What changed in this filing

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Item 1. Financial Statements

2026-08-04 compared with 2026-05-05 · 258 added, 153 removed, 518 unchanged (44% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

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

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

2026 January 2,

3 unchanged sentences

Other current assets 493 656

Assets held for sale 943

Total current assets 5,246 4,814

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Operating lease right-of-use assets, net 491 526

Deferred tax assets

Other long-term assets 389 392

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Accrued payroll and employee benefits 855 819

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

Current portion of long-term debt 22 20

Liabilities held for sale 163

Total current liabilities 3,220 2,827

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Operating lease liabilities 547 587

Deferred tax liabilities

Other long-term liabilities 520 489

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Stockholders’ equity:

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

Common stock, $ 0.0001 par value, 500,000,000 shares authorized, 125,492,013 and 126,380,657 shares issued and outstanding at July 3, 2026, and January 2, 2026, respectively

Additional paid-in capital 88 319

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended

in millions, except per share data) April 3,

2026 April 4,

Three Months Ended Six Months Ended

in millions, except per share data) July 3,

Revenues $ 4,558 $ 4,253 $ 8,958 $ 8,498

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Interest expense, net ( 69 ) ( 55 ) ( 124 ) ( 104 )

Other expense, net

Other income (expense), net 6 2 ( 18 ) ( 1 )

Income before income taxes 451 518 880

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended

in millions) April 3,

2026 April 4,

Three Months Ended Six Months Ended

in millions) July 3,

Net income $ 356

1 unchanged sentence

Unrecognized loss on derivative instruments

( 1 ) — ( 2 )

Pension adjustments ( 2 )

( 1 ) 15 ( 1 )

Total other comprehensive income, net of taxes

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

Net income — — 354 — 354 2 356

Other comprehensive income, net of taxes — — — 2 2 — 2

Issuances of stock — 18 — — 18 — 18

Repurchases of stock and other

( 1 ) ( 73 ) — — ( 73 ) — ( 73 )

Dividends of 0.43 per share

— — ( 56 ) — ( 56 ) — ( 56 )

Stock-based compensation — 26 — — 26 — 26

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

Balance at July 3, 2026 125 $ 88 $ 5,219 $ ( 23 ) $ 5,284 $ 52 $ 5,336

Leidos Holdings, Inc.

PART I—FINANCIAL INFORMATION

LEIDOS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY [CONTINUED]

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

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

— — 363 — 363 2 365

Net income — — 363 — 363 2 365

Other comprehensive income, net of taxes — — — 27 27 — 27

— — — 27 27 — 27

Issuances of stock 1 17 — — 17 — 17

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

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

See accompanying notes to condensed consolidated financial statements.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

in millions) April 3,

2026 April 4,

Six Months Ended

in millions) July 3,

Cash flows from operations:

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Deferred income taxes ( 2 ) 200

Loss on pension plan settlement

Other 10 ( 1 )

Net loss on pension plan settlement 20 —

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

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Divestiture of a business

Net proceeds from sale of assets 4 —

Other ( 4 ) —

Net cash used in investing activities ( 2,397 ) ( 336 )

1 unchanged sentence

Proceeds from debt issuance 1,397 997

Net proceeds from commercial paper 300

Repayments of borrowings ( 10 ) ( 559 )

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Net capital distributions to non-controlling interests ( 3 ) ( 7 )

Other ( 7 ) ( 6 )

Net cash provided by (used in) financing activities 970 ( 193 )

Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash — 14

Net decrease in cash, cash equivalents and restricted cash

( 666 ) ( 67 )

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

Cash, cash equivalents and restricted cash at end of period 538 924

restricted cash at end of period 81 82

Cash and cash equivalents at end of period $ 457 $ 842

See accompanying notes to condensed consolidated financial statements.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS [CONTINUED]

Three Months Ended

in millions) April 3,

2026 April 4,

Six Months Ended

in millions) July 3,

Net (decrease) increase in cash, cash equivalents and restricted cash, including cash classified in current assets held for sale ( 333 )

change in cash balances classified as assets held for sale 41

Net (decrease) increase in cash, cash equivalents and restricted cash ( 374 )

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

Cash, cash equivalents and restricted cash at end of period 830

restricted cash at end of period 82

Cash and cash equivalents at end of period $ 748

Supplementary cash flow information:

Cash paid for income taxes, net of refunds $ ( 5 ) $ ( 4 )

Cash paid for income taxes $ 9 $ 162

Cash paid for interest 112 100

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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 combined "Deferred tax assets" with "Other long-term assets" and "Deferred tax liabilities" with "Other long-term liabilities" on the condensed consolidated balance sheets.

