- Revenue reached $4.56 billion, with net bookings of $4.9 billion
- Backlog closed the quarter at $48.7 billion, funded backlog up 44 percent year over year
- The VA has suspended incentive payments to all medical disability exam vendors for the rest of the year
Leidos raised the bottom end of its full-year revenue and earnings guidance Tuesday after second-quarter revenue rose 7 percent to $4.56 billion. Non-GAAP diluted earnings per share came to $3.26, up 2 percent.
The company now expects 2026 revenue between $18. billion and $18.40 billion, against a prior floor of $18 billion. Non-GAAP diluted EPS guidance moved to $12.20 to $12.50, and Leidos lifted its operating cash flow outlook to roughly $1.85 billion.
“We’re seeing meaningful growth emerge across our Defense Tech, Energy Infrastructure, and Cyber growth pillars,” said Leidos CEO Tom Bell, a three-time Wash100 Award winner.
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Why Did Leidos’ Reported Earnings Fall?
Net income dropped 9 percent to $356 million, and diluted EPS slipped 7 percent to $2.81. Leidos said $29 million in costs weighed on the quarter, stemming from the ENTRUST Solutions Group acquisition, the pending joint venture with Analogic and restructuring tied to its NorthStar 2030 realignment.
The comparison also runs against a stronger quarter. Leidos said the year-ago period included one-time gains, including a $25 million insurance reimbursement for legal costs.
Adjusted EBITDA came to $631 million, down 2 percent, with margin narrowing to 13.8 percent from 15.2 percent. Operating cash flow reached $793 million and free cash flow $761 million.
What Did Leidos Book in the Quarter?
Net bookings totaled $4.9 billion for a book-to-bill ratio of 1.1. Backlog ended the quarter at $48.7 billion, of which $10.2 billion is funded. Funded backlog grew 44 percent from a year earlier, against 5 percent growth in the total.
The largest award was a $475 million follow-on from the Air Force Sustainment Center covering the diagnostic system used to maintain F-16 avionics. The General Services Administration awarded Leidos $456 million over four years to run Military OneSource, which provides counseling, tax help and relocation support to service members and their families.
A $350 million modification from Air Force Materiel Command adds low-band surveillance radar units and signal-processing software. The Defense Health Agency issued a potential 30-month, $325 million modification keeping medical and dental exams running for reservists while it settles on a longer-term approach.
Customs and Border Protection awarded a five-year, $270 million single-award IDIQ for up to 100 medium energy mobile inspection systems. Naval Surface Warfare Center selected Leidos for an $88 million other transaction agreement for experimental hypersonic glide vehicles.
What Is Happening With the VA Exam Business?
During an earnings call, Bell said the Department of Veterans Affairs has suspended incentive payments to all vendors in its medical disability examination program for the remainder of the year while it reviews administrative aspects of the program. He added that the agency is likely to extend the current regions contract into the first part of 2027, with a recompete draft solicitation still pending.
