What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2025-11-04 compared with 2025-08-05 · 158 added, 121 removed, 590 unchanged (32% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

in millions, except share and per share data) July 4,

in millions, except share and per share data) October 3,

2025 January 3,

8 unchanged sentences

Operating lease right-of-use assets, net 512 560

Deferred tax assets

Other long-term assets 348 321

6 unchanged sentences

Operating lease liabilities 578 621

Deferred tax liabilities

Other long-term liabilities 270 315

2 unchanged sentences

Stockholders’ equity:

Common stock, $ 0.0001 par value, 500,000,000 shares authorized, 128,295,977 and 131,163,899 shares issued and outstanding at July 4, 2025, and January 3, 2025, respectively

Common stock, $ 0.0001 par value, 500,000,000 shares authorized, 127,854,145 and 131,163,899 shares issued and outstanding at October 3, 2025, and January 3, 2025, respectively

Additional paid-in capital 588 1,112

10 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended Six Months Ended

in millions, except per share data) July 4,

2025 June 28,

Three Months Ended Nine Months Ended

in millions, except per share data) October 3,

2025 September 27,

2024 October 3,

2025 September 27,

Revenues $ 4,469 $ 4,190 $ 12,967 $ 12,297

2 unchanged sentences

Acquisition, integration and restructuring costs 4 3 10 14

Asset impairment charges 4 6 4 6

Equity earnings of non-consolidated subsidiaries ( 8 ) ( 10 ) ( 23 ) ( 25 )

2 unchanged sentences

Interest expense, net ( 51 ) ( 46 ) ( 155 ) ( 146 )

Other income (expense), net

Other (expense) income, net

Income before income taxes 484 470 1,480 1,264

1 unchanged sentence

Net income 369 362 1,127 969

net income attributable to

net income (loss) attributable to

non-controlling interest

2 ( 2 ) 6 ( 1 )

Net income attributable to Leidos common stockholders $ 367 $ 364 $ 1,121 $ 970

7 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended Six Months Ended

in millions) July 4,

2025 June 28,

Three Months Ended Nine Months Ended

in millions) October 3,

2025 September 27,

2024 October 3,

2025 September 27,

Net income $ 369 $ 362 $ 1,127 $ 969

1 unchanged sentence

( 4 ) 37 60 18

Unrecognized (loss) gain on derivative instruments

Unrecognized loss on derivative instruments

( 2 ) ( 5 ) ( 4 ) ( 4 )

Pension adjustments 1 ( 1 ) — —

Total other comprehensive income (loss), net of taxes 34 7 61 ( 17 )

Total other comprehensive (loss) income, net of taxes

( 5 ) 31 56 14

Comprehensive income 364 393 1,183 983

net income attributable to non-controlling interest

net income (loss) attributable to non-controlling interest

2 ( 2 ) 6 ( 1 )

Comprehensive income attributable to Leidos common stockholders

29 unchanged sentences

Balance at July 4, 2025 128 $ 650 $ 4,061 $ ( 49 ) $ 4,662 $ 45 $ 4,707

— — 367 — 367 2 369

Other comprehensive income, net of taxes — — — ( 5 ) ( 5 ) — ( 5 )

Issuances of stock — 15 — — 15 — 15

Repurchases of stock and other — ( 103 ) — — ( 103 ) — ( 103 )

Dividends of $ 0.40 per share

— — ( 53 ) — ( 53 ) — ( 53 )

Stock-based compensation — 26 — — 26 — 26

Net capital distributions to non-controlling interest — — — — — ( 2 ) ( 2 )

Balance at October 3, 2025 128 $ 588 $ 4,375 $ ( 54 ) $ 4,909 $ 45 $ 4,954

See accompanying notes to condensed consolidated financial statements.

25 unchanged sentences

Balance at June 28, 2024 135 $ 1,654 $ 2,866 $ ( 65 ) $ 4,455 $ 55 $ 4,510

Net income (loss)

— — 364 — 364 ( 2 ) 362

Other comprehensive income, net of taxes

— — — 31 31 — 31

Issuances of stock — 1 — — 1 — 1

Repurchases of stock and other ( 2 ) ( 205 ) — — ( 205 ) — ( 205 )

Dividends of $ 0.38 per share

— — ( 51 ) — ( 51 ) — ( 51 )

Stock-based compensation — 19 — — 19 — 19

Balance at September 27, 2024 133 $ 1,469 $ 3,179 $ ( 34 ) $ 4,614 $ 53 $ 4,667

See accompanying notes to condensed consolidated financial statements.