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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Changes in estimates on contracts were as follows:

Three Months Ended

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

2026 April 4,

Three Months Ended Six Months Ended

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

Favorable impact $ 46 $ 42 $ 83 $ 95

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Revenue Recognized from Prior Obligations

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.

We recognized revenue of $ 21 million and $ 8 million from performance obligations satisfied in previous periods for the three and six months ended July 3, 2026, respectively, compared to $ 3 million and $ 24 million for the three and six months ended July 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.

Leidos Holdings, Inc.

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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 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.

As of July 3, 2026, we had $ 20 billion of RPO and expect to recognize approximately 63 % 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 April 3, 2026

Three Months Ended July 3, 2026

(in millions) Intelligence & Digital

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Total $ 1,489 $ 1,086 $ 1,018 $ 955 $ 4,548

Three Months Ended April 4, 2025

Three Months Ended July 4, 2025

(in millions) Intelligence & Digital Health Homeland Defense Total

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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 3, 2026

(in millions) Intelligence & Digital

Intelligence Community

$ 2,175 $ 468 $ 38 $ 1,724 $ 4,405

government agencies (1)

782 1,776 570 46 3,174

Commercial and non-U.S.

customers 29 30 1,225 68 1,352

Total $ 2,986 $ 2,274 $ 1,833 $ 1,838 $ 8,931

Six Months Ended July 4, 2025

(in millions) Intelligence & Digital Health Homeland Defense Total

Intelligence Community

$ 1,933 $ 521 $ 36 $ 1,634 $ 4,124

government agencies (1)

837 1,800 555 68 3,260

Commercial and non-U.S.

customers 20 32 949 76 1,077

Total $ 2,790 $ 2,353 $ 1,540 $ 1,778 $ 8,461

(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 April 3, 2026

Three Months Ended July 3, 2026

(in millions) Intelligence & Digital

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Total $ 1,489 $ 1,086 $ 1,018 $ 955 $ 4,548

Three Months Ended July 4, 2025

(in millions) Intelligence & Digital Health Homeland Defense Total

Cost-reimbursement and fixed-price-incentive-fee

$ 793 $ 374 $ 156 $ 528 $ 1,851

Firm-fixed-price 355 761 433 278 1,827

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

245 35 182 93 555

Total $ 1,393 $ 1,170 $ 771 $ 899 $ 4,233

Six Months Ended July 3, 2026

(in millions) Intelligence & Digital

Cost-reimbursement and fixed-price-incentive-fee $ 1,808 $ 816 $ 367 $ 1,063 $ 4,054

Firm-fixed-price 696 1,395 951 603 3,645

Time-and-materials and fixed-price-level-of-effort 482 63 515 172 1,232

Total $ 2,986 $ 2,274 $ 1,833 $ 1,838 $ 8,931

Leidos Holdings, Inc.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Three Months Ended April 4, 2025

Six Months Ended July 4, 2025

(in millions) Intelligence & Digital Health Homeland Defense Total

Cost-reimbursement and fixed-price-incentive-fee $ 1,588 $ 781 $ 325 $ 1,045 $ 3,739

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

Firm-fixed-price 698 1,496 867 535 3,596

Time-and-materials and fixed-price-level-of-effort 504 76 348 198 1,126

259 41 166 105 571

Total $ 2,790 $ 2,353 $ 1,540 $ 1,778 $ 8,461

Disaggregated revenues by geographic location were as follows:

Three Months Ended April 3, 2026

Three Months Ended July 3, 2026

(in millions) Intelligence & Digital

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Total $ 1,489 $ 1,086 $ 1,018 $ 955 $ 4,548

Three Months Ended April 4, 2025

Three Months Ended July 4, 2025

(in millions) Intelligence & Digital Health Homeland Defense Total

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Total $ 1,393 $ 1,170 $ 771 $ 899 $ 4,233

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.

