What changed in this filing

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Item 1. Financial Statements

2026-05-05 compared with 2025-11-04 · 270 added, 347 removed, 401 unchanged (61% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

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

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

2026 January 2,

13 unchanged sentences

Accrued payroll and employee benefits 687 819

Current portion of long-term debt 19 618

Short-term debt and current portion of long-term debt 320 20

Total current liabilities 3,152 2,827

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Stockholders’ equity:

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

Common stock, $ 0.0001 par value, 500,000,000 shares authorized, 125,783,512 and 126,380,657 shares issued and outstanding at April 3, 2026, and January 2, 2026, respectively

Additional paid-in capital 117 319

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended Nine Months Ended

in millions, except per share data) October 3,

2025 September 27,

2024 October 3,

2025 September 27,

Three Months Ended

in millions, except per share data) April 3,

2026 April 4,

Revenues $ 4,400 $ 4,245

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Acquisition, integration and restructuring costs 35 4

Asset impairment charges 4 6 4 6

Equity earnings of non-consolidated subsidiaries ( 5 ) ( 7 )

Operating income 508 530

Non-operating income (expense):

Non-operating expense:

Interest expense, net ( 55 ) ( 49 )

Other (expense) income, net

Other expense, net

Income before income taxes 429 478

1 unchanged sentence

Net income 335 365

net income (loss) attributable to

non-controlling interest

2 ( 2 ) 6 ( 1 )

net income attributable to non-controlling interest

Net income attributable to Leidos common stockholders $ 328 $ 363

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended Nine Months Ended

in millions) October 3,

2025 September 27,

2024 October 3,

2025 September 27,

Three Months Ended

in millions) April 3,

2026 April 4,

Net income $ 335 $ 365

Foreign currency translation adjustments

( 4 ) 37 60 18

Unrecognized loss on derivative instruments

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

Pension adjustments 17 —

Total other comprehensive (loss) income, net of taxes

( 5 ) 31 56 14

Total other comprehensive income, net of taxes

Comprehensive income 360 392

net income (loss) attributable to non-controlling interest

2 ( 2 ) 6 ( 1 )

net income attributable to non-controlling interest

Comprehensive income attributable to Leidos common stockholders

$ 362 $ 395 $ 1,177 $ 984

See accompanying notes to condensed consolidated financial statements.

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Balance at April 3, 2026 126 $ 117 $ 4,921 $ ( 25 ) $ 5,013 $ 51 $ 5,064

Net income — — 391 — 391 2 393

Other comprehensive income, net of taxes — — — 34 34 — 34

Issuances of stock — 16 — — 16 — 16

Repurchases of stock and other ( 1 ) ( 10 ) — — ( 10 ) — ( 10 )

Dividends of $ 0.40 per share

— — ( 51 ) — ( 51 ) — ( 51 )

Stock-based compensation — 25 — — 25 — 25

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

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.

Leidos Holdings, Inc.

PART I—FINANCIAL INFORMATION

in millions, except per share data) Shares of common stock Additional

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income (loss) Leidos stockholders' equity Non-controlling interest Total stockholders' equity

Balance at December 29, 2023 136 $ 1,885 $ 2,364 $ ( 48 ) $ 4,201 $ 57 $ 4,258

Net income (loss) — — 284 — 284 ( 1 ) 283

Other comprehensive loss, net of taxes — — — ( 24 ) ( 24 ) — ( 24 )

Issuances of stock — 14 — — 14 — 14

Repurchases of stock and other

( 1 ) ( 184 ) — — ( 184 ) — ( 184 )

Dividends of $ 0.38 per share

— — ( 53 ) — ( 53 ) — ( 53 )

Stock-based compensation — 20 — — 20 — 20

Net capital distributions to non-controlling interest — — — — — ( 1 ) ( 1 )

Balance at March 29, 2024 135 $ 1,735 $ 2,595 $ ( 72 ) $ 4,258 $ 55 $ 4,313

Net income — — 322 — 322 2 324

Other comprehensive income, net of taxes — — — 7 7 — 7

Issuances of stock 1 14 — — 14 — 14

Repurchases of stock and other ( 1 ) ( 115 ) — — ( 115 ) ( 115 )

Dividends of $ 0.38 per share

— — ( 51 ) — ( 51 ) — ( 51 )

Stock-based compensation — 20 — — 20 — 20

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

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

Net income (loss)

Balance at January 3, 2025 131 $ 1,112 $ 3,410 $ ( 110 ) $ 4,412 $ 48 $ 4,460

— — 363 — 363 2 365

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Repurchases of stock and other

( 3 ) ( 531 ) — — ( 531 ) — ( 531 )

Dividends of $ 0.40 per share

1 unchanged sentence

Stock-based compensation — 21 — — 21 — 21

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

Net capital distributions to non-controlling interest — — — — — ( 5 ) ( 5 )

