positive May 1).

Entry Price: 50% at $149.23 (current pre-print), 30% reserved for post-print add (above $155 confirmation OR toward $142 weakness), 20% reserved for further weakness toward $140.

Stop Loss: $135.00 (below 52-week low $139.69 with 3% buffer).

Position Sizing: 3-4% of portfolio. Tier 2 capped due to 87% USG revenue concentration, recurring shutdown risk, D/E 107.7 leverage.

FINAL TRANSACTION PROPOSAL: BUY

Investment Debate

Bull Researcher

LDOS at $149.23 is value setup compressed into Q1 2026 earnings (May 5).

Specificity bar items:

Dated catalysts: 2026-05-05 Q1 earnings + Q2-Q3 2026 first Golden Dome/SHIELD task orders.
Customer-segment math: IFPC $1.2B (1.5% of total rev), SHIELD 1% capture = $150M, Military OneSource $91M annual = $400-600M incremental high-confidence revenue (already conservatively in the $17.5-17.9B guide).
Budget cycle: DoD FY27 POM in HASC/SASC markup, NDAA Q4 2026, topline $895B (+2%), missile defense/homeland security +8-10%. LDOS NS&D + Defense Systems = 57% in fast-growing categories.
Consolidation: Analogic JV positions LDOS in $4-6B/year homeland security screening market dominated by 2 incumbents. Aligns with Trump admin homeland security spend.
Kill-switch (tightened R2): If Q1 2026 trailing 4-quarter book-to-bill prints below 1.10x AND FY 2026 guide unchanged or trimmed in May 5 release, thesis broken.

Numbers: FY 2025 revenue $17.2B (+3%, normalized +5%), Adj EBITDA $2.42B (14.1% margin), backlog $49.0B (2.85x revenue), FCF $1.625B, ROE 31%, capital return $1.155B (71% of FCF). Forward P/E 11.3x is 30-40% discount to BAH (19x) and modest discount to SAIC (14x). EBITDA multiple 7.8x vs peers 9-12x.

Round 2 conceded: IFPC ramp pricing back-half-loaded, Analogic JV is 24-36 month build, kill-switch needed tightening.

Rebuttals: shutdown is known (priced in 27% drawdown); margin compression is D&A-driven (cash margin intact); sector divergence reverses on earnings catalyst; death cross resolves on fundamentals.

Recommendation: Buy. Target $185-$200 (forward P/E 14-15x on FY 2026 EPS midpoint $12.25). Time horizon 6-12 months.

Bear Researcher

The bull cleared 4 of 5 specificity items but glossed structural challenges.

Issues with bull's case:

May 5 earnings is coin flip; Q4 2025 beat EPS but stock dipped on guidance.
SHIELD task orders Y1 likely $50-150M not $150-300M (front-loaded years are tech development).
IFPC $1.2B already in backlog/guide; year 1-2 ramp is $100-150M (lower than bull's $250M average).
DoD topline +2% means missile defense growth ~$1.4-1.8B over 5-yr FYDP at 2% capture = 2% revenue lift, not multi-billion.
Analogic JV is 24-36 months out, not realized consolidation.

What bull skipped:

Government shutdown structural risk: Q4 2025 -2pp; Sept 30 2026 next window.
Margin compression mid-13% Adj EBITDA = -80bps structural mix shift, multi-year not one-quarter.
D/E 107.7 highest among peers; refinancing in higher-for-longer rates compounds.
Death cross (50 SMA below 200 SMA) = 3-6 month repair.
Sector divergence: ITA +6% YTD vs LDOS -22% YTD = -28pp, lasts 2-3 quarters historically.

Round 2 rebuttals:

Shutdown EV: 0.35 × 2.5pp = 87.5bps = $160M revenue at risk, 1% of FY 2026 — material.
Margin: investors price off Adj EBITDA, not EBIT; quality-of-earnings concern.
Sector divergence: 5 historical episodes show only 2/5 reverse within 9 months.
Death cross: technical resistance at $162 + $178 SMAs is real; +9% then +19% from spot against active sellers.

Recommendation: Underweight. Target $130-$140 (forward P/E 10-11x on conservative EPS $11.80-$12.00). Time horizon 6-12 months.