Six Months Ended July 3, 2026

(in millions) Intelligence & Digital

United States

$ 2,985 $ 2,274 $ 1,092 $ 1,819 $ 8,170

International

1 — 741 19 761

Total $ 2,986 $ 2,274 $ 1,833 $ 1,838 $ 8,931

Six Months Ended July 4, 2025

(in millions) Intelligence & Digital Health

Homeland Defense

United States

$ 2,789 $ 2,353 $ 878 $ 1,754 $ 7,774

International

1 — 662 24 687

Total $ 2,790 $ 2,353 $ 1,540 $ 1,778 $ 8,461

Revenues by customer-type, contract-type and geographic location exclude lease income of $ 10 million and $ 27 million for the three and six months ended July 3, 2026, respectively, and $ 20 million and $ 37 million for the three and six months ended July 4, 2025, respectively.

CONTRACT ASSETS AND LIABILITIES

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As a result, the timing of revenue recognition, customer billings and cash collections for each contract results in a net contract asset or liability at the end of each reporting period.

Leidos Holdings, Inc.

LEIDOS HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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

(in millions) Balance sheet line item April 3,

(in millions) Balance sheet line item July 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.

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

The increase in unbilled receivables was primarily due to the acquisition of Entrust (see "Note 3–Acquisitions and Divestitures") and revenue recognized on certain contracts, partially offset by the timing of billings on certain contracts.

For the three and six months ended July 3, 2026, $ 20 million and $ 76 million, respectively, of revenue recognized was included as a contract liability at January 2, 2026.

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.

Note 3–Acquisitions and Divestitures

Entrust Acquisition

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

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

completed the acquisition of KENE Holdings, L.P.

and KENE Parent Inc.

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Cash and cash equivalents $ 47

Receivables, net 162

Receivables 162

Other current assets 18

Property, plant and equipment, net

Intangible assets, net 564

Operating lease right-of-use assets, net

Other long-term assets 1

Property, plant and equipment 12

Intangible assets 664

Operating lease right-of-use assets 22

Deferred tax liabilities

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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.

As of July 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

Leidos Holdings, Inc.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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.

The acquired customer relationships and backlog 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.

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

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(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.

Customer relationships 10 $ 621

For the three and six months ended July 3, 2026 , $ 141 million and $ 152 million, res pectively, of revenues related to Entrust were recognized within the Homeland reportable segment.

Pro Forma Financial Information

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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,

Three Months Ended Six Months Ended

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

Revenues $ 4,558 $ 4,394 $ 9,086 $ 8,772

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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 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.

u Acquisition-related costs of $ 1 million and $ 30 million for the three and six months ended July 3, 2026, respectively, were excluded from the pro forma financial information for fiscal 2026 and were included in the pro forma financial information for fiscal 2025.

Leidos Holdings, Inc.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Kudu Dynamics Acquisition

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

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

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.

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Programs 7 $ 60

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

For the three and six months ended July 3, 2026, $ 17 million and $ 39 million, respectively, of revenues related to Kudu Dynamics were recognized within the Intelligence & Digital reportable segment.

Acquisition, Integration and Restructuring Costs

The following expenses were incurred related to the Company's acquisitions, integration and restructuring activities:

Three Months Ended

Six Months Ended

(in millions)

Acquisition costs $ — $ — $ 29 $ —

Integration costs 3 1

Restructuring costs 27 1

Total acquisition, integration and restructuring costs $ 30 $ 2 $ 70 $ 6

These costs were recorded within the Homeland, Health and Intelligence & Digital reportable segments and Corporate, and presented in "Acquisition, integration and restructuring costs," "Cost of revenues," "Selling, general and administrative expenses," and "Interest expense, net" on the condensed consolidated statements of operations.

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.

The transaction will involve divesting our Security Enterprise Solutions and Industrial Automation businesses ("SES Business"), which will be combined with Analogic Corporation, a portfolio company of Altaris, LLC, in a newly formed joint venture.

The joint venture will primarily focus on security product innovation, research and development, manufacturing, screening technologies, artificial Intelligence and 3D imaging solutions.