Balance at April 4, 2025 129 $ 619 $ 3,721 $ ( 83 ) $ 4,257 $ 45 $ 4,302

See accompanying notes to condensed consolidated financial statements.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

in millions) October 3,

2025 September 27,

Three Months Ended

in millions) April 3,

2026 April 4,

Cash flows from operations:

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Deferred income taxes ( 8 )

Asset impairment charges 4 6

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

Loss on pension plan settlement

Other 10 ( 1 )

Change in assets and liabilities, net of effects of acquisitions and dispositions:

Receivables ( 160 ) ( 246 )

7 unchanged sentences

Payments for property, equipment and software ( 31 )

Divestiture of a business

Net cash used in investing activities ( 2,359 ) ( 22 )

1 unchanged sentence

Proceeds from debt issuance 1,397 997

Net proceeds from commercial paper 300

Repayments of borrowings ( 5 ) ( 529 )

4 unchanged sentences

Net capital distributions to non-controlling interests ( 2 ) ( 5 )

Other ( 7 ) —

Net cash used in financing activities ( 788 ) ( 644 )

Net cash provided by (used in) financing activities 1,393 ( 110 )

Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash ( 1 ) 7

Net increase in cash, cash equivalents and restricted cash

Net decrease in cash, cash equivalents and restricted cash

( 666 ) ( 67 )

Cash, cash equivalents and restricted cash at beginning of period 1,204 991

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS [CONTINUED]

Nine Months Ended

in millions) October 3,

2025 September 27,

Three Months Ended

in millions) April 3,

2026 April 4,

Supplementary cash flow information:

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Property, plant and equipment additions $ 1

Non-cash financing activity:

Finance lease obligations $ 1

See accompanying notes to condensed consolidated financial statements.

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Headquartered in Reston, Virginia, with 50,000 global employees, Leidos' customers include the U.S.

Department of Defense ("DoD"), the U.S.

Department of War (“DoW”), the U.S.

Intelligence Community, the U.S.

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and its consolidated subsidiaries.

We have a controlling interest in Hanford Mission Integration Solutions, LLC ("HMIS"), the legal entity for the follow-on contract to Mission Support Alliance, LLC's ("MSA") contract and a joint venture with Centerra Group, LLC and Parsons Government Services, Inc.

During the quarter ended July 4, 2025, we dissolved our controlling interest in MSA.

Beginning fiscal 2026, we completed a realignment of our reporting structure, which resulted in the identification of four reportable segments:

Intelligence & Digital, Health, Homeland and Defense.

Additionally, we separately present the unallocable costs associated with corporate functions as Corporate.

We commenced operating and reporting under the new organizational structure effective the first day of fiscal 2026.

As a result of this change, prior year segment results have been recast to reflect the current reportable segment structure.

We have a controlling interest in Hanford Mission Integration Solutions, LLC ("HMIS") and a joint venture with Centerra Group, LLC and Parsons Government Services, Inc.

The financial results for HMIS are consolidated into our unaudited condensed consolidated financial statements.

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however, actual results could differ materially from those estimates.

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.

Prior year financial information has been updated to conform to our current presentation on the condensed consolidated balance sheet and condensed consolidated statement of cash flows.

See the Cash and Cash Equivalents section below for further discussion of the change and the impact on the financial statements.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, which consist of normal recurring adjustments, necessary for a fair presentation thereof.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

ACCOUNTING STANDARDS UPDATES ISSUED BUT NOT YET ADOPTED

ASU 2023-09 Income Taxes

In December 2023, the FASB issued ASU 2023-09, to enhance the transparency and usefulness of income tax disclosures.

The update requires enhancements to the annual rate reconciliation, including disclosure of specific categories and additional information for reconciling items meeting a quantitative threshold.

The update also requires disclosure of income taxes paid disaggregated by federal, state and foreign taxes, and individual jurisdictions meeting a quantitative threshold.

The amendments in this update are effective for public business entities for annual periods beginning after December 15, 2024, and may be adopted on a prospective or retrospective basis.

ACCOUNTING STANDARDS UPDATES ADOPTED

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 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.

Effective fiscal 2026, we adopted the requirements of ASU 2025-06, using the prospective method.

The adoption did not have a material impact on our consolidated financial statements and related disclosures.

ACCOUNTING STANDARDS UPDATES ISSUED BUT NOT YET ADOPTED

ASU 2024-03 Disaggregation of Income Statement Expenses

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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.

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 Nine Months Ended

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

2025 September 27,

2024 October 3,

2025 September 27,

Three Months Ended

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

2026 April 4,

Favorable impact $ 37 $ 53

3 unchanged sentences

$ ( 0.05 ) $ 0.17

Leidos Holdings, Inc.

