Leidos Holdings (LDOS)

Leidos is not a small company. It is a U.S. government technology and IT services contractor generating over $18 billion in annual revenue (FY2026 guidance), one of the largest prime contractors serving the Pentagon, the Department of Veterans Affairs (VA), and numerous other federal agencies. The company was spun off from SAIC in 2013 and has since built a reputation as the go-to contractor for mission-critical systems, from military command-and-control to electronic health records (EHR) for the armed forces.

But 2026 has been a rough year. Leidos just lost its Defense Health Agency (DHA) contract — its role as lead systems integrator for the military's EHR system, held since 2015 (over a decade). This is not a minor contract; it was one of the longest-standing, most prestigious anchor relationships in Leidos' Health segment. The stock has fallen roughly 42% off its 52-week high (~$199.55-$205.77, Nov 2025) to around $115.50 now. The big question for investors: is this a defense compounder temporarily on sale, or a sign the company is starting to lose core trust with the U.S. government?

Business Structure — 4 Segments (current FY2025/26 reporting structure)

• National Security & Digital — the largest segment (~44% of group revenue). Focused on intelligence, cyber, and digital modernization for national security agencies.
• Health & Civil — the highest-margin segment (operating margin ~23.7%, well above industry average). Covers DoD/VA health, transportation, energy, public safety. This is the segment most directly affected by the DHA contract loss.
• Defense Systems — the fastest-growing segment (revenue up +7% in FY2025 to $2.18 billion). Mission systems, command-and-control, and production programs like hypersonics.
• Commercial & International — the smallest segment, providing diversification outside U.S. government work.

What matters here: while Health & Civil is facing a reputational headwind (the DHA loss), Defense Systems and National Security & Digital continue winning major new contracts — including a ~$2.7 billion U.S. Army hypersonics production award, a $456 million Military OneSource directed award, and a new ~$180 million DHA virtual health task order. So the narrative "Leidos is losing all its government business" is simplistic — a more accurate picture is one important relationship cracking, while others continue to grow.

Management

CEO Tom Bell has led Leidos since May 2023, bringing experience from Rolls-Royce, Lockheed Martin, and Boeing. He is executing the "NorthStar 2030" strategy, which focuses on defense tech, energy infrastructure, cyber, mission & digital solutions, and managed health services — a long-term plan to diversify Leidos beyond its traditional DoD-centric relationships.

⚠️ Shariah Status: NON-COMPLIANT

Leidos is a conventional defense contractor with an interest-bearing debt structure (~$6.3 billion). This makes LDOS Shariah non-compliant — not only on financial-ratio grounds, but also on core business activity (conventional defense/military services). For investors prioritizing a Shariah-compliant portfolio, LDOS is not an option to consider, regardless of how attractive the current valuation looks. This write-up is for educational purposes — to understand the dynamics of the U.S. defense/govt-IT industry — not an investment recommendation.

Leidos reported Q2 FY2026 (quarter ended 3 July 2026) on 4 Aug 2026: record revenue of $4.558B (+7% YoY, +4% organic), non-GAAP EPS of $3.26 (+2%) and GAAP EPS of $2.81 (-7%). Cash generation was the highlight, profit margin the soft spot.

Metric (USD)	Q2 FY2026	Q2 FY2025	Change
Revenue	$4.558B	about $4.26B (est.)	+7%
Operating income	$514M	$571M	-10%
GAAP net income	$356M	$393M	-9%
GAAP diluted EPS	$2.81	$3.01	-7%
Non-GAAP diluted EPS	$3.26	$3.21	+2%
Adjusted EBITDA (margin)	$631M (13.8%)	$647M (15.2%)	-1.4 pts margin
Operating cash flow	$793M	n/a	-

First half FY2026: revenue $8.958B (vs $8.498B, +5%) and net income attributable to Leidos $682M (vs $754M, -10%).

The backlog is $48.7B with a book-to-bill of 1.1, which gives good revenue visibility. Management raised FY2026 guidance to revenue of $18.20B-$18.40B, non-GAAP EPS of $12.20-$12.50 and operating cash flow of about $1.85B.

Leidos pays a regular quarterly dividend of $0.43 per share, or $1.72 a year. At the 5 Oct 2026 close of $119.45 that is a yield of about 1.4%. It declared $0.43 in both Q1 and Q2 2026.

This is a dividend-growth style payout, not an income play. The yield is low, but the cash cost is small: about $55M per quarter, against operating cash flow guided at about $1.85B for the year.