The divestiture of the SES Business is expected to be completed during the second half of fiscal 2026.

Upon close of the transaction, Leidos will retain a 41.5 % non-controlling equity interest and Altaris will retain a 58.5 % controlling interest in the new joint venture.

The Company has presented the associated assets and liabilities of the SES Business as held for sale in the Company's condensed consolidated balance sheet as of July 3, 2026.

The major classes of assets and liabilities classified as held for sale were as follows:

Leidos Holdings, Inc.

LEIDOS HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in millions)

Cash and cash equivalents $ 41

Receivables, net 94

Inventory, net 250

Other current assets 14

Property, plant and equipment, net 36

Intangible assets, net 112

Operating lease right-of-use assets, net 46

Other long-term assets 5

Total assets held for sale $ 935

Accounts payable and accrued liabilities $ 76

Accrued payroll and employee benefits 18

Operating lease liabilities 45

Other long-term liabilities

Total liabilities held for sale

Upon consummation of the transaction, Leidos will deconsolidate the SES Business and account for our 41.5 % minority interest in the joint venture as an equity method investment.

As the divestiture of the SES Business does not represent a material strategic shift in operations, the SES Business will not be presented as a discontinued operation.

During the quarter ended July 3, 2026, we also reclassified $ 8 million of aircraft from "Property, plant and equipment, net" to "Assets held for sale" on the condensed consolidated balance sheets, following the execution of sale agreements for those aircraft.

The sales are expected to be finalized during the second half of fiscal 2026.

Note 4–Goodwill and Intangible Assets

Beginning the first day of fiscal 2026, we completed a business realignment, which resulted in new reportable segments (see "Note 10–Business Segments").

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Foreign currency translation adjustments — — 6 — 6

Goodwill at April 3, 2026 (1)

Transfers to assets held for sale — — ( 337 ) — ( 337 )

Goodwill at July 3, 2026

$ 2,238 $ 1,336 $ 2,298 $ 1,791 $ 7,663

(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.

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.

(1) Carrying amount includes accumulated impairment loss of $ 596 million within the Homeland segment, which is part of the SES Business discussed above.

Leidos Holdings, Inc.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

INTANGIBLE ASSETS

Intangible assets, net consisted of the following:

April 3, 2026 January 2, 2026

July 3, 2026 January 2, 2026

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

Customer relationships

$ 662 $ ( 37 ) $ 625 $ 53 $ ( 34 ) $ 19

Software and technology

1,626 ( 1,359 ) 267 1,748 ( 1,391 ) 357

55 ( 20 ) 35 12 ( 7 ) 5

Customer relationships

Software and technology

93 ( 77 ) 16 264 ( 187 ) 77

Total intangible assets $ 2,436 $ ( 1,493 ) $ 943 $ 2,077 $ ( 1,619 ) $ 458

$ 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:

Amortization expense was $ 40 million and $ 70 million for the three and six months ended July 3, 2026, respectively, and $ 32 million and $ 62 million for the three and six months ended July 4, 2025, respectively.

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

Fiscal year ending (in millions)

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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 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").

We are a limited partner in an investment fund.

The investment’s fair value is measured using the net asset value ("NAV") practical expedient and is therefore excluded from the fair value hierarchy.

Estimated fair value is based on our proportionate share of the fund’s NAV.

As of July 3, 2026, and January 2, 2026, the fair value of debt was $ 6.0 billion and $ 4.7 billion, respectively, and the carrying amount was $ 6.0 billion and $ 4.6 billion, respectively (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).

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 April 3,

(in millions) Stated interest rate Effective interest rate July 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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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.

As of July 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").

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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.

In connection with the acquisition of Entrust, we entered into an agreement with Citigroup Global Markets Inc., which provided 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 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").

We have a commercial paper program in which the Company may issue short-term unsecured commercial paper notes ("Commercial Paper Notes") not to exceed $ 1.5 billion.

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 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.

As of July 3, 2026, and January 2, 2026, we did not have any Commercial Paper Notes outstanding.

The Revolving Facility, Commercial Paper Notes, senior unsecured term loan and notes 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.