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

in millions) July 4,

2025 June 28,

Nine Months Ended

in millions) October 3,

2025 September 27,

Cash flows from operations:

4 unchanged sentences

Deferred income taxes 288 ( 96 )

Asset impairment charges 4 6

Change in assets and liabilities, net of effects of acquisition:

8 unchanged sentences

Payments for property, equipment and software ( 82 ) ( 63 )

Net proceeds from sale of assets — 2

Net cash used in investing activities ( 372 ) ( 56 )

20 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS [CONTINUED]

Six Months Ended

in millions) July 4,

2025 June 28,

Nine Months Ended

in millions) October 3,

2025 September 27,

Supplementary cash flow information:

33 unchanged sentences

Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation.

We disaggregated "Deferred tax assets" from "Other long-term assets" and "Deferred tax liabilities" from "Other long-term liabilities" on the condensed consolidated balance sheets.

Additionally, we combined "Net proceeds from sale of assets" into "Other" within net cash used in investing activities on the condensed consolidated statements of cash flows.

We changed our Cash and Cash Equivalents policy to exclude outstanding payments from “Cash and cash equivalents” on the condensed consolidated balance sheets.

14 unchanged sentences

Early adoption is permitted.

We are currently evaluating the impacts of this update and plan to adopt these amendments using the prospective approach for annual disclosures in fiscal 2025.

We plan to adopt these amendments using the prospective approach for annual disclosures in fiscal 2025 and do not expect them to have a material impact on our consolidated financial statements and related disclosures.

ASU 2024-03 Disaggregation of Income Statement Expenses

6 unchanged sentences

We are currently evaluating the impacts of this update and plan to adopt these amendments for annual disclosures in fiscal 2027 and interim disclosures in fiscal 2028.

ASU 2025-06 Intangibles - Goodwill and Other-Internal-Use Software

In September 2025, the FASB issued ASU 2025-06 which amends certain aspects of the accounting and disclosure of Internal use software costs.

Current guidance requires capitalization of internal-use software development costs depending on the nature of the costs and the project stage during which they occur.

The amendments in this update remove references to prescriptive and sequential software development stages and require entities to start capitalizing software development costs when a) management authorizes and commits to funding the software project, and b) it is probable that the project will be completed, and the software will be used to perform the intended function.

The amendments in this update are effective for public business entities for annual periods beginning after December 15, 2027, including interim periods within those annual reporting periods, and may be adopted on a prospective, modified or retrospective basis.

Early adoption is permitted.

We are currently evaluating the impacts of this update and plan to adopt these amendments using the prospective approach in fiscal 2026.

We do not expect them to have a material impact on our consolidated financial statements and related disclosures.

CHANGES IN ESTIMATES ON CONTRACTS

1 unchanged sentence

Changes in estimates on contracts were as follows:

Three Months Ended Six Months Ended

(in millions, except per share data) July 4,

2025 June 28,

Three Months Ended Nine Months Ended

(in millions, except per share data) October 3,

2025 September 27,

2024 October 3,

2025 September 27,

Favorable impact $ 52 $ 58 $ 147 $ 125

3 unchanged sentences

$ 0.11 $ 0.17 $ 0.34 $ 0.10

The impact on diluted earnings per share ("EPS") attributable to Leidos common stockholders is calculated using the statutory tax rate.

Revenue Recognized from Prior Obligations

We recognized revenue of $ 3 million and $ 24 million for the three and six months ended July 4, 2025, respectively, and reduced revenue by $ 16 million and $ 21 million from performance obligations satisfied in previous periods for the three and six months ended June 28, 2024, respectively.

The changes primarily relate to revisions of variable consideration including award and incentive fees, and revisions to estimates at completion resulting from changes in contract scope, mitigation of contract risks or true-ups of contract estimates at the end of contract performance.

Leidos Holdings, Inc.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The impact on diluted earnings per share ("EPS") attributable to Leidos common stockholders is calculated using the statutory tax rate.

Revenue Recognized from Prior Obligations

Revenue recognized from performance obligations satisfied in previous periods was $ 18 million and $ 32 million for the three and nine months ended October 3, 2025, respectively, and $ 78 million and $ 12 million for the three and nine months ended September 27, 2024, respectively.

