Leidos Holdings, Inc. Q1 FY2026 earnings call

Tom reported a strong start for Leidos in 2026. First quarter revenue up 4% to $4.4 billion, adjusted EBITDA 14%. Raising 2026 guidance for revenue by $500 million, non-GAAP diluted EPS by 5 cents, and operating cash flow by $50 million. Execution of North Star 2030 growth strategy in full swing. In defense: capitalizing on technological investment, pursuing accelerated procurement agreements, successes in munitions, Navy MUSV, AirShield tech, ALPS product. In health: $456 million Military OneSource award, My Service Treatment Record AI-driven tool, high disability exam volume and customer satisfaction. Three substantial portfolio moves in last 12 months: SES joint venture, KUDU acquisition benefits, Entrust quick close and integration. AI is an accelerant for Leidos, digital infrastructure business is a strength.

First quarter revenue was up 4% year on year to $4.4 billion, and adjusted EBITDA was 14%. Intel and digital revenues increased 7% year over year, with 6% coming organically. Health revenues were unchanged from a year ago. Homeland revenues increased 6% year-over-year. Defense revenues of $883 million were up slightly compared to the prior year quarter, with strong growth in integrated air defense systems offsetting the wind down of some airborne surveillance programs.

Raising 2026 revenue guidance by $500 million to $18 billion to $18.4 billion, maintaining adjusted EBITDA margin guidance at mid-13s, raising non-GAAP diluted EPS guidance by 5 cents to $12.10 to $12.50, increasing operating cash flow guidance by $50 million to approximately $1.8 billion. Entrust acquisition makes 2026 non-GAAP EPS and cash accretive, more accretion in 2027 and beyond. Q2 likely low point, expecting growth pick up in second half. Bullish on long-term outlook.

Q: Sheila Kyleglu with Jefferies asked about profitability and impact in defense contracting, key programs in defense.

A: Chris said defense profitability reflected development stage program, new programs like IFTIC, Pounds, ABADS have superior economic profiles.

Q: David Strass with Wells Fargo asked about CapEx plan.

A: Josh Korn said CapEx increase earmarked, need not risen in Q1, anticipate spending more this year.

Q: Toby Somer with Truro Securities asked about health business outlook.

A: Tom said health volumes staying high, VA volumes hopeful to remain elevated, focused on managed health as growth pillar.

Q: Scott Mekas with Milius Research asked about portfolio streamlining.

A: Tom said new defense business focused, appointed COO, bullish on defense tech business.

Q: John Gillespie with Citi asked about revenue and margin shape.

A: Chris said Q2 likely low, expecting growth step in back half.

Q: Noah Poponek with Goldman Sachs asked about health business multi-year outlook.

A: Tom said bullish on long-term growth trajectory, focused on digital ecosystem and rural areas.

Q: Jonathan Siegman with Stiefel asked about maritime demand.

A: Tom said maritime programs seeing increased pull, Leidos excels in autonomous boats with mission effects.

Q: Peter Armit with Baird asked about CapEx continuity.

A: Tom said not continuing at elevated level perpetually, SES joint venture formed to leverage growth.

Q: Seth Seisman with JP Morgan asked about intelligence and digital business growth.

A: Tom said IC budgets growing, AI propelling progress, digital infrastructure business as foundation.

Q: Gautam Khanna with Cowan asked about big upcoming re-competes.

A: Tom said near-term continuity in DIMSOM and Antarctic programs, buoyed by recent wins.

Q: Ken Herbert with RBC Capital Markets asked about Entrust integration and order pipeline.

A: Tom said Entrust closed quickly, integration seamless, $10 billion order pipeline with rapid growth expected.