Risk Assessment

Aggressive

Round 1: 5-6% portfolio weight. Asymmetry ~$10 down vs ~$50 up = 1:5 reward-to-risk. 87% federal concentration is category-level not name-specific. SHIELD IDIQ $151B ceiling, 3-5% capture over 10yr = $4.5-7.5B incremental cumulative revenue. Buyback $944M/year on $19B cap = 5% annualized share count reduction = structural EPS tailwind even on flat revenue.

Round 2: Shutdown EV math: 0.35 × 1.5pp = 50bps = $90M = 0.5% of revenue, fully offset by buyback. Pre-print 4% sizing captures the asymmetric upside; sitting out the highest-asymmetry event of the year is risk aversion to the point of inefficiency. Move pre-print to 4% with 1% post-print add capacity.

Conservative

Round 1: 1.5-2.5% portfolio weight. Q4 2025 BEAT EPS but stock dipped — beat-the-quarter models don't protect from guidance reactions. -27% drawdown in a sector +6% = name-specific issue, may not yet be known. Shutdown base rate is non-zero, FY 2026 low-end guide breaks if repeats. D/E 107.7 + $200M annual interest in higher-for-longer rates compounds 100-150bps EBIT margin headwind 3-5 years.

Round 2: Conceded shutdown EV but using 2.5pp average impact (60/40 weighted) gets 87.5bps = $160M = 1% FY 2026 revenue at risk = material. Asymmetric setup only works at right entry; $149.23 is 7% above 52-week low, marginal gain from 4% vs 2% pre-print is small if positive but larger loss if negative. Move to 2% pre-print + 1.5% reserved = 3.5% max.

Neutral

Round 1: 3% pre-print at $149.23 with 1-2% reserved post-print response = total 3-4%. SHIELD math is unproven 12-month catalyst, sizing on it today is sizing on forward unconfirmed = tier-2 (3-4%) appropriate not tier-1 (5-6%). Shutdown is priced into 27% drawdown, adding margin of safety beyond is double-counting.

Round 2 final: 2% pre-print at $149.23, 1.5% reserved (1% added on confirmation, 0.5% kept for weakness toward $140). Total max 3.5%. Hard stop $135. Trim 25% above $172, additional 25% above $185, exit above $200. Aggressive 5-6% too much for binary event with shutdown risk; conservative 1.5-2.5% misses asymmetric upside. 3% with capacity to grow to 3.5% is right blend.

Analyst Reports

Daily close (warm umber) with under-fill, volume bars in tan. Trailing range capped at 252 trading days.

Market Analysis

Market Report

LDOS closed at $149.23 on May 1, 2026, just 7% above its 52-week low of $139.69 and a brutal 27.5% below its 52-week high of $205.77. Stock decisively in a downtrend on every framework: price below 50-day SMA ($162.18) by 8.0%, below 200-day SMA ($178.34) by 16.3%, and recently formed a death cross (50 SMA crossing below 200 SMA, in motion since early April).

Trend structure. Three-act drawdown: (1) early-April held the $158-$160 zone with brief test of $162; (2) sharp leg-down between April 16 and April 24 from $156 to $144 (-7.4% in 6 sessions); (3) bounce from the $144 oversold zone to $149.23 over the last 4 sessions on rising volume (May 1 = 1.16M, highest single-day in the period).

Momentum signals — early reversal. MACD line at -4.37 vs. signal -4.49, histogram +0.12 — crossed positive on May 1 for the first time. Textbook bullish histogram divergence. RSI at 39.6 has rallied off a 27.5 oversold low set on April 27, the most extreme reading in the dataset.

Volatility regime. Bollinger middle band $152.95, upper $163.36, lower $142.55 — band width compressed 30% from early April, often precedes directional moves.

Earnings setup. LDOS reports Q1 2026 on May 5 BMO. Consensus: Revenue $4.27B (-0.5% YoY), EPS $2.88 (-3% YoY). Zacks Earnings ESP +0.41% with Strong Buy / Buy / Hold rank suggests positive surprise model. A clean print resolves to 50-day SMA at $162 (+8.5%); a miss takes the stock to $139.69 (-6.4%).

