Leidos Holdings, Inc.

Leidos reported Q2 fiscal 2026 revenue of $4.56 billion, up 7% year over year and 4% organically. Adjusted EBITDA was $631 million with a 13.8% margin, and non-GAAP diluted EPS was $3.26. Operating cash flow was $793 million and free cash flow was $761 million. Net awards were $5 billion and book-to-bill was 1.1; Defense book-to-bill was 2.2, and Homeland grew 32% total / 15% organic. For 2026, management raised the midpoint of revenue guidance by $100 million, raised the midpoint of EPS guidance by $0.05, and raised operating cash flow guidance by $50 million; Chris Cage said the lower end of the revenue range was raised by $200 million and non-GAAP EPS by $0.10, CapEx is now expected to be closer to $250 million, implied free cash flow guidance is up about $150 million, and adjusted EBITDA margin guidance remains mid-13%. Management also said organic revenue for the rest of Leidos is expected to grow approximately 7% and adjusted EBITDA about 19% in 2026, while Defense is expected to post high single-digit growth for the year and Health revenues to sustain around Q2 levels with non-GAAP OI margins around 20%.

Tom Bell said the quarter showed NorthStar 2030 is working, pointing to record revenue, best-in-class margins, record Q2 operating cash flow and strong awards momentum. He emphasized accelerating customer procurement, especially in Defense Tech, munitions, counter-UAS, unmanned systems and space payloads, and framed Leidos as well positioned for defense-tech demand and sovereign AI/cyber opportunities. On Health, he acknowledged the VA incentive-payment change and MHS GENESIS transition, but argued Leidos can continue to maintain, enhance and integrate those systems while expanding into adjacent growth areas like My Service Treatment Record, rural health and behavioral health.

Chris Cage focused on the financial strength of the quarter: $4.56 billion of revenue, $631 million of adjusted EBITDA, $793 million of operating cash flow and $761 million of free cash flow. He highlighted a strong balance sheet with $6 billion of debt, $748 million of cash and cash equivalents, gross leverage of 2.5x, and the payoff of the remaining $300 million of commercial paper tied to the Entrust acquisition. On guidance, he said the company raised the lower end of revenue by $200 million, EPS by $0.10, and operating cash flow by $50 million, cut expected CapEx to about $250 million, and kept adjusted EBITDA margin guidance at mid-13%; he also said the guidance excludes the pending SES joint venture with Analogic.

Analysts focused on the VA medical disability exam business, asking about the removal of incentive payments, the timing of the RFP and what 2027 margins could look like; management said the incentive pause is for this year, the draft RFP should come soon, and the current contract likely extends into next year, with international and predischarge work likely extended as well. They also asked about defense bookings and the Intel/Digital mix, and management said customer activity is picking up, the second-half pipeline is strong and some work is moving toward fixed-price, outcome-based contracts. On capital allocation, questions centered on free cash flow, repurchases and M&A; management said share repurchases remain a tool, the new authorization is in place, and they are being selective on M&A because targets are expensive.