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📘 Leidos Holdings, Inc. (LDOS) — Investment Overview

🧩 Business Model Overview

Leidos Holdings, Inc. operates as a leading science, engineering, and technology company with a primary focus on serving the national security, health, and civil markets. Its core offerings span systems integration, advanced data analytics, software development, cybersecurity, and engineering solutions. Leidos’s customer base is predominantly government entities—including defense, intelligence, and civilian agencies—supplemented by commercial clients requiring mission-critical solutions. The company addresses highly complex, large-scale projects such as defense modernization, aviation systems, healthcare IT, and infrastructure security, leveraging deep domain expertise across physical and digital environments.

💰 Revenue Model & Ecosystem

Leidos generates revenue through a diverse suite of contract-based services, software-driven solutions, and hardware integration. Its model emphasizes long-term, recurring contracts—primarily with government agencies—that provide stable and predictable cash flow. Revenue streams include managed services, technology consulting, enterprise IT modernization, cybersecurity programs, and integrated defense systems. These are supplemented by occasional project-based or product sales, including hardware, cloud-based software, and analytics platforms. The company’s business-to-government orientation ensures a broad base of multi-year engagements, often bundled within larger technology or transformation projects.

🧠 Competitive Advantages

  • Brand strength: Leidos is recognized as a reputable and trusted provider in critical national security and public sector domains.
  • Switching costs: Deep integration within clients’ legacy systems, strict compliance needs, and the classified nature of many projects create high barriers to switching providers.
  • Ecosystem stickiness: The company’s end-to-end solutions and breadth of expertise make it a one-stop partner, embedding Leidos across multiple mission areas within clients.
  • Scale + supply chain leverage: As a large integrator with extensive supplier networks and global reach, Leidos can efficiently manage complex projects and adapt to evolving client needs.

🚀 Growth Drivers Ahead

Leidos is well-positioned to benefit from ongoing tailwinds in national security modernization, digital transformation within government agencies, and expansion of public health initiatives. Key growth catalysts include increasing investments in cybersecurity, automation, cloud migration, and artificial intelligence by federal and international clients. The company is poised to capture value from expanding intelligence and defense budgets, the growing need for secure infrastructure, and emerging opportunities in space, unmanned systems, and advanced logistics. Strategic acquisitions further support its expansion into adjacent markets and technology domains, enhancing capabilities and client reach.

⚠ Risk Factors to Monitor

Leidos operates in a highly competitive and regulated environment. Risks include intensifying competition from both large defense contractors and nimble technology challengers, potential delays in government contract awards or appropriations, and regulatory changes impacting spending priorities. Margin pressures can arise from rising labor costs, fixed-price contract risks, or shifts in contract mix. Additionally, technological disruption—including rapid advances in AI, cyber, or cloud infrastructure—may require ongoing investment to maintain leadership, posing risks if innovation pace lags industry trends.

📊 Valuation Perspective

The market typically values Leidos relative to a peer group of defense, government services, and IT integrators. Its valuation often reflects a premium to pure government services vendors—attributed to mission-critical contracts, specialized technological expertise, and recurring revenue visibility—yet might trade at a discount to pure-play software or high-growth technology providers due to its lower volatility but more moderate growth profile. Investors may also factor in the durability and visibility of contract backlogs as a supportive element in assessment.

🔍 Investment Takeaway

Leidos represents a stable, technology-driven platform deeply embedded within essential government programs, offering resilient cash flows and exposure to long-term secular trends in national security and digital modernization. The bull case hinges on sustained government investment, successful execution of large contracts, and continued technological leadership. On the other hand, investors should weigh risks around competitive dynamics, cost management, and portfolio adaptability to disruptive technology shifts. Overall, Leidos provides a compelling blend of defensive characteristics and innovation potential but requires ongoing monitoring for evolving industry and regulatory factors.


⚠ AI-generated research summary — not financial advice. Validate using official filings & independent analysis.