LEIDOS HOLDINGS, INC.

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.

We reduced revenue by $ 8 million and recognized revenue of $ 27 million from performance obligations satisfied in previous periods for three months ended April 3, 2026, and April 4, 2025, 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.

CASH AND CASH EQUIVALENTS

Our cash equivalents are primarily comprised of investments in several large institutional money market accounts, with original maturity of three months or less.

Effective as of the first quarter of fiscal 2025, we changed our policy to exclude outstanding payments from “Cash and cash equivalents” on the condensed consolidated balance sheets.

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 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.

There is no impact to our condensed consolidated statements of operations, including EPS, condensed consolidated statements of comprehensive income, or condensed consolidated statements of equity.

All periods presented have been adjusted.

RESTRICTED CASH

We have restricted cash balances, primarily representing advances from customers that are restricted for use on certain expenditures related to that customer's contract.

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

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

Leidos Holdings, Inc.

LEIDOS HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 2–Revenues

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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 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.

As of April 3, 2026, we had $ 19 billion of RPO and expect to recognize approximately 62 % and 82 % over the next 12 months and 24 months, respectively, with the remainder to be recognized thereafter.

DISAGGREGATION OF REVENUES

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Disaggregated revenues by customer-type were as follows:

Three Months Ended October 3, 2025

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

Intelligence Community

$ 1,456 $ 241 $ 10 $ 536 $ 2,243

government agencies (1)

513 1,034 89 16 1,652

Commercial and non-U.S.

32 21 471 30 554

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

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

Three Months Ended April 3, 2026

(in millions) Intelligence & Digital

Intelligence Community $ 1,078 $ 249 $ 20 $ 822 $ 2,169

$ 1,281 $ 243 $ 15 $ 475 $ 2,014

government agencies (1)

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Total $ 1,497 $ 1,188 $ 815 $ 883 $ 4,383

(1) Includes federal government agencies other than the DoD and U.S.

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

Nine Months Ended October 3, 2025

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

Three Months Ended April 4, 2025

(in millions) Intelligence & Digital Health Homeland Defense Total

Intelligence Community $ 958 $ 269 $ 23 $ 809 $ 2,059

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Commercial and non-U.S.

customers 83 58 1,396 94 1,631

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

Nine Months Ended September 27, 2024

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

Intelligence Community $ 3,749 $ 755 $ 29 $ 1,341 $ 5,874

government agencies (1)

10 16 470 36 532

Commercial and non-U.S.

customers 87 48 1,348 86 1,569

Total $ 1,397 $ 1,183 $ 769 $ 879 $ 4,228

(1) Includes federal government agencies other than the DoD and U.S.

(1) Includes federal government agencies other than the DoW and U.S.

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

Disaggregated revenues by contract-type were as follows:

Three Months Ended October 3, 2025

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

Cost-reimbursement and fixed-price-incentive-fee

$ 1,107 $ 443 $ 99 $ 345 $ 1,994

Firm-fixed-price 555 809 347 201 1,912

Time-and-materials and fixed-price-level-of-effort

339 44 124 36 543

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

Three Months Ended September 27, 2024

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

Three Months Ended April 3, 2026

(in millions) Intelligence & Digital

Cost-reimbursement and fixed-price-incentive-fee

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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

Cost-reimbursement and fixed-price-incentive-fee $ 3,127 $ 1,344 $ 284 $ 978 $ 5,733

Firm-fixed-price 1,566 2,355 1,051 536 5,508

Time-and-materials and fixed-price-level-of-effort 1,032 150 368 119 1,669

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

Nine Months Ended September 27, 2024

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

Three Months Ended April 4, 2025

(in millions) Intelligence & Digital Health Homeland Defense Total

Cost-reimbursement and fixed-price-incentive-fee

$ 795 $ 407 $ 169 $ 517 $ 1,888

Firm-fixed-price 343 735 434 257 1,769

Time-and-materials and fixed-price-level-of-effort

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

Disaggregated revenues by geographic location were as follows:

Three Months Ended October 3, 2025

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

United States

259 41 166 105 571

International

14 3 322 6 345

Total $ 1,397 $ 1,183 $ 769 $ 879 $ 4,228

Three Months Ended September 27, 2024

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

United States

$ 1,840 $ 1,222 $ 257 $ 511 $ 3,830

International

7 1 320 11 339

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

Nine Months Ended October 3, 2025

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

Disaggregated revenues by geographic location were as follows:

Three Months Ended April 3, 2026

(in millions) Intelligence & Digital

United States

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Total $ 1,497 $ 1,188 $ 815 $ 883 $ 4,383

Nine Months Ended September 27, 2024

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

Three Months Ended April 4, 2025

(in millions) Intelligence & Digital Health Homeland Defense Total

United States

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Total $ 1,397 $ 1,183 $ 769 $ 879 $ 4,228

Leidos Holdings, Inc.

