Leidos Holdings, Inc. 10-Q Summary: Quarter Ended October 3, 2025
Business Context and Reporting Period
This filing is a Quarterly Report on Form 10-Q for Leidos Holdings, Inc. for the period ended October 3, 2025. Leidos is a technology and services company serving U.S. government agencies (including DoD, Intelligence Community, and DHS) and commercial customers. The company operates through four segments: National Security & Digital, Health & Civil, Commercial & International, and Defense Systems. As of the reporting date, the company had approximately 47,000 global employees.
Key Financial Metrics
| Metric | Q3 2025 (3 Months) | Q3 2024 (3 Months) | YTD 2025 (9 Months) | YTD 2024 (9 Months) |
|---|---|---|---|---|
| Revenues | $4,469 million | $4,190 million | $12,967 million | $12,297 million |
| Operating Income | $535 million | $516 million | $1,636 million | $1,406 million |
| Operating Margin | 12.0% | 12.3% | 12.6% | 11.4% |
| Net Income (Attributable to Leidos) | $367 million | $364 million | $1,121 million | $970 million |
| Diluted EPS | $2.82 | $2.68 | $8.62 | $7.13 |
| Cash from Operations (YTD) | $1,255 million (vs. $1,141 million YTD 2024) | |||
| Total Debt (Gross) | $4.651 billion (as of Oct 3, 2025) | |||
| Cash & Equivalents | $974 million (as of Oct 3, 2025) |
Material Changes vs. Prior Period
- Revenue Growth: Revenues increased 6.7% in Q3 and 5.4% YTD compared to the prior year, driven by program wins, volume increases, and the acquisition of Kudu Dynamics.
- Profitability: Operating income grew 3.7% in Q3 and 16.4% YTD. The Health & Civil segment saw significant margin expansion (25.2% in Q3 vs. 23.4% prior year) due to volume increases and net write-ups.
- Acquisition Impact: The acquisition of Savanna Industries, Inc. ("Kudu Dynamics") contributed $26 million in Q3 revenue and $38 million YTD revenue. Goodwill increased by $229 million.
- Debt Restructuring: In February 2025, the company issued $1 billion in new senior notes (maturing 2032 and 2035) to retire $500 million of notes due in May 2025 and fund an Accelerated Share Repurchase (ASR). Interest expense increased as a result.
- Tax Legislation: The "One Big Beautiful Bill Act" (OBBBA) enacted in July 2025 impacted the effective tax rate (23.8% in Q3 vs. 23.0% prior year) but is expected to lower future tax liabilities by approximately $270 million in payable taxes and $235 million in deferred taxes.
Outlook, Risks, and Management Commentary
- Government Shutdown: A federal government shutdown began on October 1, 2025. Management anticipates potential reduced or delayed work on existing contracts and delays in payments until the government reopens.
- Backlog: Total backlog stands at $47.7 billion ($9.1 billion funded, $38.6 billion unfunded). A policy change in Q1 2025 now includes estimated future revenue on sole-source IDIQ contracts in backlog reporting.
- Liquidity: The company maintains a $1.0 billion revolving credit facility with no outstanding borrowings. Management expects to meet liquidity needs through operating cash flow and available credit.
- Legal & Regulatory: The company is cooperating with an ongoing SEC investigation regarding international operations (DOJ inquiry closed in Dec 2024). Additionally, a DOJ Antitrust Division investigation regarding 2021-2022 procurements remains open.
- Subsequent Event: On October 31, 2025, the company divested an immaterial business within the Commercial & International segment.
Investor Verification Checklist
- Government Shutdown Impact: Monitor the duration of the federal shutdown and its specific effect on billings and revenue recognition in Q4 2025.
- Tax Law Implementation: Verify the actual cash tax savings realized from the OBBBA legislation in subsequent quarters against the estimated $270 million reduction.
- Regulatory Outcomes: Track the resolution of the ongoing SEC investigation and the DOJ Antitrust Division inquiry for potential fines or penalties.
- Debt Servicing: Confirm continued compliance with financial covenants (Debt/EBITDA ratio) given the increased interest expense from new 2032/2035 notes.
- Backlog Conversion: Assess the conversion rate of the $38.6 billion unfunded backlog, particularly given the inclusion of sole-source IDIQ estimates.