Leidos Holdings, Inc. (LDOS) Stock Analysis and Metrics

Sector: Technology Industry: Information Technology Services CIK: 0001336920

ROIC (Qtr) 0.33

Total Debt (Qtr) 4.65 Bn

Revenue Growth (1y) (Qtr) -3.62

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About

Leidos Holdings, Inc., a prominent technology solutions company, operates in the defense, civil, and health sectors with a workforce of approximately 47,000 employees. This Fortune 500 company, headquartered in Reston, Virginia, generates revenue through its three reportable segments: Defense Solutions, Civil, and Health. The Defense Solutions segment focuses on delivering leading-edge and technologically advanced services, solutions, and products to a diverse customer base, including the U.S. Department of Defense (DoD), the U.S. Intelligence...

Leidos Holdings, Inc., a prominent technology solutions company, operates in the defense, civil, and health sectors with a workforce of approximately 47,000 employees. This Fortune 500 company, headquartered in Reston, Virginia, generates revenue through its three reportable segments: Defense Solutions, Civil, and Health.

The Defense Solutions segment focuses on delivering leading-edge and technologically advanced services, solutions, and products to a diverse customer base, including the U.S. Department of Defense (DoD), the U.S. Intelligence Community, and allied governments. The segment's primary areas of concentration include digital modernization, mission systems and integration, Command, Control, Computers, Communications, Intelligence, Surveillance, and Reconnaissance (C4ISR) technologies and services, maritime solutions, transformative software, analytics, intelligence analysis, mission support, and logistics services. Leidos has a strong presence in the defense industry, with a significant portion of its revenue generated from U.S. government contracts. The company competes with other major defense contractors, including Accenture Federal Systems, Amentum Services Inc., BAE Systems, Booz Allen Hamilton Inc., CACI International Inc., General Dynamics Corporation, IBM, Jacobs Engineering Group Inc., KBR Inc., L3Harris, Lockheed Martin Corporation, ManTech, Northrop Grumman Corporation, Peraton, Raytheon Technologies Corporation, and SAIC.

The Civil segment at Leidos concentrates on modernizing infrastructure, systems, and security for government and commercial customers. The segment's capabilities include digital modernization, energy infrastructure, integrated missions, transportation applications, and security detection. Leidos is a trusted systems developer, service provider, and integrator for Air Navigation Service Providers around the world, including the Federal Aviation Administration (FAA).

The Health segment provides effective and affordable solutions to federal and commercial customers responsible for the health and well-being of people worldwide. The segment's capabilities include health information management services, managed health services, digital modernization, and life sciences research and development.

Leidos is dedicated to promoting diversity, equity, and inclusion (DEI) in the workplace, fostering a culture of inclusion through education and best practices. The company's workforce is diverse, with approximately 36% of its employees holding degrees in science, technology, engineering, or mathematics (STEM) fields, and a strong focus on employee development and growth.

In terms of competition, Leidos often partners with other companies, including its competitors, to submit bids for large U.S. government procurements or other opportunities. These collaborations vary depending on the program, contract, or customer requirements, as well as the relative size, qualifications, capabilities, customer relationships, and experience of Leidos and its partners.

Leidos operates in a highly regulated environment, providing services and products to numerous U.S. government agencies and entities, including the DoD, the U.S. Intelligence Community, and the Department of Homeland Security (DHS). The company must comply with various laws and regulations when working with these and other U.S. government agencies and entities. Some significant laws and regulations that affect Leidos include the Federal Acquisition Regulation (FAR) and supplements, the Truth in Negotiations Act, the Procurement Integrity Act, the Civil False Claims Act, the False Statements Act, and the U.S. government Cost Accounting Standards (CAS).

In terms of data privacy and security, Leidos operates in an environment with extensive federal, state, and international laws requiring organizations to provide certain privacy protections and security safeguards for personal information and protected health information. These laws include the European Union's General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA).