Key technical levels:

Level	Price	Significance
Resistance 1	$162-$163	50-day SMA / Bollinger upper
Resistance 2	$178	200-day SMA — must reclaim for trend repair
Pivot	$149.23	Spot / 10 EMA confluence
Support 1	$144	Recent April 27 low
Support 2	$142	Bollinger lower / 2-sigma
Critical	$139.69	52-week low

Verdict. Tactically oversold with early MACD/RSI confirmation, structurally broken on every moving-average framework. Setup is binary into May 5: beat-and-raise resolves to $162-$170 (+8-14%); in-line-or-miss takes to $140-$145 (-3 to -7%).

Indicator	Reading	Signal
Price vs 50 SMA	-8.0%	Strong bearish
Price vs 200 SMA	-16.3%	Strong bearish (death cross)
MACD vs Signal	+0.12 (histogram)	Early bullish reversal
RSI(14)	39.6 (off 27.5 low)	Recovering from oversold
Bollinger position	Below middle, above lower	Mean-reversion buy zone
10 EMA vs Price	$149.24 ≈ $149.23	Flat — pivot point
52W High proximity	-27.5%	Deep drawdown
52W Low proximity	+6.8%	Just above floor

Social Sentiment

Social Sentiment Report

LDOS enters May 2026 in a sentiment vacuum unusual for a $19B mid-cap with this newsflow. Bifurcated: headline-level analyst tone is positive (Zacks "expected to beat earnings"), but the stock action says nobody believes it (down 27% from peak even as bookings momentum accelerates).

Bull narrative — strongest threads:

IFPC Inc. 2 contract blitz. April 2026: $617M U.S. Army award, cumulative $1.2B, 100+ launchers committed for delivery, R&D funded through 2029.
MDA SHIELD IDIQ position ($151B ceiling). 10-year vehicle for "Golden Dome" homeland missile defense. Plus DMEA ATSP V $24.5B and AF Air Base Air Defense $2.2B 5-year award. Q4 2025 booking package qualitatively the strongest in years.
Military OneSource win ($456M). Health & Civil segment story for 4.7M+ eligible service members.
Analogic JV for security screening. Aligns with 2030 growth strategy and Trump administration homeland security priorities.

Bear narrative — strongest threads:

Stock down 27% from peak says something is wrong. Defense-IT sector ETFs (ITA, XAR) +6% YTD vs LDOS -22% YTD = -28pp divergence.
Q4 2025 was -4% YoY revenue. EPS $2.53 down from Q3's $2.82 and Q2's $3.01. Sequential decline.
FY 2026 guide is +1.7% to +4% revenue. Defensive holding pattern. Adj EBITDA margin guide "mid-13%" vs FY 2025 14.1% — explicit 80bps compression.
$7B of awards "slipped" from Q4 into Q1. Either timing (which works out) or optimistic forecasting.
Government shutdown drama recurring. 3 shutdowns in 4 years; FY27 budget negotiations ahead.

Insider transactions: Mixed signals from cache. Net neutral.

Sentiment lane	Read	Direction
Recent contract awards	$617M IFPC, $456M Military OneSource, SHIELD IDIQ	Bullish
Sell-side pre-print stance	Beat-the-quarter model triggered	Mild bullish
Stock price action	-27% from peak, sector outperformed	Bearish
Q4 2025 earnings reaction	"Beats EPS, stock dips"	Mixed
FY 2026 guide reception	Margin compression, low growth	Bearish
Defense budget tape	European rearmament, Golden Dome	Bullish (macro)
Government shutdown overhang	6-week Q4 2025 disruption	Bearish (recurring)
Insider activity	No strong signal	Neutral

News & Macro

News Report

April-May 2026 macro tape dominated by three forces: (1) Trump administration's homeland security and missile defense build-out (Golden Dome), (2) European rearmament creating exportable demand, (3) recurring federal budget process risk producing 3 shutdowns in 4 years.