LEIDOS HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

We were in compliance with all financial covenants as of July 3, 2026.

Note 7–Accumulated Other Comprehensive Income (Loss)

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

Other comprehensive income (loss) 9 — 23 32

Other comprehensive income 13 — 20 33

Taxes ( 1 ) — ( 5 ) ( 6 )

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

Balance at July 3, 2026 $ ( 20 ) $ ( 3 ) $ — $ ( 23 )

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

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

Leidos Holdings, Inc.

LEIDOS HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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.

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

Note 8–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

(in millions) April 3,

2026 April 4,

Three Months Ended Six Months Ended

(in millions) July 3,

Basic weighted average number of shares outstanding 126 129 126 129

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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 0.5 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.

The total outstanding stock options and vesting stock awards that were anti-dilutive were less than 1.0 million for the three and six months ended July 3, 2026, and less than 0.5 million for the three and six months ended July 4, 2025.

During the three and six months ended July 3, 2026, we made open market repurchases of our common stock for an aggregate purchase price of $ 66 million and $ 266 million, respectively.

All repurchased shares were immediately retired.

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

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

In fiscal 2025, we entered into an accelerated share repurchase agreement with a financial institution to repurchase shares of our outstanding common stock.

We paid $ 500 million to the financial institution and received 3.6 million shares.

Note 9–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.

LEIDOS HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The effective tax rate was 21.1 % for the three months ended July 3, 2026, compared to 24.1 % for the three months ended July 4, 2025, and 21.5 % for the six months ended July 3, 2026, compared to 23.9 % for the six months ended July 4, 2025.

The decrease in both periods was primarily due to a decrease in unrecognized tax benefits.

Note 10–Business Segments

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

Leidos Holdings, Inc.

LEIDOS HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Our Homeland business serves five markets:

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

Three Months Ended April 3, 2026

Three Months Ended July 3, 2026

(in millions) Intelligence & Digital Health Homeland Defense Total

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Total operating income $ 514

Three Months Ended July 4, 2025

(in millions) Intelligence & Digital Health Homeland Defense Total

Revenues $ 1,408 $ 1,175 $ 771 $ 899 $ 4,253

374 199 161 204 938

Amortization of intangible assets 7 6 7 12 32

Other segment expense 892 667 539 605 2,703

Segment operating income

$ 135 $ 303 $ 64 $ 78 $ 580

Corporate expense

Total operating income $ 571

Leidos Holdings, Inc.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Three Months Ended April 4, 2025

Six Months Ended July 3, 2026

(in millions) Intelligence & Digital Health Homeland Defense Total

Revenues $ 3,012 $ 2,274 $ 1,834 $ 1,838 $ 8,958

383 206 162 208 959

Direct labor 786 397 400 438 2,021

Amortization of intangible assets 15 7 26 22 70

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Segment operating income $ 288 $ 538 $ 125 $ 146 $ 1,097

Corporate expense 75

Total operating income $ 1,022

Six Months Ended July 4, 2025

(in millions) Intelligence & Digital Health Homeland Defense Total

Revenues $ 2,816 $ 2,363 $ 1,541 $ 1,778 $ 8,498

757 405 323 412 1,897

Amortization of intangible assets 12 12 14 24 62

Other segment expense 1,780 1,355 1,079 1,190 5,404

Segment operating income $ 267 $ 591 $ 125 $ 152 $ 1,135

Corporate expense

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

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.

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.

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.

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Asset information by segment is not a key measure of performance used by the CODM.

Leidos Holdings, Inc.

LEIDOS HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 11–Commitments and Contingencies

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Defense Contract Audit Agency

As of April 3, 2026, active indirect cost audits by the Defense Contract Audit Agency remain open for fiscal 2024 and subsequent fiscal years.

As of July 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 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)

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

Other Government Investigations and Reviews

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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 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.

As of July 3, 2026, we have outstanding letters of credit of $ 111 million, principally related to performance guarantees on contracts and outstanding surety bonds with a notional amount of $ 154 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.

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.

As of July 3, 2026, we invested $ 18 million in an investment fund as a limited partner and have committed to invest an additional $ 82 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:

As of July 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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2031 and thereafter 1

Note 11–Subsequent Events

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