CASH AND CASH EQUIVALENTS

2 unchanged sentences

To reflect the change in accounting policy, we recast "Cash and cash equivalents" and "Accounts payable and accrued liabilities" on the condensed consolidated balance sheet as of January 3, 2025, reducing both balances by $ 94 million from the previously reported amounts.

The recast of the condensed consolidated statement of cash flows for the six months ended June 28, 2024, resulted in an increase of $ 57 million to net cash provided by operations.

The recast of the condensed consolidated statement of cash flows for the nine months ended September 27, 2024, resulted in an increase of $ 48 million to net cash provided by operations.

We believe this presentation enhances the usefulness of financial reporting and enhances comparability to align with industry practice.

4 unchanged sentences

Restricted cash balances are included as "Other current assets" in the condensed consolidated balance sheets.

Our restricted cash balances were $ 90 million and $ 141 million at July 4, 2025, and January 3, 2025, respectively.

Our restricted cash balances were $ 123 million and $ 141 million at October 3, 2025, and January 3, 2025, respectively.

Note 2–Revenues

2 unchanged sentences

RPO does not include unexercised option periods and future potential task orders expected to be awarded under indefinite delivery/indefinite quantity ("IDIQ") contracts, General Services Administration Schedule or other master agreement contract vehicles, with the exception of certain IDIQ contracts where task orders are not competitively awarded and separately priced but instead are used as a funding mechanism, and where there is a basis for estimating future revenues and funding on future anticipated task orders.

As of July 4, 2025, we had $ 16 billion of RPO and expect to recognize approximately 61 % and 80 % over the next 12 months and 24 months, respectively, with the remainder to be recognized thereafter.

As of October 3, 2025, we had $ 17 billion of RPO and expect to recognize approximately 64 % and 82 % over the next 12 months and 24 months, respectively, with the remainder to be recognized thereafter.

DISAGGREGATION OF REVENUES

1 unchanged sentence

Disaggregated revenues by customer-type were as follows:

Three Months Ended July 4, 2025

Three Months Ended October 3, 2025

(in millions) National Security & Digital Health & Civil Commercial & International Defense Systems Total

6 unchanged sentences

Total $ 2,001 $ 1,296 $ 570 $ 582 $ 4,449

Three Months Ended June 28, 2024

Leidos Holdings, Inc.

LEIDOS HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Three Months Ended September 27, 2024

(in millions) National Security & Digital Health & Civil Commercial & International Defense Systems Total

8 unchanged sentences

Intelligence Community, as well as state and local government agencies.

Leidos Holdings, Inc.

LEIDOS HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Six Months Ended July 4, 2025

Nine Months Ended October 3, 2025

(in millions) National Security & Digital Health & Civil Commercial & International Defense Systems Total

5 unchanged sentences

Total $ 5,725 $ 3,849 $ 1,703 $ 1,633 $ 12,910

Six Months Ended June 28, 2024

Nine Months Ended September 27, 2024

(in millions) National Security & Digital Health & Civil Commercial & International Defense Systems Total

8 unchanged sentences

Disaggregated revenues by contract-type were as follows:

Three Months Ended July 4, 2025

Three Months Ended October 3, 2025

(in millions) National Security & Digital Health & Civil Commercial & International Defense Systems Total

5 unchanged sentences

Total $ 2,001 $ 1,296 $ 570 $ 582 $ 4,449

Three Months Ended June 28, 2024

Three Months Ended September 27, 2024

(in millions) National Security & Digital Health & Civil Commercial & International Defense Systems Total

5 unchanged sentences

Total $ 1,847 $ 1,223 $ 577 $ 522 $ 4,169

Six Months Ended July 4, 2025

Leidos Holdings, Inc.

LEIDOS HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Nine Months Ended October 3, 2025

(in millions) National Security & Digital Health & Civil Commercial & International Defense Systems Total

3 unchanged sentences

Total $ 5,725 $ 3,849 $ 1,703 $ 1,633 $ 12,910

Leidos Holdings, Inc.