Trump-era defense priorities — the Golden Dome thesis. MDA's SHIELD IDIQ ($151B 10-year ceiling) is the operational vehicle for integrated homeland missile defense. Leidos won a position in Q4 2025. First task orders should hit Q2-Q3 2026. Even modest 1-2% share capture implies $1.5B+ of incremental annual revenue at steady-state vs current $17.2B base.

European rearmament — the export tailwind. EU defense spending projected at €420B for 2026 (+18% vs 2025). US defense IT primes positioned for 15-20% via FMS channels. IFPC Inc. 2 system Leidos is building is exactly the integrated air-defense platform European NATO members are requisitioning.

Federal budget risk — the recurring tail. 6-week government shutdown in Q4 2025 hit Leidos -4% YoY. Another shutdown event before FY27 budget enacted is non-trivial risk. September 30 FY-end creates predictable disruption windows.

DoD POM cycle. FY27 POM in HASC/SASC markup, NDAA expected Q4 2026. Topline DoD request $895B (+2%), but missile defense / homeland security line items growing +8-10%. Leidos NS&D (44%) + Defense Systems (13%) = 57% in fast-growing categories.

FAA / civilian government. Health & Civil (30% of revenue) covers VA, FAA, NSF, DoE. Administration priorities of FAA modernization, VA modernization, Energy nuclear modernization all flow to Leidos.

Macroeconomic backdrop. Fed funds 3.75-4.00%, dollar mildly weaker. Long-end rates stabilized 4.20-4.50% 10Y, removing 2024-2025 multiple-compression headwind.

Sector tape. ITA +6% YTD vs LDOS -22% YTD = -28pp divergence. Either uniquely broken or uniquely cheap.

Macro lane	2026 reading	Net for LDOS
Trump homeland security priority	Golden Dome / SHIELD IDIQ	Bullish
European rearmament	EU 2026 defense +18%	Bullish (FMS exposure)
DoD FY27 POM cycle	$895B request, +8-10% missile defense	Bullish (segment skew)
Government shutdown risk	6-week Q4 2025 hit; September 30 FY-end	Bearish (recurring)
FAA/VA/civilian agency	Modernization priorities	Mild bullish
FFP contract exposure	Margin risk on cost overruns	Bearish (mix)
Federal interest rates	Stabilizing, mild dollar weakness	Mild bullish
Sector relative performance	LDOS -22% YTD vs ITA +6%	Bearish (divergence)

Fundamental Analysis

Fundamentals Report

LDOS is a defense IT services prime deriving 87% of revenue from US government contracts. High-quality, low-multiple, cash-generative compounder running into challenging mid-cycle revenue trough.

Top line — modest growth, segment skew matters.

Year	Revenue ($B)	YoY Growth
2023	15.4	+7%
2024	16.7	+8.4%
2025	17.2	+3%
2026E	17.5-17.9	+1.7% to +4%

Deceleration from +8% to +3% is real but normalized for 53rd week (FY24) and 6-week shutdown (Q4 2025) underlying organic growth is closer to +5%.

Quarterly revenue trend (FY 2025):

Q1 2025: $4.245B
Q2 2025: $4.253B
Q3 2025: $4.469B
Q4 2025: $4.207B (govt shutdown hit)

Q1 2026 consensus $4.27B suggests sequential normalization.

Profitability — improving, with one caveat.

FY 2025 GM: ~18.0%
FY 2025 OM: ~12.3% (vs ~10.5% FY 2024 — material expansion)
FY 2025 Adj EBITDA: $2.42B (14.1% margin)
ROE: 31.0% (buyback-amplified)

FY 2026 guide of "mid-13%" Adj EBITDA margin is ~80bps below FY 2025.

EPS trend:

FY 2025 sum: $11.13 (matches TTM EPS)
FY 2026 guide: $12.05-$12.45 (+8% to +12% YoY)

EPS growth +8-12% on revenue +1.7-4% implies aggressive buyback execution + interest expense reduction doing most of the work.

Balance sheet — manageable leverage.

Cash (Q4 2025): $1.108B
Total debt: ~$5.0B
D/E ratio: 107.7 (highest among peers)
Current ratio: 1.70x

Cash flow — robust and growing.

FY 2025 OCF: ~$1.75B
FY 2025 FCF: $1.625B (TTM)
FY 2025 capex: $125M
FCF margin: 9.5%

Capital return.

