Research · Sep 3, 2026
[LDOS] Leidos Thesis 2026: Federal IT Services Tested by DOGE Spending Review
Leidos Holdings Inc. FY2025 revenue ~$16.5-17.0B (+4-7%) with adj. EPS ~$10.40-10.80 reflecting continued Federal IT services growth + selected DoD modernization + selected Intelligence + selected Civil + Health segment growth + selected operational excellence offset by selected DOGE/Trump federal IT spending review (~$300-500M revenue at-risk) under continued CEO Tom Bell. Leading US Federal IT services firm focused on Defense (~50% revenue) + Intelligence + Civil + Health end markets; formed September 2013 via spin-off from SAIC (selected SAIC split into SAIC + Leidos September 2013); SAIC predecessor founded 1969 by J. Robert Beyster in San Diego (originally as Science Applications International Corporation; selected ~56+ year heritage); selected post-August 2016 Lockheed Martin IS&GS spin-combine merger created selected combined Federal IT services scale (Lockheed IS&GS contributed ~$5B+ revenue). Headquartered in Reston Virginia; ~48,000+ employees; ~$16.5-17.0B revenue; ~$80B+ contract backlog (~5x annual revenue). 4 segments: Defense Systems 50% ($8.5B — DoD enterprise IT + selected DoD modernization + selected weapons systems integration; ~10-12% segment margin) + Intelligence 17% ($2.8B — selected Intelligence Community contracts CIA + NSA + DIA + NRO + NGA + selected; selected classified IT; ~10-12% margin) + Civil 17% ($2.8B — selected FAA + DHS + selected DOT + DOI + selected federal civilian agencies; selected post-DOGE review impact; ~7-9% margin) + Health 12% ($2.0B — VA disability medical exams + selected DHA Defense Health Agency + selected HHS + Medicare; ~10-12% margin) + Other 3% ($0.5B). CEO Tom Bell since May 3, 2023 (succeeded Roger Krone CEO 2014-May 2023 retired; Bell ex-Rolls-Royce North America CEO 2014-2023 + ex-General Electric various roles + ~30-year aerospace/defense executive career). Selected DOGE/Trump federal IT spending review impact ~$300-500M revenue at-risk (~2-3% of total revenue); selected concentrated in Civil + Health segments. Capital return: dividend $1.52-1.60/share annual (selected continued increases ~5% annually) + buybacks $0.5-1B (selected modest); investment-grade Baa3/BBB- credit rating; net debt $4-5B. FY2026 thesis: Federal IT services growth + DOGE navigation + DoD modernization + capital return. Risks: DOGE/Trump federal IT review, Federal contract competitive intensity (Booz Allen + SAIC + Accenture Federal), GenAI commoditization, contract execution.