Investment thesis

Bull case

Leidos’ 2025 results demonstrate a resilient operating model that balances high‑margin defense work with a diversified commercial footprint, creating a moat that is difficult for competitors to erode. The company’s adjusted EBITDA margin rose 120 basis points to 14.1%, and book‑to‑bill consistently held at 1.3, signaling healthy demand that is being translated into actual revenue. Management’s emphasis on the North Star 2030 strategy—realigning the organization into four segments and investing heavily in core growth pillars—offers a clear blueprint for capturing emerging opportunities across cyber, intelligence, space, and energy. The pipeline of award wins, including the Air Force’s $2.2 billion passive radar contract and the Department of Defense’s $151 billion SHIELD IDIQ, illustrates the firm’s ability to win large, long‑term, multi‑year agreements that will support sustained revenue growth. By tripling capital expenditures to $350 million in 2026, Leidos is poised to scale production capacity for critical defense systems such as the IFPIC interceptor and hypersonic platforms, positioning the company to capture significant market share as the U.S. military upgrades its arsenal. The strategic acquisition of Entrust Solutions Group is expected to be margin‑accretive, bringing a high‑growth, engineering‑centric business that dovetails with Leidos’ existing capabilities in systems integration and cyber. The company’s robust free‑cash‑flow generation—$1.63 billion in 2025 and a projected $1.75 billion in 2026—provides a cushion to fund growth, support a strong dividend, and fund opportunistic acquisitions without jeopardizing balance‑sheet health. Finally, Leidos’ leadership transition, highlighted by the appointment of Ted Tanner as Chief Technology Officer and Will Johnson as Enterprise Transformation Leader, signals a renewed focus on AI and process optimization that should accelerate cost efficiencies and spur higher‑value service offerings.
The health and civil segment, despite a 9.3 % decline in 2025, presents a long‑term tailwind that the firm is actively developing. Managed Health Services (MHS) is scaling rapidly in rural care and behavioral health, where federal spending is expanding and reimbursement models are shifting toward value‑based care. Leidos’ partnership with the Department of War and the Veterans Administration gives it first‑mover advantage in this space, and the firm has already demonstrated success in reducing veteran wait times by 60 %. This experience positions Leidos to capture a significant share of the $200 billion federal health IT market, which is projected to grow at 6 % annually. Management’s commitment to investing $350 million in 2026 will further accelerate the digital modernization of health records, improving data analytics and enabling more efficient service delivery, which should translate into higher profit margins over the next five years. Additionally, the firm’s cross‑sell opportunities across the health and civil segment—such as integrating cyber capabilities into health IT systems—will create synergies that further enhance revenue and margin prospects.
Leidos’ focus on zero‑trust architecture and multi‑cloud brokering, as demonstrated by the Air Force Cloud One contract, positions the company at the forefront of the federal cybersecurity transformation. The U.S. Department of Defense is increasing its budget for cyber capabilities, and the adoption of zero‑trust models is accelerating across agencies. Leidos’ early investments in cyber—particularly through the Kudu Dynamics acquisition—have positioned the firm to win new, high‑value contracts that demand advanced threat detection and automated response. The firm’s ability to blend commercial cloud technologies with rigorous security requirements gives it a unique competitive edge over traditional defense contractors that rely on legacy solutions. Furthermore, the company’s ongoing AI initiatives, led by its Enterprise Transformation office, are expected to reduce development times and costs for cyber products, creating a lower cost base and higher margin opportunities. As federal agencies seek to modernize their IT infrastructure, Leidos is well‑placed to be the preferred partner for integrating zero‑trust frameworks into mission‑critical systems.
Leidos’ strategic divestiture of Barrick and acquisition of Entrust represent a disciplined focus on high‑growth, high‑margin businesses, thereby improving the overall portfolio mix. Barrick was a legacy energy asset that generated lower margins, whereas Entrust brings a track record of consistent profitability and an opportunity to become a leader in power engineering and design. The integration of Entrust should provide immediate cross‑sell revenue opportunities with existing defense and homeland security customers, leveraging shared engineering platforms and joint customer relationships. Additionally, the synergies realized from the acquisition are expected to produce cost savings in procurement, engineering, and project management, which will improve Leidos’ operating leverage. By concentrating on high‑margin segments, the company will enhance its resilience against cyclical defense spending swings and position itself for stronger growth trajectories through 2030.
Leidos’ commitment to maintaining a healthy balance sheet—leveraged at 1.9 times gross debt to adjusted EBITDA in 2025, projected to be 2.6 times post‑Entrust acquisition—provides ample liquidity for future growth initiatives. The company’s free cash flow of $1.63 billion in 2025 and projected $1.75 billion in 2026 demonstrates its ability to fund capital expenditures without resorting to high‑yield debt. The firm’s share repurchase program and dividend policy reinforce shareholder value creation, while its planned capital raise of $1.4 billion in bonds is structured to keep leverage within acceptable limits. The ability to refinance debt on favorable terms, thanks to a strong credit profile, further ensures financial flexibility. This robust financial footing supports Leidos’ strategy to pursue opportunistic M&A, invest in AI, and expand into emerging domains such as space and undersea warfare.