LEIDOS HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Six Months Ended June 28, 2024

Nine Months Ended September 27, 2024

(in millions) National Security & Digital Health & Civil Commercial & International Defense Systems Total

4 unchanged sentences

Disaggregated revenues by geographic location were as follows:

Three Months Ended July 4, 2025

Three Months Ended October 3, 2025

(in millions) National Security & Digital Health & Civil Commercial & International Defense Systems Total

4 unchanged sentences

Total $ 2,001 $ 1,296 $ 570 $ 582 $ 4,449

Three Months Ended June 28, 2024

Three Months Ended September 27, 2024

(in millions) National Security & Digital Health & Civil Commercial & International Defense Systems Total

4 unchanged sentences

Total $ 1,847 $ 1,223 $ 577 $ 522 $ 4,169

Six Months Ended July 4, 2025

Nine Months Ended October 3, 2025

(in millions) National Security & Digital Health & Civil Commercial & International Defense Systems Total

4 unchanged sentences

Total $ 5,725 $ 3,849 $ 1,703 $ 1,633 $ 12,910

Six Months Ended June 28, 2024

Nine Months Ended September 27, 2024

(in millions) National Security & Digital Health & Civil Commercial & International Defense Systems Total

4 unchanged sentences

Total $ 5,421 $ 3,670 $ 1,645 $ 1,491 $ 12,227

Revenues by customer-type, contract-type and geographic location exclude lease income of $ 20 million and $ 37 million for the three and six months ended July 4, 2025, respectively, and $ 25 million and $ 49 million for the three and six months ended June 28, 2024, respectively.

Leidos Holdings, Inc.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Revenues by customer-type, contract-type and geographic location exclude lease income of $ 20 million and $ 57 million for the three and nine months ended October 3, 2025, respectively, and $ 21 million and $ 70 million for the three and nine months ended September 27, 2024, respectively.

CONTRACT ASSETS AND LIABILITIES

6 unchanged sentences

The components of contract assets and contract liabilities consisted of the following:

(in millions) Balance sheet line item July 4,

(in millions) Balance sheet line item October 3,

2025 January 3,

8 unchanged sentences

(1) Certain contracts record revenue net of cost of revenues, and therefore, the respective deferred revenue balance will not fully convert to revenue.

The decrease in deferred revenue was primarily due to revenue recognized during the period offset by the timing of advanced payments from customers.

For the three and six months ended July 4, 2025, $ 62 million and $ 199 million, respectively, of revenue recognized was included as a contract liability at January 3, 2025.

For the three and six months ended June 28, 2024, $ 54 million and $ 211 million, respectively, of revenue recognized was included as a contract liability at December 29, 2023.

The increase in unbilled receivables was primarily due to revenue recognized on certain contracts, partially offset by the timing of billings on certain contracts.

The increase in deferred revenue was primarily due to the timing of advanced payments from customers, offset by revenue recognized during the period.

For the three and nine months ended October 3, 2025, $ 21 million and $ 220 million, respectively, of revenue recognized was included as a contract liability at January 3, 2025.

For the three and nine months ended September 27, 2024, $ 45 million and $ 256 million, respectively, of revenue recognized was included as a contract liability at December 29, 2023.

Note 3–Acquisitions, Goodwill and Intangible Assets

1 unchanged sentence

On May 23, 2025 (the "Purchase Date"), we completed the acquisition of Savanna Industries, Inc.

("Kudu Dynamics") for preliminary purchase consideration of approximately $ 291 million, net of $ 29 million of cash acquired.

("Kudu Dynamics") for a final purchase consideration of $ 293 million, net of $ 29 million of cash acquired.

The Kudu Dynamics business provides artificial intelligence enabled cyber capabilities for defense, intelligence and homeland security customers.

1 unchanged sentence

All of the goodwill recognized is tax deductible.

The following table summarizes the preliminary fair value of intangible assets acquired at the Purchase Date and the related weighted average amortization period:

The following table summarizes the final fair value of intangible assets acquired at the Purchase Date and the related weighted average amortization period:

Weighted Amortization Period Fair Value

1 unchanged sentence

Programs 7 $ 60

For the three and six months ended July 4, 2025, $ 12 million of revenues related to Kudu Dynamics were recognized within the National Security & Digital reportable segment.

For the three and nine months ended October 3, 2025, $ 26 million and $ 38 million, respectively, of revenues related to Kudu Dynamics were recognized within the National Security & Digital reportable segment.

Leidos Holdings, Inc.

10 unchanged sentences

Foreign currency translation adjustments — — 29 — 29

Goodwill at July 4, 2025 (1)

Goodwill at October 3, 2025 (1)

$ 2,987 $ 1,366 $ 801 $ 1,188 $ 6,342

(1) Carrying amount includes accumulated impairment loss of $ 596 million within the Commercial & International segment.

