Leidos Holdings Inc (LDOS) Q4 2025 Earnings Call Highlights: Navigating Challenges and Seizing …

GuruFocus News

Wed, February 18, 2026 at 4:01 AM GMT+9 5 min read

In this article:

LDOS

-5.58%

This article first appeared on GuruFocus.

**2025 Revenue:** $17.2 billion, up 3.1% year-over-year.

**Q4 2025 Revenue:** $4.2 billion, a year-over-year decrease of 3.6%.

**Adjusted EBITDA Margin 2025:** 14.1%, a year-over-year increase of 120 basis points.

**Q4 2025 Adjusted EBITDA Margin:** 13.2%, up 160 basis points year-over-year.

**Non-GAAP Diluted EPS 2025:** $11.99, up 17% year-over-year.

**Free Cash Flow 2025:** $1.63 billion, a 104% conversion rate.

**Net Bookings Q4 2025:** $5.6 billion, with a book-to-bill ratio of 1.3 times.

**Funded Backlog Increase:** Up 15% year-over-year.

**2025 Capital Expenditures and IRAD:** $312 million.

**Cash and Cash Equivalents End of 2025:** $1.1 billion.

**Debt End of 2025:** $4.6 billion, with a leverage ratio of 1.9 times gross debt to adjusted EBITDA.

**2026 Revenue Guidance:** $17.5 billion to $17.9 billion, reflecting growth of up to 4% over 2025.

**2026 Adjusted EBITDA Margin Guidance:** Mid-13% range.

**2026 Non-GAAP Diluted EPS Guidance:** $12.05 to $12.45.

**2026 Operating Cash Flow Guidance:** $1.75 billion.

**2026 Capital Expenditure Guidance:** $350 million.

Warning! GuruFocus has detected 3 Warning Sign with ALLE.

Is LDOS fairly valued? Test your thesis with our free DCF calculator.

Release Date: February 17, 2026

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Leidos Holdings Inc (NYSE:LDOS) recorded 2025 revenue toward the top of their guidance, with earnings and cash ending the year above expectations.

The company achieved a 17% growth in non-GAAP diluted earnings per share and a 26% increase in free cash flow.

Net bookings for the fourth quarter were $5.6 billion, resulting in a book-to-bill ratio of 1.3 times, matching the previous quarter.

Leidos Holdings Inc (NYSE:LDOS) secured significant contracts, including a $2.2 billion contract with the Air Force for passive radar systems and a $455 million Air Force Cloud One program.

The company is actively investing in growth pillars, with plans to triple capital expenditure investments to $350 million in 2026 to expand production capacity and upgrade facilities.

Negative Points

Q4 revenue decreased by 3.6% year-over-year, impacted by an extra week in Q4 2024 and a six-week government shutdown in 2025.

The managed health services business faced moderate headwinds in the quarter, affecting overall performance.

The company anticipates modestly lower revenue and margin in the Health segment due to additional vendor competition and transitions in key programs.

Leidos Holdings Inc (NYSE:LDOS) faces potential challenges in maintaining profitability in recompete contracts, such as the VA medical exam recompete.

The guidance for 2026 includes a mid-13s adjusted EBITDA margin, normalizing some of the one-time benefits from 2025, indicating potential pressure on margins.

 






Story continues  

Q & A Highlights

Q: Can you discuss the investment areas for additional CapEx and how they support the defense business ramp-up? Are these related to co-investment opportunities with the Department of Defense? A: Stuart Davis, Investor Relations: Yes, we are investing in co-development opportunities with the Department of Defense, but not exclusively. We are also keen on investing in our health business and other growth pillars. Christopher Cage, CFO: In defense, we are expanding our maritime growth pillar and production capacity for integrated air defense and hypersonics, which will support investment returns.

Q: You mentioned growth accelerating through the year. How should we think about the early part of the year and which segments are seeing weakness? A: Christopher Cage, CFO: Growth will be lower in the first half and accelerate in the second half. We haven’t seen significant funding for Golden Dome initiatives or FAA modernization yet, but these are catalysts for the second half. We have a robust business development pipeline, and awards are expected to drive growth in the latter part of the year.

Q: Can you elaborate on the book-to-bill ratio and the expectation of award activity and bookings backdrop? A: Thomas Bell, CEO: Our 1.3 book-to-bill ratio in the third and fourth quarters is due to our investment in growth functions. We have a robust pipeline and expect continued orders. Christopher Cage, CFO: The next 12-month pipeline is at its highest, with a focus on new business and takeaway, indicating strong future opportunities.

Q: What are your expectations for the VA medical exam recompete, and how do you plan to sustain profitability? A: Thomas Bell, CEO: We are proud of our execution in the health business and plan to compete strongly despite new entrants. We expect an RFP in the middle of the year and are focused on making exams better, faster, and less expensive. Christopher Cage, CFO: We have proven our ability to deliver for the customer and shareholders, and we expect to sustain attractive returns.

Q: Regarding FY26 growth guidance and margin, where is the greatest degree of conservatism, and what milestones could lift guidance? A: Christopher Cage, CFO: Defense has a robust track record, and decisions on funding could accelerate growth. FAA modernization is ready for execution, and health could see upside if volumes differ. No one-timers are included in the guidance, and performance this year will set a higher basis for next year.

Q: Can you update us on the defense tech areas that have hit their stride and those still developing? A: Thomas Bell, CEO: IFPC is ramping up with a $4.1 billion IDIQ, and hypersonics are fast-tracked. We are bullish on wide field of view in space and have opportunities in Shield and Microelectronics IDIQs. Christopher Cage, CFO: Maritime is also promising with products like SEDAR and ADC Mark V.

Q: How are you thinking about capital allocation and M&A opportunities this year? A: Thomas Bell, CEO: With our NorthStar 2030 strategy, we will focus on organic and inorganic investments. We will continue our dividend program and look for shareholder-friendly capital deployments. Christopher Cage, CFO: No buybacks are included in the guidance, but we have capacity for more.

Q: Are you concerned that AI could drive down prices for digital modernization programs? A: Thomas Bell, CEO: We see AI as a force multiplier and an opportunity to make operations more efficient. We are embracing AI internally to deliver bottom-line results and prototype top-line benefits for customers. AI will help shift budgets from maintenance to high-value mission outcomes.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Terms and Privacy Policy

Privacy Dashboard

More Info