📢 Show latest earnings summary

📢 Earnings Summary — LDOS

Leidos delivered a strong Q3 with 7% revenue growth, 13.8% adjusted EBITDA margin, robust cash generation, and record bookings momentum. Management raised EBITDA margin and EPS guidance for 2025 while reaffirming revenue and cash flow, citing resilient demand across mission-essential programs despite a modestly impactful government shutdown. Segment performance was broad-based, with double-digit growth in Defense Systems and record margins in Health & Civil, while Commercial & International was mixed due to product delivery timing and higher AI investments. Strategic execution around NorthStar 2030 and AI-enabled solutions, particularly in energy infrastructure, is driving competitive wins and margin efficiency. The outlook is constructive given a $69B pipeline and pending large opportunities like SHIELD, though management acknowledges timing risks from government efficiency measures and shutdown dynamics.

📈 Growth Highlights

  • Q3 revenue +7% YoY (+6% organic) to $4.47B; sequential +5%.
  • YTD 2025: revenue +5%, EBITDA +13%, EPS +18%.
  • National Security & Digital revenue +8% YoY (7% organic).
  • Health & Civil revenue +6% YoY; record margin performance.
  • Defense Systems revenue +11% YoY; seventh straight period of high single- to low double-digit growth.
  • Funded backlog +27% sequential; book-to-bill 1.3x.
  • Energy infrastructure business growing double digits; now >$600M annual revenue.

🔨 Business Development

  • Re-won ~$0.5B counterterrorism contract using automation and AI.
  • Extension to enhance and sustain MHS GENESIS electronic health record.
  • Award to modernize Kazakhstan’s air traffic control with Skyline X.
  • Order for 24 mobile VACIS systems for CBP with near-term deliveries.
  • TSA checkpoint modernization pilots at Houston and Sacramento (digitized checkpoints, remote baggage screening, cybersecurity hardening).
  • Multibillion-dollar classified award ramping on plan.
  • FAA ATC: no-bid prime integrator due to conflict of interest; continuing as key systems/tech provider.
  • Kudu Dynamics acquisition contributed $26M revenue in first full quarter; integration underway.
  • Expanded contribution under contract supporting NASA’s Artemis long-duration space exploration.
  • Golden Dome/SHIELD $150B IDIQ: proposals under evaluation; positioning on interceptor modernization and advanced radar.

💵 Financial Performance

  • Adjusted EBITDA $616M; margin 13.8% (+3% YoY).
  • Non-GAAP diluted EPS $3.05 (+4% YoY); lower share count offset slightly higher interest expense and tax rate.
  • Revenue $4.47B (+7% YoY; +6% organic).
  • Legal reserves increased by $24M.
  • Segment margins: NS&D ~10.0% (vs. 10.5% PY); Health & Civil 25.7% (benefited from nonrecurring items); Commercial & International 8.1% (down 70 bps); Defense Systems 8.9%.
  • Operating cash flow $711M; free cash flow $680M; 171% FCF conversion; DSO improved by 2 days.

🏦 Capital & Funding

  • Repurchased $100M of shares in Q3.
  • Increased quarterly dividend 7.5% to $0.43 (third increase in 3 years; record date Dec 15).
  • Paid down $450M term loan; ending debt $4.7B; cash $974M; gross leverage ~2.0x; no principal due until 2028.
  • Strong balance sheet to fund organic investments, strategic M&A, and opportunistic buybacks.
  • Completed divestiture of noncore Varec asset.

🧠 Operations & Strategy

  • NorthStar 2030 strategy centered on five pillars: Space & maritime; Energy infrastructure; Digital modernization & cyber; Mission software; Managed health services.
  • Accelerating AI-driven ‘Golden Bolts’ (e.g., Skywire) to lower customer costs and improve outcomes.
  • Outcome-based delivery focus; major EHR deployment delivered on time and under budget.
  • Investing in defense tech: counter-UAS, low-cost cruise missiles, hypersonics, autonomous maritime vessels.
  • In Defense Systems, investing to capture Golden Dome and maritime autonomy; targeting sustainable double-digit margins over time.
  • Applying AI/analytics to utility grid engineering, drone-based storm damage assessment, and grid cyber defense.