Leidos’ 2025 results demonstrate a resilient operating model that balances high‑margin defense work with a diversified commercial footprint, creating a moat that is difficult for competitors to erode. The company’s adjusted EBITDA margin rose 120 basis points to 14.1%, and book‑to‑bill consistently held at 1.3, signaling healthy demand that is being translated into actual revenue. Management’s emphasis on the North Star 2030 strategy—realigning the organization into four segments and investing heavily in core growth pillars—offers a clear blueprint for capturing emerging opportunities across cyber, intelligence, space, and energy. The pipeline of award wins, including the Air Force’s $2.2 billion passive radar contract and the Department of Defense’s $151 billion SHIELD IDIQ, illustrates the firm’s ability to win large, long‑term, multi‑year agreements that will support sustained revenue growth. By tripling capital expenditures to $350 million in 2026, Leidos is poised to scale production capacity for critical defense systems such as the IFPIC interceptor and hypersonic platforms, positioning the company to capture significant market share as the U.S. military upgrades its arsenal. The strategic acquisition of Entrust Solutions Group is expected to be margin‑accretive, bringing a high‑growth, engineering‑centric business that dovetails with Leidos’ existing capabilities in systems integration and cyber. The company’s robust free‑cash‑flow generation—$1.63 billion in 2025 and a projected $1.75 billion in 2026—provides a cushion to fund growth, support a strong dividend, and fund opportunistic acquisitions without jeopardizing balance‑sheet health. Finally, Leidos’ leadership transition, highlighted by the appointment of Ted Tanner as Chief Technology Officer and Will Johnson as Enterprise Transformation Leader, signals a renewed focus on AI and process optimization that should accelerate cost efficiencies and spur higher‑value service offerings.
The health and civil segment, despite a 9.3 % decline in 2025, presents a long‑term tailwind that the firm is actively developing. Managed Health Services (MHS) is scaling rapidly in rural care and behavioral health, where federal spending is expanding and reimbursement models are shifting toward value‑based care. Leidos’ partnership with the Department of War and the Veterans Administration gives it first‑mover advantage in this space, and the firm has already demonstrated success in reducing veteran wait times by 60 %. This experience positions Leidos to capture a significant share of the $200 billion federal health IT market, which is projected to grow at 6 % annually. Management’s commitment to investing $350 million in 2026 will further accelerate the digital modernization of health records, improving data analytics and enabling more efficient service delivery, which should translate into higher profit margins over the next five years. Additionally, the firm’s cross‑sell opportunities across the health and civil segment—such as integrating cyber capabilities into health IT systems—will create synergies that further enhance revenue and margin prospects.
Leidos’ focus on zero‑trust architecture and multi‑cloud brokering, as demonstrated by the Air Force Cloud One contract, positions the company at the forefront of the federal cybersecurity transformation. The U.S. Department of Defense is increasing its budget for cyber capabilities, and the adoption of zero‑trust models is accelerating across agencies. Leidos’ early investments in cyber—particularly through the Kudu Dynamics acquisition—have positioned the firm to win new, high‑value contracts that demand advanced threat detection and automated response. The firm’s ability to blend commercial cloud technologies with rigorous security requirements gives it a unique competitive edge over traditional defense contractors that rely on legacy solutions. Furthermore, the company’s ongoing AI initiatives, led by its Enterprise Transformation office, are expected to reduce development times and costs for cyber products, creating a lower cost base and higher margin opportunities. As federal agencies seek to modernize their IT infrastructure, Leidos is well‑placed to be the preferred partner for integrating zero‑trust frameworks into mission‑critical systems.
Leidos’ strategic divestiture of Barrick and acquisition of Entrust represent a disciplined focus on high‑growth, high‑margin businesses, thereby improving the overall portfolio mix. Barrick was a legacy energy asset that generated lower margins, whereas Entrust brings a track record of consistent profitability and an opportunity to become a leader in power engineering and design. The integration of Entrust should provide immediate cross‑sell revenue opportunities with existing defense and homeland security customers, leveraging shared engineering platforms and joint customer relationships. Additionally, the synergies realized from the acquisition are expected to produce cost savings in procurement, engineering, and project management, which will improve Leidos’ operating leverage. By concentrating on high‑margin segments, the company will enhance its resilience against cyclical defense spending swings and position itself for stronger growth trajectories through 2030.
Leidos’ commitment to maintaining a healthy balance sheet—leveraged at 1.9 times gross debt to adjusted EBITDA in 2025, projected to be 2.6 times post‑Entrust acquisition—provides ample liquidity for future growth initiatives. The company’s free cash flow of $1.63 billion in 2025 and projected $1.75 billion in 2026 demonstrates its ability to fund capital expenditures without resorting to high‑yield debt. The firm’s share repurchase program and dividend policy reinforce shareholder value creation, while its planned capital raise of $1.4 billion in bonds is structured to keep leverage within acceptable limits. The ability to refinance debt on favorable terms, thanks to a strong credit profile, further ensures financial flexibility. This robust financial footing supports Leidos’ strategy to pursue opportunistic M&A, invest in AI, and expand into emerging domains such as space and undersea warfare.

