Key Highlights

  • GAAP diluted EPS of USD 3.28 rose from USD 2.82 and sat above the consensus estimate of USD 3.03.
  • Revenue of USD 4.63 billion rose 3.6% but fell short of the consensus estimate of USD 4.71 billion.
  • Homeland Revenue rose 32.1% on the Entrust acquisition, while Health revenue fell 11.7% on lower managed health volumes.
  • Backlog of USD 49.6 billion compared with USD 47.7 billion a year earlier, on net bookings of USD 5.5 billion.

Leidos Holdings, Inc. (NYSE:LDOS) reported third quarter 2026 revenue of USD 4.630 billion, up 3.6% from USD 4.469 billion a year earlier but below the consensus estimate of USD 4.71 billion. GAAP diluted EPS was USD 3.28 against USD 2.82 a year earlier, above a consensus estimate of USD 3.03. Net Income attributable to common stockholders rose 11.7% to USD 410 million, and Operating Income rose 3.4% to USD 553 million, an Operating Margin of 11.9% against 12.0%.

The effective tax rate fell to 14.3% from 23.8% on a larger federal research tax Credit and lower unrecognized tax benefits. Net non-operating expense rose to USD 71 million from USD 51 million, driven by interest on USD 600 million and USD 800 million of senior notes issued in March 2026.

Homeland Surges While Health Declines

Homeland revenue rose 32.1% to USD 1.024 billion, including USD 142 million from the acquired Entrust business, and operating income rose to USD 81 million from USD 50 million. Intelligence and Digital revenue edged up 1.4% to USD 1.546 billion, while operating income rose 21.3% to USD 171 million and margin widened to 11.1% from 9.2%. Defense revenue rose 3.4% to USD 992 million with operating income of USD 86 million against USD 79 million.

Health revenue fell 11.7% to USD 1.068 billion and operating income dropped to USD 240 million from USD 324 million, a margin of 22.5% against 26.8%. The company attributed the decline to reduced volumes in managed health services programs and lower related incentive fees in the second half of fiscal 2026. Corporate operating loss narrowed to USD 25 million from USD 59 million on USD 23 million of lower legal expenses.

Funding Timeline and Divestiture Effects

The divestiture of the SES Business closed on October 5, 2026, with Leidos retaining a 41.5% non-controlling interest in the new joint venture and Altaris holding 58.5%. The company said fourth quarter revenue is lower than it would have been without the transaction.

U.S. government contracts accounted for about 83% of third quarter revenue, against 87% a year earlier. Federal funding is secured through December 11, 2026 under a continuing resolution, and a partial or full Government Shutdown would result if Congress does not pass appropriations or another continuing resolution by then. The company said it does not currently see tariffs having a significant effect on its business and plans to recover certain cost increases through contractual measures.

Cash, Debt and Backlog Against Year End and Prior Year Levels

Cash stood at USD 630 million against USD 1.108 billion at January 2, 2026, while debt rose to USD 6.0 billion from USD 4.6 billion after the USD 2.338 billion Entrust purchase. Third quarter Operating Cash Flow of USD 523 million compares with USD 711 million a year earlier, while the nine month figure of USD 1.617 billion compares with USD 1.255 billion. Share repurchases were USD 500 million in the quarter against USD 100 million a year earlier. Funded backlog was USD 11.062 billion against USD 9.064 billion, and Defense backlog was USD 14.654 billion against USD 10.492 billion.