🌍 Market Outlook

  • Government shutdown impact modest; many programs mission essential/funded; company can absorb up to ~3% top-line hit from efficiency reviews and potential shutdown.
  • Utilities expected to invest >$1T over next decade, driven by electrification, reindustrialization, data centers, and resilience needs.
  • Bookings momentum strong: funded backlog up sharply; $69B near-term pipeline with $24B awaiting adjudication.
  • FAA and TSA modernization and CBP inspection mandates underpin near-term demand.
  • Golden Dome SHIELD IDIQ progressing; expect increased government engagement later in November.
  • 2025 guidance updated: revenue $17.0–$17.25B (reaffirmed), adjusted EBITDA margin raised to high-13s, non-GAAP EPS raised to $11.45–$11.75, operating cash flow ~$1.65B (reaffirmed).

⚠ Risks & Headwinds

  • U.S. government shutdown and efficiency reviews create revenue timing risk; guidance ranges widened.
  • Security Products delivery shifts to Q4 and elevated AI investments pressured Commercial & International margins.
  • Defense Systems margins constrained by early-phase materials mix and pursuit investments.
  • Slightly higher interest expense and tax rate vs. prior year.
  • Conflict of interest limitations on certain prime roles (e.g., FAA integrator).
  • Increased legal reserves ($24M) reflect ongoing legal exposure.

AI-generated earnings recap sourced from company results & conference call observations. Not investment advice — verify with official filings.

📊 Leidos Holdings, Inc. (LDOS) — AI Scoring Summary

📊 AI Stock Rating — Summary

Leidos Holdings, Inc. reported Q3 2025 revenue of $4.47 billion and net income of $367 million, resulting in an EPS of $2.87. Its free cash flow for the quarter was $680 million. The company has demonstrated solid growth, with a 1-year share price increase of 18.67%. Revenue growth appears stable, driven by strong demand across its Defense, Civil, and Health segments. Profit margins are healthy with an EPS trend indicating efficiency in operations. Cash flow is robust with significant free cash flow and liquidity available. Net debt stands at $4.26 billion, and the debt-to-equity ratio is 1.22, indicating moderate leverage. The stock has a P/E ratio of 13.57 and a free cash flow yield of 2.15%, suggesting reasonable valuation relative to earnings and cash generation. Analysts project a consensus price target of $222.75, indicating potential upside. Shareholder returns are bolstered by moderate dividends yielding 0.98% and share buybacks, further enhanced by strong stock price performance.

AI Score Breakdown

Revenue Growth — Score: 8/10

The company's revenue growth is steady, supported by robust demand across its diverse business segments. This stability bodes well for future expansion.

Profitability — Score: 8/10

Profitability is strong with consistent EPS growth and efficient operations. The company's ability to maintain healthy net margins is commendable.

Cash Flow Quality — Score: 8/10

Free cash flow is solid, and the company maintains an attractive dividend policy alongside share buybacks, ensuring good liquidity.

Leverage & Balance Sheet — Score: 6/10

Leverage is moderate with a debt-to-equity ratio of 1.22. The balance sheet shows sufficient resilience with reasonable net debt levels.

Shareholder Returns — Score: 8/10

Shareholder returns are strong with an 18.67% stock price increase over the past year, complemented by dividends and buybacks.

Analyst Sentiment & Valuation — Score: 7/10

Valuation appears fair with a P/E of 13.57 and a positive stock trend. Analyst targets suggest further upside, indicating investor confidence.

⚠ AI-generated — informational only, not financial advice.

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