Bear case

Leidos remains heavily exposed to the cyclical nature of federal procurement, and any future government shutdowns or budgetary delays could impose a significant negative impact on order flow and revenue. The company’s Q4 2025 revenue decline of 3.6 % was largely attributed to a six‑week shutdown, and management acknowledged that the same risk could recur, potentially eroding the recently achieved momentum. The firm’s reliance on long‑term IDIQs, which are not reflected in current backlog figures, introduces uncertainty around future revenue recognition and may create gaps between projected earnings guidance and actual cash flows if task orders are delayed. This cyclical exposure makes Leidos vulnerable to policy changes and fiscal uncertainty that can disrupt contract award cycles.
Leidos’ aggressive capital expenditure plan for 2026, tripling to $350 million, raises concerns about dilution of free cash flow and the potential need for additional debt financing. While the company currently has a leverage ratio of 1.9, the post‑Entrust acquisition pro‑forma leverage is projected at 2.6, leaving less room for margin expansion if market conditions deteriorate or if cost overruns occur. The increased cap‑ex may strain cash flows, especially if defense budgets are tightened or if the firm underperforms on large programs such as IFPIC or hypersonic projects. A higher debt burden could also limit flexibility in pursuing future M&A opportunities or in navigating unexpected downturns.
Management’s response to questions about the actual impact of IDIQs on revenue and the conversion of those awards into cash flow is evasive, suggesting limited transparency around potential upside or downside in the near term. The company’s guidance explicitly excludes Golden Dome, SHIELD, and microelectronics IDIQs from the backlog, indicating that these awards are not guaranteed revenue streams. Investors may overestimate the value of these programs, leading to an overvaluation of Leidos if the conversion rate is lower than expected. The lack of concrete details on task order frequency and pricing further compounds the risk of revenue volatility.
Leidos’ health and civil segment, while showing potential for future growth, currently suffers from lower margins and a 9.3 % decline in 2025 revenue, reflecting intense competition and pricing pressure from other federal health IT vendors. The segment’s reliance on the Department of Defense and Veterans Administration creates a concentration risk, and any shift in agency procurement policies or budget cuts could exacerbate revenue erosion. Additionally, the segment’s transition to a sustainment phase for electronic health records may limit growth prospects, and the firm may face challenges in monetizing innovations without clear reimbursement models. This weak performance signals that the health business may not deliver the projected margin improvement expected by 2030.
The company’s ambitious acquisition strategy, while aimed at accelerating growth, carries integration risk, particularly with Entrust, which operates in a distinct engineering and power sector. Successful integration will require seamless alignment of corporate cultures, processes, and technology platforms, and any missteps could erode expected synergies and create operational disruption. Furthermore, the acquisition cost of $2.4 billion, financed with $1.4 billion in new bonds, could put upward pressure on Leidos’ interest expense if interest rates rise or if the firm’s credit profile deteriorates. Misaligned cost structures or failure to realize projected cross‑sell opportunities may leave the acquisition as a negative contributor to earnings.