LEIDOS HOLDINGS, INC.

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.

Revenues by customer-type, contract-type and geographic location exclude lease income of $ 17 million for both the three months ended April 3, 2026, and April 4, 2025.

CONTRACT ASSETS AND LIABILITIES

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Contract assets consist of unbilled receivables, which is the amount of revenue recognized that exceeds the amount billed to the customer.

Unbilled receivables exclude amounts billable where the right to consideration is solely subject to the passage of time.

Unbilled receivables exclude amounts billable where the right to consideration is unconditional and not billed.

Contract liabilities consist of deferred revenue, which represents cash advances received prior to performance for programs and billings in excess of revenue recognized.

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

(in millions) Balance sheet line item October 3,

(in millions) Balance sheet line item April 3,

2026 January 2,

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

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.

Leidos Holdings, Inc.

LEIDOS HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

The increase in deferred revenue was primarily due to the acquisition of Entrust (see "Note 3–Acquisitions, Goodwill and Intangible Assets") and timing of advanced payments from customers, partially offset by revenue recognized during the period.

For the three months ended April 3, 2026, $ 56 million of revenue recognized was included as a contract liability at January 2, 2026.

For the three months ended April 4, 2025, $ 137 million of revenue recognized was included as a contract liability at January 3, 2025.

Note 3–Acquisitions, Goodwill and Intangible Assets

ENTRUST ACQUISITION

On March 27, 2026, ("Acquisition Date"), Leidos, Inc.

completed a stock purchase agreement with KENE Holdings, L.P.

and KENE Parent Inc.

("Entrust") to acquire all of the shares of Entrust for a purchase price of $ 2.4 billion in cash, subject to customary adjustments for Entrust’s cash, debt, transaction expenses and net working capital.

Entrust is an engineering firm that provides infrastructure design, grid modernization and program management services primarily to electric, gas and pipeline utilities.

This acquisition enhances existing energy infrastructure capabilities within our Homeland reportable segment.

The preliminary fair values of the assets acquired and liabilities assumed at the Acquisition Date were as follows (in millions):

Cash and cash equivalents $ 47

Receivables, net 162

Other current assets 19

Property, plant and equipment, net

Intangible assets, net 564

Operating lease right-of-use assets, net

Other long-term assets 1

Deferred tax liabilities

Accounts payable and accrued liabilities ( 74 )

Accrued payroll and employee benefits ( 21 )

Operating lease liabilities ( 21 )

Total identifiable net assets acquired 637

Goodwill 1,748

Purchase price $ 2,385

Due to the timing and complexity of the acquisition, the assets acquired and liabilities assumed were recorded at their preliminary estimated fair values.

As of April 3, 2026, we had not finalized the determination of fair values for substantially all of the acquired assets and liabilities assumed.

The preliminary purchase price allocation is subject to change as we complete our determination of the final working capital and the fair value of the acquired assets and liabilities assumed, the impact of which could be material.

The goodwill represents intellectual capital and the acquired assembled workforce, neither of which qualify for recognition as a separate intangible asset.

Of the preliminary goodwill recognized, approximately $ 119 million is tax deductible.

Leidos Holdings, Inc.

LEIDOS HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

Weighted Amortization Period Fair Value

(in millions)

Programs 7 $ 530

The preliminary fair value and related weighted average amortization period of the intangible assets acquired were based on an industry benchmarking analysis surrounding recent and relevant industry transactions.

The difference between the benchmark estimate and ultimate fair value of intangible assets identified may be material.

For the three months ended April 3, 2026, $ 11 million of revenues related to Entrust were recognized within the Homeland reportable segment.

Acquisition and Integration Costs

For the three months ended April 3, 2026, $ 29 million of acquisition and integration costs were recorded related to the acquisition of Entrust.

These costs were recorded within the Homeland reportable segment and Corporate, and presented in "Acquisition, integration and restructuring costs" and "Interest expense, net" on the condensed consolidated statements of operations.

Pro Forma Financial Information

The following pro forma financial information presents consolidated results of operations as if the acquisition of Entrust had occurred on January 4, 2025.

The pro forma financial information was prepared based on historical financial information and has been adjusted to give effect to the events that are directly attributable to the acquisition of Entrust and factually supportable.

These adjustments include amortization and interest expense that are directly attributable to the acquisition.

The pro forma results below do not reflect future events that have occurred or may occur after the acquisition, including anticipated synergies or other expected benefits that may be realized from the acquisition.

The pro forma information is not intended to reflect the actual results of operations that would have occurred if the acquisition had been completed on January 4, 2025, nor is it intended to be an indication of future operating results.