FY 2025 buybacks: $944M
FY 2025 dividends: $211M
Combined: $1.155B (71% of FCF)

Backlog and book-to-bill — defense-IT critical metric.

FY 2025 backlog: $49.0B (vs $43.6B FY 2024 = +12.4%)
Funded backlog: $9.7B (+15% YoY)
Q4 2025 net bookings: $5.6B (book-to-bill 1.3x)
Q3 2025 book-to-bill: 1.3x
FY 2025 book-to-bill: 1.0x
Pending awards: $20B
Revenue/Backlog coverage: 2.85x

Customer concentration (10-K Item 1A):

US Government: 87% of FY 2025 revenue
International: ~8%
Commercial: ~5%

Segment mix (FY 2025):

Segment	% of Revenue
National Security & Digital	44%
Health & Civil	30%
Commercial & International	13%
Defense Systems	13%

Workforce: 47,000 globally (41,900 US); ~25,000 hold US security clearances (multi-billion replacement cost moat).

Risk factor inventory (10-K Item 1A, filed Feb 17, 2026): Top 7: (1) US Govt budget dependence 87%, (2) FFP contract exposure, (3) Cybersecurity, (4) Regulatory/CMMC compliance, (5) Security clearance dependency 53%, (6) Capital structure D/E 107.7, (7) Talent retention.

Metric	Value	Note
Revenue (TTM)	$17.17B	+3% YoY (FY 2025)
Net Income (TTM)	$1.45B	Strong YoY
EBITDA Margin (FY 2025)	14.1%	Mid-13% guided FY 2026 (-80bps)
Operating Margin (FY 2025)	11.2%	Improving
ROE	31.0%	Buyback-amplified
Forward P/E	11.3x	Cheap vs sector peers (BAH 19x, SAIC 14x)
PEG	2.46	High due to slowing growth
Backlog (FY 2025)	$49.0B	2.85x revenue coverage
Funded backlog	$9.7B	+15% YoY
FY 2025 book-to-bill	1.0x	Below peer 1.05-1.10x
Q4 2025 book-to-bill	1.3x	Re-acceleration
FY 2026 guide	$17.5-$17.9B	+1.7% to +4% growth
US Gov % of revenue	87%	High concentration
Net debt	~$3.9B	D/E 107.7 (highest among peers)

Risk Factors (Item 1A)

Source: Leidos Holdings Inc. Form 10-K, filed Feb 17, 2026, for fiscal year ended Jan 2, 2026. Filing URL: https://www.sec.gov/Archives/edgar/data/1336920/000133692025000006/ldos-20250103.htm

Top 7 most material risk factors:

U.S. Government budget dependence — 87% of FY 2025 revenue from U.S. government contracts. Risks include budget reductions, sequestration, procurement delays, and continuing-resolution disruption. The Q4 2025 6-week government shutdown directly cost ~2pp of FY revenue growth.

Firm-fixed-price contract exposure — FFP contracts increase risk of cost overruns; fixed-price incentive arrangements subject company to cost-sharing affecting profitability. Defense Systems segment ramp programs (IFPC Inc. 2) are predominantly FFP.

Cybersecurity & data security threats — Public reference to "cybersecurity, data security or other security threats, system failures or other disruptions." For a 47,000-employee defense IT prime with classified work, this is dominant operational risk.

Regulatory & compliance — FAR, DFARS, CAS, ITAR, and CMMC cybersecurity standards phasing through November 2028. CMMC implementation costs are recurring opex headwind.

Security clearance dependency — ~53% of 47,000-employee workforce holds U.S. security clearances (~25,000 cleared). Inability to obtain or maintain clearances poses operational risk; talent competition for cleared engineers is intense.

Capital structure & debt — Multiple debt instruments maturing through 2040. D/E 107.7 (highest among peer set), interest expense $200M+ annual = 1.6% of revenue, refinancing risk in higher-for-longer rate environment.

Talent acquisition & retention — Competition for skilled technical talent, especially those with security clearances and specialized expertise (cyber, AI/ML, hypersonic). Cleared engineer replacement takes 12-18 months.