Leidos remains heavily exposed to the cyclical nature of federal procurement, and any future government shutdowns or budgetary delays could impose a significant negative impact on order flow and revenue. The company’s Q4 2025 revenue decline of 3.6 % was largely attributed to a six‑week shutdown, and management acknowledged that the same risk could recur, potentially eroding the recently achieved momentum. The firm’s reliance on long‑term IDIQs, which are not reflected in current backlog figures, introduces uncertainty around future revenue recognition and may create gaps between projected earnings guidance and actual cash flows if task orders are delayed. This cyclical exposure makes Leidos vulnerable to policy changes and fiscal uncertainty that can disrupt contract award cycles.
Leidos’ aggressive capital expenditure plan for 2026, tripling to $350 million, raises concerns about dilution of free cash flow and the potential need for additional debt financing. While the company currently has a leverage ratio of 1.9, the post‑Entrust acquisition pro‑forma leverage is projected at 2.6, leaving less room for margin expansion if market conditions deteriorate or if cost overruns occur. The increased cap‑ex may strain cash flows, especially if defense budgets are tightened or if the firm underperforms on large programs such as IFPIC or hypersonic projects. A higher debt burden could also limit flexibility in pursuing future M&A opportunities or in navigating unexpected downturns.
Management’s response to questions about the actual impact of IDIQs on revenue and the conversion of those awards into cash flow is evasive, suggesting limited transparency around potential upside or downside in the near term. The company’s guidance explicitly excludes Golden Dome, SHIELD, and microelectronics IDIQs from the backlog, indicating that these awards are not guaranteed revenue streams. Investors may overestimate the value of these programs, leading to an overvaluation of Leidos if the conversion rate is lower than expected. The lack of concrete details on task order frequency and pricing further compounds the risk of revenue volatility.
Leidos’ health and civil segment, while showing potential for future growth, currently suffers from lower margins and a 9.3 % decline in 2025 revenue, reflecting intense competition and pricing pressure from other federal health IT vendors. The segment’s reliance on the Department of Defense and Veterans Administration creates a concentration risk, and any shift in agency procurement policies or budget cuts could exacerbate revenue erosion. Additionally, the segment’s transition to a sustainment phase for electronic health records may limit growth prospects, and the firm may face challenges in monetizing innovations without clear reimbursement models. This weak performance signals that the health business may not deliver the projected margin improvement expected by 2030.
The company’s ambitious acquisition strategy, while aimed at accelerating growth, carries integration risk, particularly with Entrust, which operates in a distinct engineering and power sector. Successful integration will require seamless alignment of corporate cultures, processes, and technology platforms, and any missteps could erode expected synergies and create operational disruption. Furthermore, the acquisition cost of $2.4 billion, financed with $1.4 billion in new bonds, could put upward pressure on Leidos’ interest expense if interest rates rise or if the firm’s credit profile deteriorates. Misaligned cost structures or failure to realize projected cross‑sell opportunities may leave the acquisition as a negative contributor to earnings.

Segments Breakdown of Revenue (2026)

Award Type Breakdown of Revenue (2026)

Peer comparison

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1	MGRT	Mega Fortune Co Ltd	-	-	-	0.00 Bn
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5	CYCU	Cycurion, Inc.	-	-	-	0.00 Bn
6	HWNI	High Wire Networks, Inc.	-	-	-	0.00 Bn
7	VEEA	Veea Inc.	-	-	-	0.01 Bn
8	VYX	NCR Voyix Corp	-	-	-	1.10 Bn

Research Tools

Leidos Holdings, Inc. (NYSE: LDOS)

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Investment thesis

Bull case

Bear case

Segments Breakdown of Revenue (2026)

Award Type Breakdown of Revenue (2026)

Peer comparison

Research Tools

Leidos Holdings, Inc. (NYSE: LDOS)

About

Investment thesis

Bull case

Bear case

Segments Breakdown of Revenue (2026)

Award Type Breakdown of Revenue (2026)

Peer comparison

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