Three Months Ended

(in millions, except per share amounts) April 3,

2026 April 4,

Revenues $ 4,528 $ 4,385

Net income 347 332

Net income attributable to Leidos common stockholders 340 330

Earnings per share:

Basic $ 2.69 $ 2.54

Diluted 2.65 2.52

The pro forma financial information above includes the following nonrecurring significant adjustment made to account for certain costs incurred as if the acquisition had been completed on January 4, 2025:

u Acquisition-related costs of $ 29 million for the three months ended April 3, 2026, were excluded from the pro forma financial information for fiscal 2026 and were included in the pro forma financial information for fiscal 2025.

KUDU DYNAMICS ACQUISITION

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

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

("Kudu Dynamics") for 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.

The preliminary goodwill recognized of $ 229 million represents intellectual capital and the acquired assembled workforce, neither of which qualify for recognition as a separate intangible asset.

Leidos Holdings, Inc.

LEIDOS HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The final goodwill recognized of $ 231 million represents intellectual capital and the acquired assembled workforce, neither of which qualify for recognition as a separate intangible asset.

All of the goodwill recognized is tax deductible.

3 unchanged sentences

Programs 7 $ 60

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.

LEIDOS HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

For the three months ended April 3, 2026, $ 22 million of revenues related to Kudu Dynamics were recognized within the Intelligence & Digital reportable segment.

Beginning the first day of fiscal 2026, we completed a business realignment, which resulted in new reportable segments (see "Note 9–Business Segments").

Goodwill was allocated to reporting units within the new reportable segments based on a relative fair value approach.

The following table presents changes in the carrying amount of goodwill by reportable segment:

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

Goodwill at December 29, 2023 (1)

(in millions) Intelligence & Digital

Goodwill at January 3, 2025 (1)

$ 2,007 $ 1,336 $ 950 $ 1,791 $ 6,084

Acquisition of a business

231 — — — 231

Divestiture of a business

— — ( 7 ) — ( 7 )

Foreign currency translation adjustments — — 34 — 34

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Foreign currency translation adjustments — — 4 — 4

Goodwill at October 3, 2025 (1)

Goodwill at April 3, 2026 (1)

$ 2,238 $ 1,336 $ 2,729 $ 1,791 $ 8,094

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

(1) Carrying amount includes accumulated impairment loss of $ 596 million within the Homeland 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, 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.

In conjunction with the change in reportable segments in fiscal 2026, the Company evaluated goodwill for impairment immediately before and after the change and determined that goodwill was not impaired.

During the three months ended April 3, 2026, and April 4, 2025, there were no impairments to goodwill.

Leidos Holdings, Inc.

LEIDOS HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

INTANGIBLE ASSETS

Intangible assets, net consisted of the following:

October 3, 2025 January 3, 2025

April 3, 2026 January 2, 2026

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

Finite-lived intangible assets:

$ 2,279 $ ( 1,413 ) $ 866 $ 1,748 $ ( 1,391 ) $ 357

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53 ( 35 ) 18 53 ( 34 ) 19

Total finite-lived intangible assets

2,076 ( 1,584 ) 492 1,999 ( 1,486 ) 513

Indefinite-lived intangible assets:

Trade names 4 — 4 4 — 4

Total intangible assets

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.

Backlog intangible assets are amortized on a straight-line basis over their estimated useful lives.

Customer relationships and software and technology intangible assets are amortized either on a straight-line basis over their estimated useful lives or over their respective estimated useful lives in proportion to the pattern of economic benefit based on expected future discounted cash flows, as deemed appropriate.

Leidos Holdings, Inc.

LEIDOS HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

$ 2,642 $ ( 1,649 ) $ 993 $ 2,077 $ ( 1,619 ) $ 458

Amortization expense was $ 30 million for both the three months ended April 3, 2026, and April 4, 2025.

The estimated annual amortization expense as of April 3, 2026, was as follows:

Fiscal year ending (in millions)

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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).

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 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 January 3, 2025 (Level 2 inputs).

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 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).

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

As of April 3, 2026, and January 2, 2026, the carrying values of our notes receivable of $ 4 million and $ 15 million, respectively, approximate 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 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").

As of April 3, 2026, and January 2, 2026, the fair value of debt was $ 6.3 billion and $ 4.7 billion, respectively, and the carrying amount was $ 6.3 billion and $ 4.6 billion, respectively (see "Note 5–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).

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.

LEIDOS HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 5–Derivative Instruments

We manage our risk to changes in interest rates through the use of derivative instruments.

We do not hold derivative instruments for trading or speculative purposes.

For variable rate borrowings, we use fixed interest rate swaps, effectively converting a portion of the variable interest rate payments to fixed interest rate payments.

These swaps are designated as cash flow hedges.

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

(in millions) Balance sheet line item October 3,

2025 January 3,

Cash flow interest rate swaps Other current assets

The cash flows associated with the interest rate swaps are classified as operating activities in the condensed consolidated statements of cash flows.