We evaluate qualitative factors that could cause us to consider whether the estimated fair value of each of our reporting units may be lower than the carrying value and trigger a quantitative assessment, including, but not limited to (i) macroeconomic conditions, (ii) industry and market considerations, (iii) our overall financial performance, including an analysis of our current and projected cash flows, revenues and earnings, (iv) a sustained decrease in share price and (v) other relevant entity-specific events including changes in management, strategy, partners or litigation.

During the three and six months ended July 4, 2025, and June 28, 2024, there were no impairments to goodwill.

We evaluate qualitative factors that could cause us to consider whether the estimated fair value of each of our reporting units may be lower than the carrying value, including, but not limited to (i) macroeconomic conditions, (ii) industry and market considerations, (iii) our overall financial performance, including an analysis of our current and projected cash flows, revenues and earnings, (iv) a sustained decrease in share price and (v) other relevant entity-specific events including changes in management, strategy, partners or litigation.

During the three and nine months ended October 3, 2025, and September 27, 2024, there were no impairments to goodwill.

INTANGIBLE ASSETS

Intangible assets, net consisted of the following:

July 4, 2025 January 3, 2025

October 3, 2025 January 3, 2025

(in millions) Gross carrying value Accumulated amortization Net carrying value Gross carrying value Accumulated amortization Net carrying value

11 unchanged sentences

Total intangible assets $ 2,080 $ ( 1,584 ) $ 496 $ 2,003 $ ( 1,486 ) $ 517

Amortization expense was $ 32 million and $ 62 million for the three and six months ended July 4, 2025, respectively, and $ 36 million and $ 73 million for the three and six months ended June 28, 2024, respectively.

Amortization expense was $ 34 million and $ 96 million for the three and nine months ended October 3, 2025, respectively, and $ 37 million and $ 110 million for the three and nine months ended September 27, 2024, respectively.

Program intangible assets are amortized over their respective estimated useful lives in proportion to the pattern of economic benefit based on expected future discounted cash flows.

4 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The estimated annual amortization expense as of July 4, 2025, was as follows:

The estimated annual amortization expense as of October 3, 2025, was as follows:

Fiscal year ending (in millions)

6 unchanged sentences

and unobservable inputs in which there is little or no market data (e.g., discounted cash flow and other similar pricing models), which requires us to develop our own market participant assumptions used in pricing the asset or liability (Level 3).

The financial instruments measured at fair value on a recurring basis primarily consisted of the following:

July 4, 2025 January 3, 2025

(in millions) Carrying value Fair value Carrying value Fair value

Financial assets:

Derivatives $ 1 $ 1 $ 4 $ 4

As of July 4, 2025, and January 3, 2025, our derivatives primarily consisted of the cash flow interest rate swaps on $ 500 million of the variable rate senior unsecured term loan (see "Note 5–Derivative Instruments").

The fair value of the cash flow interest rate swaps is determined based on observed values for underlying interest rates on the one-month Secured Overnight Financing Rate ("SOFR") rate as of July 4, 2025, and January 3, 2025 (Level 2 inputs).

As of January 3, 2025, our derivatives primarily consisted of the cash flow interest rate swaps on $ 500 million of the variable rate senior unsecured term loan (see "Note 5–Derivative Instruments").

The carrying value and fair value of our cash flow interest rate swap was $ 4 million.

The $ 500 million interest rate swaps matured in August 2025.

The carrying amounts of our financial instruments, other than derivatives, which include cash equivalents, accounts receivable, accounts payable and accrued expenses, are reasonable estimates of their related fair values.

As of July 4, 2025, and January 3, 2025, the carrying value of our notes receivable of $ 16 million approximates fair value as the stated interest rates within the agreements are materially consistent with the current market rates for similar instruments (Level 2 inputs).

As of October 3, 2025, and January 3, 2025, the carrying value of our notes receivable of $ 16 million approximates fair value as the stated interest rates within the agreements are materially consistent with the current market rates for similar instruments (Level 2 inputs).

Our notes receivable are included within “Other current assets” and "Other long-term assets" on the condensed consolidated balance sheets.

As of July 4, 2025, and January 3, 2025, the fair value of debt was $ 5.1 billion and $ 4.5 billion, respectively, and the carrying amount was $ 5.1 billion and $ 4.7 billion, respectively (see "Note 6–Debt").

As of October 3, 2025, and January 3, 2025, the fair value of debt was $ 4.7 billion and $ 4.5 billion, respectively, and the carrying amount was $ 4.7 billion for both periods (see "Note 6–Debt").

