Target
$151.69 → $152
Current stock research snapshot · 7/22/26 35 days old
LDOSLeidos Holdings, Inc.
Investment conviction●●○○○2 of 5 · current snapshot
Research target$152Current stock price target
Investment thesis statusINTACTLast reviewed 7/22/26
Market cap$13.20BSnapshot value · 7/22/26
Research history
See all LDOS changes ↗What changed
Target
$151.67 → $151.69
Leidos is a defense IT and national security solutions provider specializing in identity management, biometrics, credentialing, and healthcare IT for government agencies. The portfolio includes TSA PreCheck, FBI biometric systems, and defense health systems — all high-switching-cost contracts.
TSA credentialing system modernization contract renewal Defense health system EHR modernization (MHS Genesis) expansion Q2 FY26 earnings — organic revenue growth acceleration
Thesis breaks if second-interceptor competition changes launcher architecture post-FY2029 (Dynetics launcher lock re-competed), IFPC-HEL advances elsewhere, or hardware business stays non-material vs $48.7B services backlog. (vault 2026-08)
Bullish — $301M Army cyber contract and $56.7M Navy mental health contract; funded backlog +44% as of Aug 25 2026. [X search Aug 2026]
Snapshot · 7/22/26🟡 Mixed · 13F 14+/11-×0.5 · short↑0.34
Snapshot · 7/22/26Timestamped research update
Deep research update
447 words · Updated Jul 25, 2026 · 3 sources
Research in development: this latest 447-word update is published for context while it is expanded toward the 1,000-word editorial standard.
Leidos builds and operates mission-critical IT, cyber, analytics, and software systems for U.S. federal, intelligence, homeland security, aviation, and select commercial customers. The company’s real product is trusted integration of secure workflows into high-stakes government environments, not generic consulting hours.
FY2025 revenue was $17.174B, operating income was $2.109B, and operating margin was 12.3%. Q1 FY2026 revenue was $4.40B (+4% YoY), operating income was $508M (11.5% margin), cash from operations was $301M, free cash flow was $270M, and backlog ended the quarter at $48.4B with $9.6B funded.
Leidos compounds when agencies need a cleared, incumbent prime to modernize classified or mission-critical systems under procurement, accreditation, and cybersecurity constraints. The lock-in is the combination of mission software, agency-specific integrations, task-order incumbency, and compliance gating, not a single proprietary product.
- FY2025 revenue from U.S. government contracts was 87% of total revenue, per the 2025 10-K.
- Q1 FY2026 net bookings were $3.3B; trailing-twelve-month book-to-bill was 1.1; total backlog grew to $48.4B, of which $9.6B was funded.
- Notable Q1 awards included MACRO II ($869M, five years), DISA GSM-O II task orders (> $461M), NSA TechSIGINT modernization ($335M, two years), and SEC ISS2 ($284M, 10 years, serving ~5,900 federal and contractor users).
- The 2025 10-K says DoW CMMC is phasing in from November 2025 through November 2028 and requires compliance with specified cybersecurity standards to win new DoW awards.
- The 2025 10-K describes Leidos as serving substantially all U.S. federal government customers through its National Security & Digital business.
The moat is compliance-gated incumbency: a cleared workforce, classified-environment know-how, sole-source and IDIQ task-order positioning, and the cost/risk of re-accrediting agency systems. In digital sovereignty terms, Leidos owns the hard part of federal IT delivery: keeping mission systems operational while the customer tolerates almost no downtime or security drift.
- Q1 FY2026 book-to-bill was only 0.8, so backlog conversion and new bookings need to keep up.
- Defense segment margin fell to 7.0% from 8.4% YoY because of schedule delays on a fixed-price development program.
- The company had $6.3B of debt at Apr. 3, 2026 after financing the Entrust acquisition.
- Federal budget delays, shutdowns, procurement protests, and changing cybersecurity rules can all slow award timing.
- Can Leidos keep converting backlog at a pace that sustains growth if bookings remain below 1.0x in any given quarter?
- How much of the new award mix is fixed-price development versus higher-quality recurring operations and sustainment work?
- Does the DS-4 queue taxonomy meaningfully fit LDOS, or should the canonical mapping stay with DS-3 as the dominant thesis exposure?
STRENGTHENED
Primary and supporting material
Sources
3 sources preserved from the latest qualified research update.