CASH FLOW HEDGES

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 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 (loss) — ( 4 ) 1 3

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

The assets and liabilities acquired in connection with the Kudu Dynamics and Entrust acquisitions 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.

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Our debt consisted of the following:

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

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

2026 January 2,

Short-term debt and current portion of long-term debt

Commercial paper

4.13 %- 4.23 %

Various $ 300

Current portion of long-term debt

Total short-term debt and current portion of long-term debt

Long-term debt:

Senior unsecured term loan:

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Senior unsecured notes:

$ 500 million notes, due May 2025

$ 600 million notes, due March 2029

4.10 % 4.20 % 600 —

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5.50 % 5.55 % 500 500

$ 800 million notes, due March 2036

5.00 % 5.03 % 800 —

$ 300 million notes, due December 2040

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Total long-term debt 6,034 4,648

Less current portion ( 19 ) ( 618 )

current portion

( 20 ) ( 20 )

Total long-term debt, net of current portion $ 6,014 $ 4,628

REVOLVING CREDIT FACILITY

We have a $ 1.0 billion senior unsecured revolving facility (the “Revolving Facility”).

The Revolving Facility will mature in March 2028 and is subject to an annual commitment fee rate of 0.125 % on the unused credit availability and permits two additional one-year extensions subject to lender consent.

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

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").

On February 12, 2026, we amended and restated our existing senior unsecured revolving credit facility (the “Revolving Facility”) to increase the borrowing capacity from $ 1.0 billion to $ 1.5 billion.

The Revolving Facility will mature in February 2031 and permits two additional one-year extensions subject to lender consent.

Borrowings under the Revolving Facility will bear interest at a rate determined, at the Company's option, based on either an alternate base rate or term SOFR rate, plus an applicable margin and is subject to an annual commitment fee rate of 0.11 % on the unused credit availability.

As of April 3, 2026, and January 2, 2026, there were no borrowings outstanding under the Revolving Facility.

On March 2, 2026, we issued and sold $ 600 million senior notes maturing in March 2029 (the "2029 Notes") and $ 800 million senior notes maturing in March 2036 (the "2036 Notes", and together with the 2029 Notes, the "Notes").

The Notes are senior unsecured obligations issued by Leidos, Inc.

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The annual interest rates for the 2029 Notes and the 2036 Notes are 4.10 % and 5.00 %, respectively, and the interest is payable on a semi-annual basis.

In connection with the issuance of the Notes, $ 10 million of debt issuance costs and discount were recognized, which were recorded as an offset against the carrying value of debt.

The proceeds from the Notes were used to retire the $ 500 million senior unsecured notes due May 2025 and repurchase $ 500 million outstanding shares of common stock in connection with the Accelerated Share Repurchase ("ASR") agreement (see "Note 8–Earnings Per Share").

In connection with the issuance of the Notes, $ 10 million of debt issuance costs and discount were recognized, which were

Leidos Holdings, Inc.

LEIDOS HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

recorded as an offset against the carrying value of debt.

The proceeds from the Notes were used to fund a portion of the consideration payable in connection with the acquisition of Entrust and for general corporate purposes.

BRIDGE FACILITY

In connection with the acquisition of Entrust, we entered into an agreement with Citigroup Global Markets Inc., which provides for a senior unsecured 364-day bridge loan facility in an aggregate principal amount of $ 1.4 billion (the "Bridge Facility").

The Bridge Facility was undrawn and was terminated following the issuance of the Notes.

As a result, we recognized $ 5 million of fees which were recorded within "Interest expense, net" on the condensed consolidated statements of operations.

COMMERCIAL PAPER

We have a commercial paper program in which the Company may issue short-term unsecured commercial paper notes ("Commercial Paper Notes") not to exceed $ 1.0 billion.

We have a commercial paper program in which the Company may issue short-term unsecured commercial paper notes ("Commercial Paper Notes").

The proceeds will be used for general corporate purposes, including working capital, capital expenditures, acquisitions and share repurchases.

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

As of April 3, 2026, we had $ 300 million of Commercial Paper Notes outstanding.

As of January 2, 2026, we did not have any Commercial Paper Notes outstanding.

The Commercial Paper Notes, senior unsecured term loan, senior unsecured notes and Revolving Facility are fully and unconditionally guaranteed and contain certain customary restrictive covenants, including among other things, restrictions on our ability to create liens and enter into sale and leaseback transactions under certain circumstances.

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 April 3, 2026.