The fair value of long-term debt is determined based on current interest rates available for debt with terms and maturities similar to our existing debt arrangements and our credit rating (Level 2 inputs).

On May 23, 2025, non-financial instruments measured at fair value on a non-recurring basis were recorded in connection with the acquisition of Kudu Dynamics.

The fair values of the assets acquired and liabilities assumed were determined using Level 3 inputs.

The assets and liabilities acquired in connection with the Kudu Dynamics acquisition were measured at fair value on a non-recurring basis using Level 3 inputs (see "Note 3–Acquisitions, Goodwill and Intangible Assets").

Leidos Holdings, Inc.

7 unchanged sentences

The fair value of the interest rate swaps was as follows:

(in millions) Balance sheet line item July 4,

(in millions) Balance sheet line item October 3,

2025 January 3,

2 unchanged sentences

CASH FLOW HEDGES

We have interest rate swap agreements to hedge the cash flows of $ 500 million of the variable rate senior unsecured term loan (the "Variable Rate Loan").

These interest rate swap agreements have a maturity date of August 2025 and a fixed interest rate of 2.96 %.

The objective of these instruments is to reduce variability in the forecasted interest payments of the Variable Rate Loan.

Under the terms of the interest rate swap agreements, we will receive monthly variable interest payments based on the one-month SOFR and will pay interest at a fixed rate.

The interest rate swap transactions are accounted for as cash flow hedges.

The gain/loss on the swaps is reported as a component of other comprehensive income (loss) and is reclassified into earnings when the interest payments on the underlying hedged items impact earnings.

A qualitative assessment of hedge effectiveness is performed on a quarterly basis, unless facts and circumstances indicate the hedge may no longer be highly effective.

As of January 3, 2025, we had 2.96 % fixed interest rate swap agreements to hedge the cash flows of $ 500 million of the variable rate senior unsecured term loan (the "Variable Rate Loan").

The objective of these instruments was to reduce variability in the forecasted interest payments of the Variable Rate Loan.

Under the terms of the interest rate swap agreements, we received monthly variable interest payments based on the one-month SOFR and paid interest at a fixed rate.

These interest rate swap agreements matured in August 2025.

The interest rate swap transactions were accounted for as cash flow hedges.

The gain/loss on the swaps was reported as a component of other comprehensive income (loss) and was reclassified into earnings when the interest payments on the underlying hedged items impacted earnings.

A qualitative assessment of hedge effectiveness was performed on a quarterly basis.

The effect of the cash flow hedges on other comprehensive income (loss) and earnings for the periods presented was as follows:

Three Months Ended Six Months Ended

(in millions) July 4,

2025 June 28,

Three Months Ended Nine Months Ended

(in millions) October 3,

2025 September 27,

2024 October 3,

2025 September 27,

Total interest expense, net presented in the condensed consolidated statements of operations in which the effects of cash flow hedges are recorded

$ 51 $ 46 $ 155 $ 146

Amount recognized in other comprehensive income 1 2 1 7

Amount recognized in other comprehensive income (loss) — ( 4 ) 1 3

Amount reclassified from accumulated other comprehensive loss to interest expense, net ( 1 ) ( 3 ) ( 4 ) ( 9 )

3 unchanged sentences

Our debt consisted of the following:

(in millions) Stated interest rate Effective interest rate July 4,

(in millions) Stated interest rate Effective interest rate October 3,

2025 January 3,

30 unchanged sentences

Principal payments are made quarterly, with the majority of the principal due at maturity.

As of July 4, 2025, and January 3, 2025, there were no borrowings outstanding under the Revolving Facility.

As of October 3, 2025, and January 3, 2025, there were no borrowings outstanding under the Revolving Facility.

On February 20, 2025, we issued and sold $ 500 million senior notes maturing in March 2032 (the "2032 Notes") and $ 500 million senior notes maturing in March 2035 (the "2035 Notes", and together with the 2032 Notes, the "Notes").

9 unchanged sentences

The Commercial Paper Notes either bear a stated or floating interest rate, if interest bearing, or will be sold at a discount from the face amount.

As of July 4, 2025, and January 3, 2025, we did not have any Commercial Paper Notes outstanding.

As of October 3, 2025, and January 3, 2025, we did not have any Commercial Paper Notes outstanding.

Leidos Holdings, Inc.

