Leidos recently released its latest Form 10-Q, showing a business built around government and commercial contracts in the U.S. and abroad. The company now reports four segments — Intelligence & Digital, Health, Homeland and Defense — after a fiscal 2026 realignment, and it also separately reports corporate costs. Its work spans national security software, cyber operations, health mission software, air traffic control systems, energy and utility services, airport and border security systems, and defense systems such as air and missile defense and space payloads.
In Item 2, Leidos said about 86% of revenue in the quarter came from U.S. government contracts, down slightly from 87% a year earlier, with international sales at about 8% in both periods. The company also noted that Congress passed legislation on April 30, 2026 to fund non-immigration Department of Homeland Security agencies after the shutdown. Leidos said tariffs could raise input costs, but it does not currently expect them to have a significant effect on the business.
For the three months ended April 3, 2026, revenue rose 3.7% to $4.4 billion from $4.245 billion, while operating income fell 4.2% to $508 million from $530 million. Net income attributable to Leidos common stockholders declined 9.6% to $328 million from $363 million. Operating margin narrowed to 11.5% from 12.5%.
By segment, Intelligence & Digital posted the strongest top-line growth, with revenue up 7.5% to $1.513 billion and operating income up 10.6% to $146 million. Leidos said that increase reflected program wins and $22 million recognized from the Kudu Dynamics acquisition, partly offset by completed programs and lower volume. Health revenue was flat at $1.188 billion, while operating income edged down to $284 million from $288 million.
Homeland revenue increased 6.0% to $816 million, but operating income dropped 45.9% to $33 million. Leidos cited a $25 million increase in acquisition, integration and restructuring costs tied to the Entrust transaction, along with write-downs on certain programs. Defense revenue rose 0.5% to $883 million, while operating income fell 16.2% to $62 million. Corporate posted an operating loss of $17 million, narrower than the $25 million loss a year earlier, helped by a $15 million insurance reimbursement for legal costs incurred before fiscal 2026.
Non-operating expense, net increased to $79 million from $52 million, mainly because of a $23 million settlement loss from the buy-out of a UK defined benefit pension plan and higher interest expense after the termination of a bridge loan facility and the issuance of $600 million and $800 million senior notes. The effective tax rate fell to 21.9% from 23.6%.
Bookings totaled an estimated $3.3 billion in the quarter, up from $2.1 billion a year earlier. Backlog increased to $48.369 billion from $46.296 billion, including $9.598 billion funded and $38.771 billion unfunded. By segment, backlog reached $19.335 billion in Intelligence & Digital, $6.560 billion in Health, $9.884 billion in Homeland and $12.590 billion in Defense.
At April 3, 2026, Leidos had $457 million in cash and cash equivalents and $6.3 billion of debt, up from $4.6 billion at January 2, 2026. The company issued $600 million of 4.10% senior notes due 2029 and $800 million of 5.00% senior notes due 2036 in March, using the proceeds partly to fund the Entrust acquisition. It also had $300 million of commercial paper outstanding and no borrowings on its $1.5 billion revolving credit facility.
Cash flow from operations was $301 million, up from $58 million a year earlier. Investing cash flow was a use of $2.359 billion, driven almost entirely by $2.338 billion of net cash paid for Entrust. Financing cash flow provided $1.393 billion, compared with a use of $110 million a year earlier, reflecting debt issuance and lower share repurchases. Leidos repurchased $200 million of stock in the quarter and paid $55 million in dividends. As a result of these announcements, the company's shares have moved -1.8% on the market, and are now trading at a price of $146.13. If you want to know more, read the company's complete 10-Q report here.