PRINCIPAL PAYMENTS

Future minimum payments of long-term debt are as follows:

Fiscal year ending (in millions)

2026 (remainder of year)

2031 and thereafter 4,185

Total principal payments 6,078

unamortized debt discount and issuance costs ( 44 )

Total long-term debt $ 6,034

Leidos Holdings, Inc.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The senior unsecured term loan, senior unsecured notes and Revolving Facility are fully and unconditionally guaranteed and contain certain customary restrictive covenants, including among other things, restrictions on our ability to create liens and enter into sale and leaseback transactions under certain circumstances.

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

Note 6–Accumulated Other Comprehensive Income (Loss)

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(in millions) Foreign currency translation adjustments Unrecognized gain (loss) on derivative instruments Pension adjustments Total AOCI

Balance at December 29, 2023 $ ( 39 ) $ 5 $ ( 14 ) $ ( 48 )

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

Other comprehensive income (loss) 74 1 ( 3 ) 72

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Balance at January 2, 2026 ( 32 ) ( 3 ) ( 15 ) ( 50 )

Other comprehensive income 65 1 — 66

Other comprehensive income (loss) 9 — 23 32

Taxes ( 1 ) — ( 6 ) ( 7 )

Reclassification from AOCI — ( 4 ) — ( 4 )

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

Balance at April 3, 2026 $ ( 24 ) $ ( 3 ) $ 2 $ ( 25 )

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

On May 20, 2022, the trustee of our UK defined benefit pension plan (the “Plan”) invested the assets of the Plan in a bulk purchase annuity policy to fully insure the benefits payable to the members of the Plan.

The transaction was structured to enable a full buy-out, at which time the insurer would assume direct responsibility for all future pension obligations.

On February 11, 2026, the Plan completed a full buy-out, thus relieving the Company of future pension obligations.

As a result we recognized a $ 23 million settlement loss primarily related to the unamortized loss previously recorded within AOCI.

The settlement loss was recorded in "Other expense, net" in the condensed consolidated statements of operations.

Note 7–Earnings Per Share

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 Nine Months Ended

(in millions) October 3,

2025 September 27,

2024 October 3,

2025 September 27,

Three Months Ended

(in millions) April 3,

2026 April 4,

Basic weighted average number of shares outstanding 126 130

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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 0.2 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.

During the three months ended April 4, 2025, we paid $ 500 million to the financial institution and received an initial delivery of 3 million shares at an average price of $ 131.50 per share.

In May 2025, we received the final delivery of 0.6 million shares related to the ASR agreement.

The total number of shares that we received under the ASR agreement was based on the volume-weighted-average-price of $ 138.44 per share, net of a discount, for the period February 20, 2025, to May 20, 2025.

The total outstanding stock options and vesting stock awards that were anti-dilutive were less than 0.5 million for both the three months ended April 3, 2026, and April 4, 2025.

During the three months ended April 3, 2026, we made open market repurchases of our common stock for an aggregate purchase price of $ 200 million.

All repurchased shares were immediately retired.

There were no open market repurchases during the three months ended April 4, 2025.

Note 8–Income Taxes

For the three months ended April 3, 2026, the effective tax rate was 21.9 % compared to 23.6 % for the three months ended April 4, 2025.

The decrease to the effective tax rate was primarily due to an increase in net excess tax benefits related to employee stock-based payment transactions and a decrease in unrecognized tax benefits.

Leidos Holdings, Inc.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The purchase was recorded to "Additional paid-in capital" in the condensed consolidated balance sheets.

All shares delivered were immediately retired.

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

On July 4, 2025, tax legislation was enacted in H.R.1 Reconciliation Act, commonly referred to as the One Big Beautiful Bill Act (the “OBBBA”) implementing several corporate tax law changes, including but not limited to, (1) restoring the ability to immediately expense U.S.

research and development costs;

(2) allowing certain taxpayers an election to deduct the unamortized balance of U.S.

research and development costs capitalized in prior years;

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

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 9–Business Segments

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The CODM considers segment revenue and operating income to assist with the evaluation of strategic business decisions, including potential acquisitions or divestitures, whether to invest in certain products or services, share repurchases and the declaration of dividends.

Beginning in fiscal 2026, we realigned our business to report in five operating segments, which are aggregated into four reportable segments in accordance with the criteria established under ASC 280:

Intelligence & Digital, Health, Homeland and Defense.

Our reportable segments are focused on specific, defined capability sets that we bring to our customers.

Additionally, we separately present the unallocable costs associated with corporate functions as Corporate.

As a result of this change, prior year segment results have been recast to reflect the current reportable segment structure.

Our Intelligence & Digital business delivers mission-focused capabilities to the U.S.

federal government and the U.S.

Intelligence Community.

The business integrates intelligence tradecraft, full-spectrum cyber capabilities, and advanced technical solutions at scale to improve decision-making across large, distributed mission networks and classified environments.

We conduct technological research and development, software engineering, modeling and simulation, advanced analytics, network modernization, artificial intelligence development, and IT service management, modernizing critical systems and enabling resilient, high-performing mission operations.

Our Health business delivers services and solutions to federal and commercial customers in areas of public health, care coordination, and life and environmental sciences.

Our offerings include IT infrastructure modernization, software development, research and implementation, response to hazardous material incidents, mission software solutions and wellness exams.

Our Homeland business serves five markets:

air traffic, airports and borders, security equipment, commercial energy engineering and international.

We provide safety critical software for the automation of air traffic both domestically and internationally.

Additionally, we provide protection of the borders and airports through software and logistics programs.

We provide security equipment for various end users.

Internationally, we support defense and other government customers with software development programs, data analytics, information technology and intelligence operations.

Our Defense business develops and produces advanced space, aerial, surface, and sub-surface manned and un-manned defense systems.

Our offerings include manufacturing, prototyping, weapons development, analytics and other advanced defense services.

Corporate includes the operations of various corporate activities, certain corporate expense items that are not reimbursed by our U.S.

government customers and certain other expense items excluded from a reportable segment's performance.

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

Three Months Ended October 3, 2025

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

Three Months Ended April 3, 2026

(in millions) Intelligence & Digital Health Homeland Defense Total

Revenues $ 1,513 $ 1,188 $ 816 $ 883 $ 4,400

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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

Three Months Ended April 4, 2025

(in millions) Intelligence & Digital Health Homeland Defense Total

Revenues $ 1,408 $ 1,188 $ 770 $ 879 $ 4,245

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Total operating income $ 530

Nine Months Ended October 3, 2025

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

Revenues $ 5,765 $ 3,864 $ 1,705 $ 1,633 $ 12,967

Direct labor 1,503 715 317 330 2,865

Amortization of intangible assets 20 18 21 37 96

Other segment expense 3,678 2,193 1,252 1,154 8,277

Segment operating income $ 564 $ 938 $ 115 $ 112 $ 1,729

Corporate expense 93

Total operating income $ 1,636

Nine Months Ended September 27, 2024

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

Revenues $ 5,471 $ 3,687 $ 1,648 $ 1,491 $ 12,297

1,454 711 306 307 2,778

Amortization of intangible assets 17 21 22 50 110

Other segment expense 3,455 2,139 1,256 1,042 7,892

Segment operating income $ 545 $ 816 $ 64 $ 92 $ 1,517

Corporate expense

Total operating income $ 1,406

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

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.

As a result, "Interest expense, net," "Other expense, 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.

The Health & Civil and Defense Systems segments also include equity earnings of non-consolidated subsidiaries within operating income.

Leidos Holdings, Inc.

LEIDOS HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The Health and Defense segments also include equity earnings of non-consolidated subsidiaries within operating income.

Government Cost Accounting Standards, indirect costs including depreciation expense are collected in indirect cost pools, which are then collectively allocated to the reportable segments based on a representative causal or beneficial relationship of the costs in the pool to the costs in the base.

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Defense Contract Audit Agency

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

As of April 3, 2026, active indirect cost audits by the Defense Contract Audit Agency remain open for fiscal 2024 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 October 3, 2025, we believe we have adequately reserved for potential adjustments from audits or reviews of contract costs.

As of April 3, 2026, we believe we have adequately reserved for potential adjustments from audits or reviews of contract costs.

Leidos Holdings, Inc.

LEIDOS HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Other Government Investigations and Reviews

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.

Department of Justice that it had closed its inquiry.

While the Company has engaged with the SEC, the Company cannot anticipate the timing, outcome or possible impact of an SEC investigation, although violations of applicable laws may result in civil sanctions, including monetary penalties, and reputational damage.

In August 2022, the Company received a Federal Grand Jury Subpoena in connection with a criminal investigation being conducted by the U.S.

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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 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.

As of April 3, 2026, 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 $ 153 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.

Leidos Holdings, Inc.

LEIDOS HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

As of April 3, 2026, we invested $ 6 million in an investment fund as a limited partner and have committed to invest an additional $ 94 million over the next five years.

The timing of our capital contributions is uncertain.

As of April 3, 2026, the future expirations of the outstanding letters of credit and surety bonds were as follows:

Fiscal year ending (in millions)

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Note 11–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.

On April 14, 2026, Leidos, Inc.

entered into a Contribution and Equity Purchase Agreement with certain affiliates of Altaris, LLC to form a new joint venture combining the Security Enterprise Solutions and Industrial Automation businesses (“SES Business”) of Leidos with Analogic Corporation, a portfolio company of Altaris, LLC.

Upon close, Leidos will contribute the SES Business to the joint venture in exchange for a 41.5 % equity interest in the new joint venture.

The transaction is expected to close in the second half of fiscal 2026, subject to the satisfaction or waiver of customary closing conditions.

Leidos Holdings, Inc.

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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