3 unchanged sentences

The financial covenants in the Revolving Facility and the senior unsecured term loan require that we maintain, as of the last day of each fiscal quarter, a ratio of adjusted consolidated total debt to consolidated EBITDA of not more than 3.75 to 1.00, subject to increases to 4.50 to 1.00 for four fiscal quarters following a material acquisition, and a ratio of EBITDA to consolidated interest expense of not less than 3.50 to 1.00.

We were in compliance with all financial covenants as of July 4, 2025.

We were in compliance with all financial covenants as of October 3, 2025.

Note 7–Accumulated Other Comprehensive Income (Loss)

6 unchanged sentences

Balance at January 3, 2025 ( 98 ) 1 ( 13 ) ( 110 )

Other comprehensive income (loss) 69 1 ( 1 ) 69

Other comprehensive income 65 1 — 66

Taxes ( 5 ) ( 1 ) — ( 6 )

Reclassification from AOCI — ( 4 ) — ( 4 )

Balance at July 4, 2025 $ ( 34 ) $ ( 1 ) $ ( 14 ) $ ( 49 )

Balance at October 3, 2025 $ ( 38 ) $ ( 3 ) $ ( 13 ) $ ( 54 )

Reclassifications from unrecognized gain (loss) on derivative instruments are recorded in "Interest expense, net" in the condensed consolidated statements of operations.

1 unchanged sentence

The following table provides a reconciliation of the weighted average number of shares outstanding used to compute basic and diluted EPS for the periods presented:

Three Months Ended Six Months Ended

(in millions) July 4,

2025 June 28,

Three Months Ended Nine Months Ended

(in millions) October 3,

2025 September 27,

2024 October 3,

2025 September 27,

Basic weighted average number of shares outstanding 128 134 129 135

2 unchanged sentences

Anti-dilutive stock-based awards are excluded from the weighted average number of shares outstanding used to compute diluted EPS.

The total outstanding stock options and vesting stock awards that were anti-dilutive were less than 0.5 million for both the three and six months ended July 4, 2025, and not material for both the three and six months ended June 28, 2024.

The total outstanding stock options and vesting stock awards that were anti-dilutive were less than 0.2 million for both the three and nine months ended October 3, 2025, and less than 0.5 million for both the three and nine months ended September 27, 2024.

On February 20, 2025, we entered into an ASR agreement with a financial institution to repurchase shares of our outstanding common stock.

7 unchanged sentences

All shares delivered were immediately retired.

During the three and six months ended June 28, 2024, we made open market repurchases of our common stock for an aggregate purchase price of $ 100 million and $ 250 million, respectively.

All shares repurchased were immediately retired.

There were no open market share repurchases during the three and six months ended July 4, 2025.

We made open market repurchases of our common stock for an aggregate purchase price of $ 100 million during both the three and nine months ended October 3, 2025, and $ 200 million and $ 450 million during the three and nine months ended September 27, 2024, respectively.

All repurchased shares were immediately retired.

Note 9–Income Taxes

4 unchanged sentences

and (3) reinstating one hundred percent bonus depreciation for eligible property.

The enactment of the OBBBA resulted in a decrease of $ 150 million to income taxes payable and a decrease of $ 130 million to deferred tax assets as of July 4, 2025.

Based upon our interpretation of the law as currently enacted, we estimate that the fiscal 2025 impact will result in a decrease of approximately $ 280 million to income taxes payable and a decrease of $ 245 million to net deferred taxes.

For the three months ended July 4, 2025, the effective tax rate was 24.1 % compared to 23.9 % for the three months ended June 28, 2024.

The increase to the effective tax rate was primarily due to impacts from the OBBBA, partially offset by a decrease in unrecognized tax benefits.

For the six months ended July 4, 2025, the effective tax rate was 23.9 % compared to 23.6 % for the six months ended June 28, 2024.

The increase to the effective tax rate was primarily due to impacts from the OBBBA and a decrease in excess tax benefits related to employee stock-based payment transactions, partially offset by a decrease in unrecognized tax benefits.

Based upon our interpretation of the law as currently enacted, we estimate that income taxes payable and net deferred taxes will be $ 270 million and $ 235 million, respectively, lower at January 2, 2026, than our estimates prior to the OBBBA enactment.

For the three months ended October 3, 2025, the effective tax rate was 23.8 % compared to 23.0 % for the three months ended September 27, 2024.

The increase to the effective tax rate was primarily due to impacts from the OBBBA, partially offset by a decrease in valuation allowance compared to the prior year quarter.

For the nine months ended October 3, 2025, the effective tax rate was 23.9 % compared to 23.3 % for the nine months ended September 27, 2024.

The increase to the effective tax rate was primarily due to impacts from the OBBBA.

Note 10–Business Segments

3 unchanged sentences

The following table summarizes business segment information for the periods presented:

Three Months Ended July 4, 2025

Three Months Ended October 3, 2025

(in millions) National Security & Digital Health & Civil Commercial & International Defense Systems Total

9 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Three Months Ended June 28, 2024

Three Months Ended September 27, 2024

(in millions) National Security & Digital Health & Civil Commercial & International Defense Systems Total

3 unchanged sentences

Other segment expense 1,189 698 427 366 2,680

Segment operating income (loss)

Segment operating income

$ 187 $ 287 $ 41 $ 37 $ 552

1 unchanged sentence

Total operating income $ 516

Six Months Ended July 4, 2025

Nine Months Ended October 3, 2025

(in millions) National Security & Digital Health & Civil Commercial & International Defense Systems Total

6 unchanged sentences

Total operating income $ 1,636

Six Months Ended June 28, 2024

Nine Months Ended September 27, 2024

(in millions) National Security & Digital Health & Civil Commercial & International Defense Systems Total

7 unchanged sentences

The statement of operations performance measures used to evaluate segment performance are revenues and operating income.

As a result, "Interest expense, net," "Other income (expense), net" and "Income tax expense" as reported in the condensed consolidated statements of operations are not allocated to our segments.

As a result, "Interest expense, net," "Other (expense) income, net" and "Income tax expense" as reported in the condensed consolidated statements of operations are not allocated to our segments.

Other segment expenses include direct program costs such as material and subcontractor expenses, as well as allocable indirect costs such as depreciation and Corporate compensation expenses, but excludes direct labor which is separately presented above.

14 unchanged sentences

Defense Contract Audit Agency

As of July 4, 2025, active indirect cost audits by the Defense Contract Audit Agency remain open for fiscal 2023 and subsequent fiscal years.

As of October 3, 2025, active indirect cost audits by the Defense Contract Audit Agency remain open for fiscal 2023 and subsequent fiscal years.

Although we have recorded contract revenues based upon an estimate of costs that we believe will be approved upon final audit or review, we cannot predict the outcome of any ongoing or future audits or reviews and adjustments, and if future adjustments exceed estimates, our profitability may be adversely affected.

As of July 4, 2025, we believe we have adequately reserved for potential adjustments from audits or reviews of contract costs.

As of October 3, 2025, we believe we have adequately reserved for potential adjustments from audits or reviews of contract costs.

Other Government Investigations and Reviews

As previously disclosed, the Company voluntarily self-reported to the Department of Justice and the Securities and Exchange Commission an investigation related to activities by its employees, third party representatives and subcontractors, raising concerns related to a portion of our business that conducts international operations, and has cooperated with both agencies.

As previously disclosed, the Company voluntarily self-reported to the Department of Justice and the Securities and Exchange Commission ("SEC") an investigation related to activities by its employees, third party representatives and subcontractors, raising concerns related to a portion of our business that conducts international operations, and has cooperated with both agencies.

In December 2024, the Company received notification from the U.S.

7 unchanged sentences

It is not possible at this time to determine whether we will incur, or to reasonably estimate the amount of, any fines, penalties, or further liabilities in connection with the investigation pursuant to which the subpoena was issued.

As of July 4, 2025, we have outstanding letters of credit of $ 59 million, principally related to performance guarantees on contracts and outstanding surety bonds with a notional amount of $ 151 million, principally related to performance and subcontractor payment bonds on contracts.

As of October 3, 2025, we have outstanding letters of credit of $ 114 million, principally related to performance guarantees on contracts and outstanding surety bonds with a notional amount of $ 151 million, principally related to performance and subcontractor payment bonds on contracts.

The value of the surety bonds may vary due to changes in the underlying project status and/or contractual modifications.

2 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

As of July 4, 2025, the future expirations of the outstanding letters of credit and surety bonds were as follows:

As of October 3, 2025, the future expirations of the outstanding letters of credit and surety bonds were as follows:

Fiscal year ending (in millions)

1 unchanged sentence

2030 and thereafter 2

Note 12–Subsequent Events

On October 31, 2025, the Company completed the divestiture of an immaterial business not aligned to the Company's long term strategy within the Commercial and International reportable segment.

Leidos Holdings, Inc.

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements