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What changed in Leidos's 10-K — 2025 vs 2026

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Paragraph-level year-over-year comparison of Leidos's 2025 and 2026 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2026 report.

+379 added−387 removedSource: 10-K (2026-02-17) vs 10-K (2025-02-11)

Top changes in Leidos's 2026 10-K

379 paragraphs added · 387 removed · 278 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

67 edited+14 added−41 removed55 unchanged
Biggest changeSome significant laws and regulations that affect us include: u the Federal Acquisition Regulation (“FAR”) and supplements, including the DoD Federal Acquisition Regulation Supplement (“DFARS”), which regulate the formation, administration and performance of U.S. government contracts; u the Truthful Cost or Pricing Data Act, which requires certification and disclosure of cost and pricing data in connection with certain contract negotiations; u the Procurement Integrity Act, which regulates access to competitor bid and proposal information and government source selection information and our ability to provide compensation to certain former government officials; u the Civil False Claims Act, which provides for substantial civil penalties for violations, including for submission of a false or fraudulent claim to the U.S. government for payment or approval; u the False Statements Act, which imposes civil and criminal liability for making false statements to the U.S. government; u the U.S. government Cost Accounting Standards (“CAS”), which imposes accounting requirements that govern our right to reimbursement under certain cost-based U.S. government contracts; and u The International Trade in Arms Regulation (“ITAR”), which governs the manufacture, export, and temporary import of defense articles, the furnishing of defense services, and brokering activities involving items described on the U.S. munitions list.
Biggest changeSome significant laws and regulations that affect us include: u the FAR and supplements, including the DoW Federal Acquisition Regulation Supplement (“DFARS”), which regulate the formation, administration and performance of U.S. government contracts; u the Truthful Cost or Pricing Data Act, which requires certification and disclosure of cost and pricing data in connection with certain contract negotiations; u the Procurement Integrity Act, which regulates access to competitor bid and proposal information and government source selection information and our ability to provide compensation to certain former government officials; u the Civil False Claims Act, which provides for substantial civil penalties for violations, including for submission of a false or fraudulent claim to the U.S. government for payment or approval; u the False Statements Act, which imposes civil and criminal liability for making false statements to the U.S. government; u the U.S. government Cost Accounting Standards (“CAS”), which imposes accounting requirements that govern our right to reimbursement under certain cost-based U.S. government contracts; u The International Trade in Arms Regulation (“ITAR”), which governs the manufacture, export, and temporary import of defense articles, the furnishing of defense services, and brokering activities involving items described on the U.S. munitions list; u the DoW Cybersecurity Maturity Model Certification ("CMMC"), which is phasing-in between November 2025 and November 2028 and requires us to meet or exceed certain specified cybersecurity standards to be eligible for new contract awards with the DoW; and u the recent executive order titled "Prioritizing the Warfighter in Defense Contracting," These regulations impose a broad range of requirements, many of which are unique to government contracting, including various procurement, import and export, security, contract pricing and cost, contract termination, adjustment and audit requirements and potential restrictions on stock buybacks, dividends and executive compensation.
Our consolidated revenues are largely attributable to prime contracts or to subcontracts with other contractors engaged in work for the U.S. government, with the remaining attributable to international customers, including the UK Ministry of Defence and Australian Department of Defence, and customers across a variety of commercial markets.
Our consolidated revenues are largely attributable to prime contracts or to subcontracts with other contractors engaged in work for the U.S. government, with the remaining attributable to international customers, including the UK Ministry of Defence, the Australian Department of Defence, NATO and customers across a variety of commercial markets.
We execute airborne training, intelligence, surveillance, and reconnaissance missions as a service for the DoD, the U.S. Intelligence Community, and military services worldwide. Our key served markets include aircraft integration and operations, sensor and autonomous systems, and Multi-Domain Operation enablers, addressing diverse missions such as target identification, border security, and counter-narcotics operations.
We execute airborne training, intelligence, surveillance, and reconnaissance missions as a service for the DoW, the U.S. Intelligence Community, and military services worldwide. Our key served markets include aircraft integration and operations, sensor and autonomous systems, and Multi-Domain Operation enablers, addressing diverse missions such as target identification, border security, and counter-narcotics operations.
Agencies are explicitly authorized by Congress for specific uses, limitations or restrictions in the use of OTAs. In the case of DoD, the department is authorized to use OTAs to carry out basic, applied or advanced research projects, prototype development projects or follow-on production to initial prototype projects. OTA agreements are generally exempt from federal procurement regulations.
Agencies are explicitly authorized by Congress for specific uses, limitations or restrictions in the use of OTAs. In the case of DoW, the department is authorized to use OTAs to carry out basic, applied or advanced research projects, prototype development projects or follow-on production to initial prototype projects. OTA agreements are generally exempt from federal procurement regulations.
Since our founding 56 years ago, we have applied our expertise in science, research and engineering in rapidly-evolving technologies and markets to solve complex problems of global concern. We use the terms “we,” “us” and “our” to refer collectively to Leidos Holdings, Inc. and its consolidated subsidiaries.
Since our founding 57 years ago, we have applied our expertise in science, research and engineering in rapidly-evolving technologies and markets to solve complex problems of global concern. We use the terms “we,” “us” and “our” to refer collectively to Leidos Holdings, Inc. and its consolidated subsidiaries.
We selectively pursue opportunities to license or transfer our technologies to third parties. In connection with the performance of services and solutions, the U.S. government has certain rights to inventions, data, software codes and related material that we develop under U.S. government-funded contracts and subcontracts.
We selectively pursue opportunities to license or transfer our technologies to third parties. In connection with the performance of services and solutions, the U.S. government has certain rights to inventions, data, software code and related material that we develop under U.S. government-funded contracts and subcontracts.
Annual Report 9 Table of Contents PART I ENVIRONMENTAL MATTERS Our operations are subject to various foreign, federal, state and local environmental protection and health and safety laws and regulations. In addition, our operations may become subject to future laws and regulations, including those related to climate change and environmental sustainability.
Annual Report 7 Table of Contents PART I ENVIRONMENTAL MATTERS Our operations are subject to various foreign, federal, state and local environmental protection and health and safety laws and regulations. In addition, our operations may become subject to future laws and regulations, including those related to climate change and environmental sustainability.
Annual Report 11 Table of Contents PART I Contracting with the U.S. government also subjects us to substantial regulation and unique risks, including the U.S. government’s ability to cancel any contract at any time through a termination for the convenience.
Annual Report 9 Table of Contents PART I Contracting with the U.S. government also subjects us to substantial regulation and unique risks, including the U.S. government’s ability to cancel any contract at any time through a termination for the convenience.
Cost-reimbursement and T&M contracts generally have lower profitability than FFP contracts. 12 Leidos Holdings, Inc. Annual Report Table of Contents PART I SEASONALITY The U.S. government’s fiscal year ends on September 30 of each year.
Cost-reimbursement and T&M contracts generally have lower profitability than FFP contracts. 10 Leidos Holdings, Inc. Annual Report Table of Contents PART I SEASONALITY The U.S. government’s fiscal year ends on September 30 of each year.
We provide services and products to numerous U.S. government agencies and entities, including to the DoD, the U.S. Intelligence Community and the DHS. When working with these and other U.S. government agencies and entities, we must comply with various laws and regulations relating to the formation, administration and performance of contracts.
We provide services and products to numerous U.S. government agencies and entities, including to the DoW, the U.S. Intelligence Community and the DHS. When working with these and other U.S. government agencies and entities, we must comply with various laws and regulations relating to the formation, administration and performance of contracts.
Additionally, we offer tuition reimbursement and certification exam reimbursement to full-time employees at accredited universities. Our Internal Mobility Program has a dedicated team that proactively focuses on the mobilization of our employees. We teach employees how to use the tools and resources available to them and help them gain visibility across the enterprise.
Additionally, we offer tuition reimbursement and certification exam reimbursement to full-time employees at accredited universities. Our Internal Mobility Program has a dedicated team that proactively focuses on the mobilization of our employees. We teach employees how to use the tools and resources available to them and help them gain visibility to hiring managers and recruiters across the enterprise.
GDPR”), which creates similar compliance obligations for companies that process personal data of UK data subjects as are imposed by the GDPR; u the California Consumer Privacy Act, as amended by the California Privacy Rights Act (collectively, “CCPA”), which broadly defines personal information and provides expanded consumer privacy rights to natural persons residing in California, such as affording them the right to access and request deletion of their information and to opt out of certain sharing and sales of personal information; and u the Health Insurance Portability and Accountability Act, as amended by the Health Information Technology for Economic and Clinical Health Act, which establishes privacy and security compliance obligations with respect to the processing of protected health information by covered entities and business associates, necessitating investment in technical and organizational compliance measures and creates the potential for substantial fines for noncompliance.
GDPR”), which creates similar compliance obligations for companies that process personal data of UK data subjects as are imposed by the GDPR; u the California Consumer Privacy Act, as amended by the California Privacy Rights Act (collectively, “CCPA”), which broadly defines personal information and provides expanded consumer privacy rights to natural persons residing in California, such as affording them the right to access and request deletion of their information and to opt out of certain sharing and sales of personal information; u the Health Insurance Portability and Accountability Act, as amended by the Health Information Technology for Economic and Clinical Health Act, which establishes privacy and security compliance obligations with respect to the processing of protected health information by covered entities and business associates, necessitating investment in technical and organizational compliance measures and creates the potential for substantial fines for noncompliance; and u federal data privacy laws pursuant to contract, such as the Privacy Act, when applicable.
Among other things, these laws and regulations: u require certification and disclosure of all cost and pricing data in connection with certain contract negotiations; u define allowable and unallowable costs and otherwise govern our right to reimbursement under various cost-type U.S. government contracts; u require compliance with U.S. government CAS; u require reviews by the Defense Contract Audit Agency (“DCAA”), Defense Contract Management Agency (“DCMA”) and other U.S. government agencies of compliance with government requirements for a contractor’s business systems; u restrict the use and dissemination of and require the protection of unclassified contract-related information and information classified for national security purposes and the export of certain products and technical data; and u require us not to compete for work if an actual or potential organizational conflict of interest, as defined by these laws and regulations, related to such work exists and/or cannot be appropriately mitigated, neutralized or avoided.
Among other things, these laws and regulations: u require certification and disclosure of all cost and pricing data in connection with certain contract negotiations; u define allowable and unallowable costs and otherwise govern our right to reimbursement under various cost-type U.S. government contracts; u require compliance with U.S. government CAS; u require reviews by the Defense Contract Audit Agency (“DCAA”), Defense Contract Management Agency (“DCMA”) and other U.S. government agencies of compliance with government requirements for a contractor’s business systems; u require compliance with federal agency- specific cybersecurity standards in agency acquisition supplements such as DFARS; u restrict the use and dissemination of and require the protection of unclassified contract-related information and information classified for national security purposes and the export of certain products and technical data; u require us not to compete for work if an actual or potential organizational conflict of interest, as defined by these laws and regulations, related to such work exists and/or cannot be appropriately mitigated, neutralized or avoided.
Each year we also attend and sponsor national conferences and local career fairs that target our key market segments and talent. Our military veteran outreach program attracts, retains and supports current veterans, transitioning service members and military spouses. Our college campus outreach engages talent from multiple university sources.
Each year we also attend and sponsor national conferences and local career fairs that target our key market segments and talent. Our military veteran outreach program attracts, retains and supports current veterans, transitioning service members and military spouses. Our college campus outreach engages talent from multiple university sources. 6 Leidos Holdings, Inc.
Our principal competitors currently include the following companies: Accenture Federal Systems, Amentum Services Inc., BAE Systems, Booz Allen Hamilton Inc., CACI International Inc., Deloitte, General Dynamics Corporation, GovCIO, IBM, KBR Inc., L3Harris, Lockheed Martin Corporation, ManTech, Northrop Grumman Corporation, Optum, Parsons Corp, Peraton, Raytheon Technologies Corporation and SAIC.
Our principal competitors currently include the following companies: Accenture Federal Services LLC, Amentum Services Inc., KBR, Inc., BAE Systems, Booz Allen Hamilton Inc., CACI International Inc., Deloitte, General Dynamics Corporation, GovCIO, IBM, KBR Inc., L3Harris Technologies, Inc., Lockheed Martin Corporation, ManTech, Northrop Grumman Corporation, Optum, Parsons Corporation, Peraton Inc., RTX Corporation and SAIC.
These customers have a number of subsidiary agencies that have separate budgets and procurement functions. Our contracts may be with the highest level of these agencies or with the subsidiary agencies of these customers. Leidos Holdings, Inc.
These customers have a number of subsidiary agencies that have separate budgets and procurement functions. Our contracts may be with the highest level of these agencies or with the subsidiary agencies of these customers.
Annual Report Table of Contents PART I TALENT ACQUISITION PRACTICES Leidos is committed to promoting hiring practices that are designed and executed to recruit, hire, train and retain best-in-class talent, including building a deep and broad pipeline of candidates. We leverage college campuses, military veteran resources, industry associations, and other sources to expand our outreach.
TALENT ACQUISITION PRACTICES Leidos is committed to promoting hiring practices that are designed and executed to recruit, hire, train and retain best-in-class talent, including building a deep and broad pipeline of candidates. We leverage college campuses, military veteran resources, industry associations, and other sources to expand our outreach.
Our company-funded research and development expense was $150 million, $128 million and $116 million for fiscal 2024, 2023 and 2022, respectively, which as a percentage of consolidated revenues was 0.9% for fiscal 2024 and 0.8% for both fiscal 2023 and 2022. We charge expenses for research and development activities performed under customer contracts directly to those contracts.
Our company-funded research and development expense was $187 million, $150 million and $128 million for fiscal 2025, 2024 and 2023, respectively, which as a percentage of consolidated revenues was 1.1%, 0.9% and 0.8% for fiscal 2025, 2024 and 2023, respectively. We charge expenses for research and development activities performed under customer contracts directly to those contracts.
We are a leader in the field of occupational health and safety (“OH&S”), and place a strong emphasis on these activities, both internally and on behalf of our customers. Internally, we emphasize direct management responsibility, corporate policies and procedures, OH&S program implementation, employee training and compliance assessments. Our corporate policies and procedures support compliance with OH&S regulations at work locations.
We are a leader in the field of occupational health and safety (“OH&S”) and place a strong emphasis on these activities, both internally and on behalf of our customers. Internally, we emphasize direct management responsibility, comprehensive corporate policies and procedures, OH&S program implementation, employee training and compliance assessments.
We provide resources, development, and experiential learning to enable employees to grow, including a talent marketplace where employees can fill temporary roles to develop skills or provide additional assistance. We provide leaders with the knowledge, skills and resources needed to coach employees and enable employees’ career development.
We provide resources, development, and experiential learning to enable employees to grow, including a talent marketplace where employees can fill temporary roles to develop skills and broaden their network. We provide leaders with the knowledge, skills and resources needed to coach employees and enable employees’ career development.
Army, Navy and Air Force, U.S Space Force, DHS, Defense Information Security Agency, FAA, Transportation Security Administration, CBP, Defense Health Agency, VA, Department of Health and Human Services, NASA, National Science Foundation, DoE, the Environmental Protection Agency and research agencies such as Defense Advanced Research Projects Agency.
Space Force, DHS, Defense Information Systems Agency, FAA, Transportation Security Administration, CBP, Defense Health Agency, VA, Department of Health and Human Services, National Science Foundation, DoE, the Environmental Protection Agency and research agencies such as Defense Advanced Research Projects Agency and the Intelligence Advanced Research Projects Agency.
With a focus on delivering mission-critical solutions, Leidos generated 87% of revenues for the fiscal year ended January 3, 2025, (“fiscal 2024”) from U.S. government contracts, either as a prime contractor or a subcontractor to other contractors engaged in work for the U.S. government. Approximately 8% of our revenues are generated by entities located outside of the United States.
With a focus on delivering mission-critical solutions, Leidos generated 87% of revenues for the fiscal year ended January 2, 2026, (“fiscal 2025”) from U.S. government contracts, either as a prime contractor or a subcontractor to others. Approximately 8% of our revenues are generated by entities located outside of the United States.
Department of Homeland Security (“DHS”), the Federal Aviation Administration (“FAA”), the Department of Veterans Affairs (“VA”), National Aeronautics and Space Administration (“NASA”) and many other U.S. civilian, state and local government agencies, foreign government agencies and commercial businesses.
Department of War (“DoW”), the U.S. Intelligence Community, the U.S. Department of Homeland Security (“DHS”), the Federal Aviation Administration (“FAA”), the Department of Veterans Affairs (“VA”) and many other U.S. civilian, state and local government agencies, foreign government agencies and commercial businesses.
We have a proactive compliance program of employee education, training, auditing and reporting that, through employee awareness and integration into our business operations, supports our commitment to a safe and healthy work environment. Leidos Holdings, Inc.
Our corporate policies and procedures support compliance with OH&S regulations at work locations. We have a proactive compliance program of employee education, training, auditing and reporting that, through employee awareness and integration into our business operations, supports our commitment to a safe and healthy work environment. Leidos Holdings, Inc.
Within the U.S. government, our revenues are diversified across many agencies, including various intelligence agencies, the U.S.
Within the U.S. government, our revenues are diversified across many agencies, including various intelligence agencies, the U.S. Army, Navy and Air Force, U.S.
We provide a variety of leadership development programs, targeted for each level of leader, and numerous resources for leader development. Annually, we host a two-day Leadership Summit for approximately 350 of our most senior leaders to align our growth strategy and transformation initiatives. Through our ongoing talent planning processes, we identify and develop high-potential employees for future roles.
We provide a variety of leadership development offerings, comprised of formal training programs, live leader labs and self-paced e-learning. Annually, we host a two-day Leadership Summit for approximately 350 of our most senior leaders to align our growth strategy and transformation initiatives. Through our ongoing talent planning processes, we identify and develop high-potential employees for future roles.
We have developed unique capabilities in behavioral health management through many decades of experience with a special emphasis on substance abuse services and non-medical counseling. We believe that these capabilities can be expanded into other clinical adjacencies.
We have developed unique capabilities in behavioral health management through many decades of experience with a special emphasis on substance abuse services and non-medical counseling.
These regulations and related risks are described in more detail below under “Risk Factors” in this Annual Report on Form 10-K. COMPANY WEBSITE AND INFORMATION Our corporate headquarters is located at 1750 Presidents Street, Reston, VA 20190 and our telephone number is (571) 526-6000. Our website can be accessed at www.leidos.com. The website contains information about our company and operations.
These regulations and related risks are described in more detail below under “Risk Factors” in this Annual Report on Form 10-K. 12 Leidos Holdings, Inc. Annual Report Table of Contents PART I COMPANY WEBSITE AND INFORMATION Our corporate headquarters is located at 1750 Presidents Street, Reston, VA 20190 and our telephone number is (571) 526-6000.
Our professionals operate a wide range of leading-edge research and development laboratories in the areas of genetics and genomics, proteins and proteomics, advanced biomedical computing and information technology, biopharmaceutical development and manufacturing, nanotechnology characterization and clinical trials management.
Our professionals operate a wide range of leading-edge research and development laboratories in the areas of genetics and genomics, proteins and proteomics, advanced biomedical computing and information technology, biopharmaceutical development and manufacturing, nanotechnology characterization and clinical trials management. Health & Civil represented 30% for both fiscal 2025 and 2024 and 27% of total revenues for fiscal 2023.
We now operate in the following reportable segments: National Security & Digital, Health & Civil, Commercial & International and Defense Systems. We also separately present the unallocated costs associated with corporate functions as Corporate. We provide a wide array of scientific, engineering and technical services and solutions across these reportable segments.
OUR BUSINESS SEGMENTS As of January 2, 2026, our business is aligned into four reportable segments: National Security & Digital, Health & Civil, Commercial & International and Defense Systems. Additionally, we separately present the unallocated costs associated with corporate functions as Corporate. We provide a wide array of scientific, engineering and technical services and solutions across these reportable segments.
During fiscal 2022, we completed the disposition of Aviation & Missile Solutions LLC within our Defense Solutions segment. For further information, see “Note 5—Acquisitions and Divestitures” in Part II of this Annual Report on Form 10-K. KEY CUSTOMERS The majority of our revenues are generated in the United States.
Additionally, during fiscal 2023, we completed an immaterial disposition of a business within our Defense Systems segment. For further information, see “Note 5—Acquisitions and Divestitures” in Part II of this Annual Report on Form 10-K. Leidos Holdings, Inc. Annual Report 5 Table of Contents PART I KEY CUSTOMERS The majority of our revenues are generated in the United States.
Our project portfolio spans large-scale energy initiatives across the United States, serving electric utilities, generation owners, and industrial clients. We support utilities and industrial customers in modernizing power delivery systems for enhanced reliability, implementing energy management strategies, advancing vehicle electrification, transforming digital infrastructure, and optimizing operational efficiency to meet evolving energy demands and market expectations.
We support utilities and industrial customers in modernizing power delivery systems for enhanced reliability, implementing energy management strategies, advancing vehicle electrification, transforming digital infrastructure, and optimizing operational efficiency to meet evolving energy demands and market expectations.
Company councils continue to champion and integrate Leidos values across the enterprise and are comprised of employees across our business areas and functions with oversight and guidance from executive leadership. 8 Leidos Holdings, Inc.
Company councils continue to champion and integrate Leidos values across the enterprise and are comprised of employees across our business areas and functions with oversight and guidance from executive leadership. We continue to invest in our employees through the continuous improvement of our Total Rewards plans and programs.
ACQUISITIONS AND DIVESTITURES During fiscal 2022, we completed the acquisition of Cobham Aviation Services Australia’s Special Mission business. See “Note 5—Acquisitions and Divestitures” in Part II of this Annual Report on Form 10-K for further information. During fiscal 2023, we completed an immaterial disposition of a business within our Defense Solutions segment.
ACQUISITIONS AND DIVESTITURES During fiscal 2025, we completed the acquisition of Savanna Industries, Inc. ("Kudu Dynamics"). See “Note 5—Acquisitions and Divestitures” in Part II of this Annual Report on Form 10-K for further information. During fiscal 2025, we completed an immaterial disposition of a business within our Commercial & International segment.
Leidos empowers and challenges employees to continuously seek, share and apply new knowledge, skills and behaviors. We recognize the value of a high-performing workforce where every member of the team has an opportunity to feel motivated, valued and fulfilled, and have a purposeful and long career at Leidos.
We recognize the value of a high-performing workforce where every member of the team has an opportunity to feel motivated, valued and fulfilled, resulting in a purposeful and long career at Leidos.
With over 30,000 products deployed across more than 120 countries, we lead the aviation screening equipment sector, including people scanners, computed tomography carry-on baggage scanners, checked baggage scanners, and explosive trace detectors. Leidos is also the primary supplier of mobile, non-intrusive inspection systems to CBP and other international customers.
With over 30,000 products deployed across more than 120 countries, including people scanners, computed tomography carry-on baggage scanners, checked baggage scanners, and explosive trace detectors. We are also the primary supplier to CBP and other 4 Leidos Holdings, Inc.
Department of Housing and Urban Development. National Security & Digital represented 44% of total revenues for fiscal 2024, 47% of total revenues for both the fiscal year ended December 29, 2023 (“fiscal 2023”) and the fiscal year ended December 30, 2022 (“fiscal 2022”).
National Security & Digital represented 44% of total revenues for both fiscal 2025 and the fiscal year ended January 3, 2025 (“fiscal 2024”) and 47% of total revenues for the fiscal year ended December 29, 2023 (“fiscal 2023”).
CAREER MOBILITY AND GROWTH We have a strong focus on our employees’ career, flexibility and well-being. We embrace what makes Leidos great by advancing a culture that helps every employee achieve personal and professional success. This is part of our broader Employee Value Proposition to 'break limits' and a commitment to make Leidos an even better place to work.
Annual Report Table of Contents PART I CAREER MOBILITY AND GROWTH We have a strong focus on our employees’ career, flexibility and well-being. We embrace what makes Leidos great by advancing a culture that helps every employee achieve personal and professional success.
We continue to grow and expand our learning and upskilling tools to develop and enhance our employees technical and leadership skills to actively maintain our workplace culture.
Leaders, managers and employees of the Company are required to take annual training to reinforce our corporate values. We continue to grow and expand our learning and upskilling tools to develop and enhance our employees' technical and leadership skills to actively maintain our workplace culture.
We also provide enterprise IT solutions to the VA, National Institutes of Health (“NIH”), DoD and other federal health customers to help operate mission critical infrastructure reliably and at a reasonable cost. u Managed Health Services – We deploy a national footprint of health clinics and health providers to support care delivery services, including medical disability and behavioral health examinations for the VA, as well as serving other independent medical exam markets.
Our core capabilities include: u Managed Health Services – We deploy a national footprint of health clinics and health providers to support care delivery services, including medical disability and behavioral health examinations for the VA, as well as serving other independent medical exam markets.
Through a link on the Investor Relations section of our website, copies of each of our filings with the U.S.
Our website can be accessed at www.leidos.com . The website contains information about our company and operations. Through a link on the Investor Relations section of our website, copies of each of our filings with the U.S.
Annual Report 7 Table of Contents PART I HUMAN CAPITAL EMPLOYEE AND WORKFORCE DEMOGRAPHICS As of January 3, 2025, we employed approximately 48,000 full and part-time employees of whom approximately 42,600 are located in the United States and the remainder of which are located in approximately 50 countries worldwide.
HUMAN CAPITAL As of January 2, 2026, we employed approximately 47,000 full and part-time employees of whom approximately 41,900 are located in the United States and the remainder of which are located in approximately 45 countries worldwide.
Approximately 37% of our employees have degrees in science, technology, engineering or mathematics fields, approximately 24% of our employees have advanced degrees, 52% of our employees possess U.S. security clearances and approximately 19% of our employees are military veterans.
Approximately 38% of our employees have degrees in science, technology, engineering or mathematics fields, approximately 24% of our employees have advanced degrees, 53% of our employees possess U.S. security clearances and approximately 19% of our employees are military veterans. CULTURE AND WORKFORCE Leidos has adopted six values that help define its culture: integrity, inclusion, innovation, agility, collaboration and commitment.
CULTURE AND CORPORATE VALUES Leidos has adopted six values that help define its culture: integrity, inclusion, innovation, agility, collaboration and commitment. These values provide a roadmap for our workplace behavior and help guide our business decisions. They are a key component of our corporate culture and are part of our employees’ annual performance assessments.
These values provide a roadmap for our workplace behavior and help guide our business decisions. They are a key component of our corporate culture and are part of our employees’ performance assessments. Our values are based on our commitment to do the right thing for our customers, our employees and our communities.
We assist managers and recruiters in identifying internal candidates for their programs. We conduct formal employee engagement surveys to listen to employees and develop customized strategies to drive engagement, inclusion and retention across the organization. We invest in our current and future leaders in several ways.
We have career advisors that meet one-on-one with employees in key talent segments to provide career coaching and mobility counseling. We conduct formal employee engagement surveys to listen to employees and develop customized strategies to drive engagement, inclusion and retention across the organization. We invest in our current and future leaders in several ways.
We model, simulate, and analyze cyber and electro-magnetic threats, develop threat emulators for range testing, and develop cyber-physical solutions. CORPORATE Corporate includes the operations of various corporate activities, certain expense items that are not reimbursed by our U.S. government customers and certain other expense items excluded from a reportable segment’s performance.
Defense Systems represented 13% of total revenues for fiscal 2025, and 12% of total revenues for both fiscal 2024 and 2023. CORPORATE Corporate includes the operations of various corporate activities, certain expense items that are not reimbursed by our U.S. government customers and certain other expense items excluded from a reportable segment’s performance.
Our policies, procedures, training and communications form a comprehensive program that promotes a culture of integrity as a foundation for employee conduct. For the seventh consecutive year, the Ethisphere Institute named Leidos one of the World’s Most Ethical Companies in 2024. Our approach to workplace culture and employee development focuses on education and best practices for leaders and employees.
For the eighth consecutive year, the Ethisphere Institute named Leidos one of the World’s Most Ethical Companies in 2025. Our approach to workplace culture and employee development focuses on education and best practices for leaders and employees. Leidos has programs designed to promote our corporate values throughout the enterprise and with our senior leadership.
Annual Report 5 Table of Contents PART I u Global Security Products and Services – Leidos is a global leader in fully integrated security detection solutions, enhancing the safety of screening and checkpoints for aviation, ports, borders, and critical infrastructure worldwide.
Our expertise spans power grid engineering and design, grid modernization, utility planning and consulting, energy management and efficiency, and technology-driven innovation, including software and application development. u Global Security Products and Services – Leidos is a global leader in fully integrated security detection solutions, enhancing the safety of screening and checkpoints for aviation, ports, borders, and critical infrastructure worldwide.
We deliver global-scale cryptographic management solutions to protect our customers’ most critical information and assets. u Intelligence Analysis, Mission Support, and Global Logistics Services – We provide intelligence analysis, operational support, logistics operations, security, linguistics, force production, biometrics, Chemical, Biological, Radiological, Nuclear, and Explosives, energetics, and training. In addition, we deliver tailored IT services and solutions to our customers.
Leidos Holdings, Inc. Annual Report 3 Table of Contents PART I u Intelligence Analysis, Mission Support, and Global Logistics Services – We provide intelligence analysis, operational support, logistics operations, security, linguistics, force production, biometrics, Chemical, Biological, Radiological, Nuclear, and Explosives, energetics, training and other services to Intelligence Community customers.
Our marine engineering involves a wide range of activities, beginning with concept and feasibility design and continues through land-based test sites, cyber and shock hardening of key components, detailed design, construction support, life-cycle support and into ship-alt design for service-life extensions. u Aerospace Systems – We provide expertise in the design, manufacturing, and integration of space-based electro-optic infrared system, multi/hyperspectral, electronic warfare and signals intelligence, and communications payloads.
Our naval architecture and marine engineering services span an entire ship’s lifetime, from early-stage concept designs through service life extensions. u Aerospace Systems – We provide expertise in the design, manufacturing, and integration of space-based electro-optic infrared systems, multi/hyperspectral, electronic warfare and signals intelligence, and communications payloads.
Our values are based on our commitment to do the right thing for our customers, our employees and our communities. Our values are demonstrated by our employees as they help our customers execute important missions in the world’s most complex markets.
Our values are demonstrated by our employees as they help our customers execute important missions in the world’s most complex markets. Our policies, procedures, training and communications form a comprehensive program that promotes a culture of integrity as a foundation for employee conduct.
We continue to enhance our surface and subsurface autonomous and unmanned technologies to help make maritime operations safer and more efficient for government and industry by providing innovative platforms, software solutions for vessel control and autonomous behaviors, leading sensor systems, signal processing, communications hardware and software to support these vital missions.
We provide innovative platforms, software solutions for vessel control and common core autonomous behaviors, enhanced sensor systems, advanced signal processing, secure communications hardware and software to fully support these vital missions.
NATIONAL SECURITY & DIGITAL Our National Security & Digital business provides leading-edge and technologically advanced services, solutions and products, as well as mission software capabilities for defense and intelligence customers in the areas of cyber, logistics, security operations and decision analytics. We also deliver IT operations and digital transformation programs across all U.S. federal government customers.
NATIONAL SECURITY & DIGITAL Our National Security & Digital business provides leading-edge and technologically advanced services, solutions and products across substantially all U.S. federal government customers. Our advanced capabilities allow us to provide technology-enabled services, software capabilities and IT modernization, including: u Digital Modernization and Transformation – We provide worldwide digital support for our nation’s largest and most critical infrastructure.
Our capabilities support offerings including cybersecurity, data analytics, and operations and logistics. Our cybersecurity solutions help detect and manage the most sophisticated cyber threats. u Digital Transformation – We deliver secure, user-centric IT solutions in cloud computing, mobility, application modernization, DevOps, data center and network modernization, asset management, help desk operations and digital workplace enablement.
We design, develop, implement, protect and maintain IT environments to provide stability, security and flexibility to mission needs. We also deliver secure, user-centric IT solutions in cloud computing, mobility, application modernization, data center and network modernization, asset management, support desk operations and digital workplace enablement.
Health & Civil represented 30% of total revenues for fiscal 2024 and 27% of total revenues for both fiscal 2023 and fiscal 2022. u Transportation Solutions – Leidos is a trusted systems developer, service provider and integrator serving Air Navigation Service Providers around the world, including the FAA.
Our managed health services activities leverage our IT and mission enablement capabilities, which underpin solutions we offer to our customers across all of our served markets. u Transportation Solutions – Leidos is a trusted systems developer, service provider and integrator for air navigation service providers around the world, including the FAA.
Our Ports & Borders solutions secure the flow of travel and trade by effectively detecting and mitigating threats across cargo, vehicles, and individuals. Our digital solution features a secure and scalable open-architecture platform that transforms airport security by integrating disparate devices and technologies into a unified management system.
Our digital solutions feature a secure and scalable open-architecture platform that transforms airport security by integrating disparate devices and technologies into a unified management system. u International – Leidos delivers a wide range of mission-focused services across multiple domains to address critical threats and provide innovative solutions to government agencies in the UK and Australia.
Defense Systems provides services in the air, land, sea, space and cyberspace environments. The Defense Systems business is dedicated to delivering cost-effective solutions in the space, airborne, land, maritime and cyber domains and supporting critical missions worldwide.
This business is dedicated to delivering cost-effective solutions and services in the space, airborne, land and maritime domains and supporting critical missions worldwide. u Maritime Systems – On and under the sea, we offer a wide range of innovative capabilities. We continue to enhance our surface and subsurface autonomous and unmanned technologies to make maritime operations safer and more efficient.
The U.S. government may revise its procurement practices or adopt new contract rules and regulations at any time. In order to help ensure compliance with these complex laws and regulations, all of our employees are required to complete ethics and other compliance trainings relevant to their position. Leidos Holdings, Inc.
The U.S. government may revise its procurement practices or adopt new contract rules and regulations at any time.
We also provide key air traffic control systems around the world, including New Zealand and South Korea. 4 Leidos Holdings, Inc. Annual Report Table of Contents PART I u Health Mission Software – Leidos employs holistic-systems used for fielding applied technology solutions across the entire continuum of healthcare.
We provide air traffic control systems that help manage the world’s most complex airspace. We also deliver crucial automation and capability development services to customers responsible for ensuring the safety and efficiency of air travel. u Health Mission Software – Leidos employs holistic-systems used for fielding applied technology solutions across the entire continuum of healthcare.
At the National Energy Technology Laboratory, we actively conduct and support fundamental and applied research efforts, including providing product and logistical support comprising strategic business development, technology transfer and agreements and education and outreach support for the effective and efficient execution of research programs. u Life Sciences Research & Development – We provide life science research and development support to the NIH, Center for Disease Control, Army Medical Research community and commercial biotech companies.
Our offerings range from integrating software for the electronic healthcare record vendor and dental record vendors to integrating picture archiving and communications software and more. u Energy and Environment – We support the critical missions of the Department of Energy (“DoE”), National Nuclear Security Administration, and National Science Foundation, providing infrastructure management and operation, logistical operations, information technology support, applied research efforts, as well as education and outreach support. u Life Sciences Research & Development – We provide life science research and development support to the NIH, Center for Disease Control, Army Medical Research community and commercial biotech companies.
Annual Report 13 Table of Contents PART I DATA PRIVACY AND SECURITY LAWS Some of our operations and service offerings involve access to and use by us of personal information and/or protected health information.
In order to help ensure compliance with these complex laws and regulations, all of our employees are required to complete ethics and other compliance trainings relevant to their position. DATA PRIVACY, CYBERSECURITY AND ARTIFICIAL INTELLIGENCE LAWS Some of our operations and service offerings involve access to and use by us of personal information and/or protected health information.
We deliver a single, common electronic health record to both DoD and VA hospitals and treatment facilities worldwide. Our responsibilities range from integrating software for the electronic healthcare record vendor and dental record vendors to integrating picture archiving and communications software and more. We support cybersecurity across all integrated systems.
We deliver a single, common electronic health record to both DoW and VA hospitals and treatment facilities worldwide.
Department of Defense, Army, Navy, Air Force, Space Force, Marine Corps, United States Special Operations Command, NASA, Defense Advanced Research Projects Agency, intelligence agencies, and international customers. We are heavily engaged in the top defense Research Development Test and Evaluation priorities that are driven by critical evolving threat-driven needs.
We are heavily engaged in the top defense Research Development Test and Evaluation priorities that are driven by evolving global threats.
We also conduct aerial border surveillance and search-and-rescue operations, covering Australia’s exclusive economic zone and search-and-rescue region. DEFENSE SYSTEMS Defense Systems addresses threats facing our nation by rapidly prototyping and delivering advanced hardware, software, and integrated systems solutions for the U.S.
DEFENSE SYSTEMS Defense Systems addresses threats facing our nation by rapidly prototyping and delivering advanced hardware, software, and integrated systems solutions for the DoW, Army, Navy, Air Force, Space Force, Marine Corps, United States Special Operations Command, Defense Advanced Research Projects Agency and intelligence agencies.
Leidos is an industry and technology leader serving government and commercial customers with smarter, more efficient digital and mission innovations.
Leidos is an industry and technology leader serving government and commercial customers with smarter, more efficient digital and mission innovations. Headquartered in Reston, Virginia, with 47,000, global employees, we pursue strategic growth across five pillars: space and maritime; energy infrastructure; digital modernization and cyber; mission software; and managed health services. Our customers include the U.S.
Commercial & International represented 14% of total revenues for both fiscal 2024 and 2023, and 13% of total revenues for fiscal 2022. u Energy Infrastructure – Leidos partners with utilities seeking reliable energy modernization solutions, demonstrated by our strong relationships and collaboration with over 75 investor-owned utilities.
Our core areas of expertise include Digital Modernization, Mission Software, Logistics, and Airborne Solutions. Commercial & International represented 13% of total revenues for fiscal 2025, and 14% of total revenues for both fiscal 2024 and 2023.
The system employs advanced threat assessment along with kinetic and non-kinetic effectors that is designed to provide air defense against unmanned aerial vehicles, particularly in dynamic operational environments. We design and manufacture persistent surveillance radar systems, advanced sensors, and radio frequency seekers, including the associated advanced algorithms that accompany them.
We design and manufacture other persistent surveillance radar systems, advanced sensors, and radio frequency seekers, including the associated advanced algorithms that accompany them. We use this expertise to provide military sensor and electronic system R&D services for our customers. u Airborne Systems – Leidos develops and integrates mission-enhancing airborne solutions.
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Headquartered in Reston, Virginia, with 48,000, global employees, we bring domain-specific capabilities, technologies and insights to customers in each of these markets by leveraging seven technical core capabilities: trusted mission artificial intelligence, cyber operations, digital modernization, mission software systems, integrated systems, mission operations, and rapid prototyping and manufacturing.
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We accelerate enterprise transformation using customizable roadmaps and repeatable processes in both classified and unclassified environments for our customers. u Mission Software – We deliver trusted national security software leveraging artificial intelligence tools for defense, intelligence, and homeland security customers. u Multi-Domain Solutions – We provide services by using artificial intelligence and machine learning to coordinate sea, ground, air and space rapidly and securely to provide warfighters the right information at the right time for mission advantage. u Cyber Operations – We offer full-spectrum cyber solutions to include offensive, defensive, and physical cyber operations delivering global-scale cryptographic management solutions to protect our customers’ most critical information and assets.
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Applying our technically-advanced solutions to help solve our customers’ most difficult problems has enabled us to build strong relationships with key customers. Our customers include the U.S. Department of Defense (“DoD”), the U.S. Intelligence Community, the U.S.
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Customs & Border Protection ("CBP"), as well as airports and ports and borders authorities. u Energy Infrastructure – Leidos partners with utilities seeking reliable energy modernization solutions. Our project portfolio spans large-scale energy initiatives across the United States, serving electric utilities, generation owners, and industrial clients.
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OUR BUSINESS SEGMENTS Beginning in fiscal 2024, we realigned our business and operate in four reportable segments that are focused on specific, defined capability sets we bring to our customers. As a result of this change, prior year segment results and disclosures have been recast to reflect the current reportable segment structure.
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Annual Report Table of Contents PART I international customers of mobile, non-intrusive ports and borders inspection systems that secure the flow of travel and trade by effectively detecting and mitigating threats across cargo, vehicles, and individuals.
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Our advanced capabilities include the delivery of technology-enabled services, mission software capabilities and IT modernization services. Our capabilities allow us to provide innovative technology solutions in software development, engineering & design, modeling & simulation, analytics, cyber security, intelligence analysis, linguistics and mission operations. u Mission Software – We deliver trusted national security software for defense, intelligence, and homeland security customers.
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We also manufacture structures and thermal protection systems for hypersonic boost-glide missiles, and we provide testing services for hypersonic vehicles. u Land Systems – We develop Integrated Air and Missile Defense systems, including the US Army Enduring Indirect Fire Protection Capability, Army Long Range Persistent Surveillance radar capability and AirShield systems.
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Our mission software aims to provide the decision advantage for protecting the homeland, securing critical infrastructure, enabling logistics and conducting multi-domain operations. The core of this capability offering is our Secure Development Operations approach that is designed to ensure our code is secure and assured from the start, enabling our mission partners to focus on execution. Leidos Holdings, Inc.
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Our Total Rewards philosophy is built on providing competitive, market-based compensation; comprehensive and flexible benefits; and programs that support employees’ overall well-being, financial security, and career growth. These offerings are designed to attract, retain, and motivate a highly skilled workforce.
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Annual Report 3 Table of Contents PART I u Multi-Domain Solutions – We provide services by using artificial intelligence and machine learning to coordinate sea, ground, air and space rapidly and securely, helping our warfighters have the right information at the right time to take action with decision advantage.
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This is part of our broader Employee Value Proposition to 'break limits' and a commitment to make Leidos an even better place to work. Leidos empowers and challenges employees to continuously seek, share and apply new knowledge, skills and behaviors.
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We apply an open architecture approach to digitally connect the joint force across air, land, sea, cyber and space domains in support of the DoD’s multi-domain operations through innovative solutions, essential services and enriched data management tools facilitating critical decision making. u Cyber Operations – We offer full-spectrum cyber solutions to include offensive, defensive, and physical cyber operations.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAnnual Report 15 Table of Contents PART I u A failure to attract, retain, and develop talent with critical skills, including our leadership team, would adversely affect our ability to execute our strategy and may disrupt our operations. u We may not realize the full amounts reflected in our backlog as revenues, which could adversely affect our expected future revenues and growth prospects. u Our earnings and profitability may vary based on the mix of our contracts and may be adversely affected by our failure to estimate and manage costs, time and resources accurately. u We use estimates in recognizing revenues, and if we make changes to estimates used in recognizing revenues, our profitability may be adversely affected. u Cybersecurity breaches and other information security incidents could negatively impact our business and financial results, impair our ability to effectively provide our services to our customers and cause harm to our reputation or competitive position. u Internal system or service failures, or failures in the systems or services of third parties on which we rely, could disrupt our business and impair our ability to effectively provide our services and products to our customers, which could damage our reputation and adversely affect our revenues and profitability. u Customer systems failures could damage our reputation and adversely affect our revenues and profitability. u Our success depends, in part, on our ability to work with complex and rapidly changing technologies to meet the needs of our customers. u We utilize artificial intelligence, which could expose us to liability or adversely affect our business, especially if we are unable to compete effectively with others in adopting artificial intelligence. u We have classified contracts with the U.S. government, which may limit investor insight into portions of our business. u We have made and continue to make acquisitions, investments, joint ventures and divestitures that involve numerous risks and uncertainties. u Goodwill represents a significant asset on our balance sheet and any impairment of this asset could negatively impact our results of operations, and shareholders’ equity. u We depend on our teaming arrangements and relationships with other contractors and subcontractors.
Biggest changeAnnual Report 13 Table of Contents PART I u Our failure to comply with various complex procurement rules and regulations could result in us being liable for penalties, including termination of our U.S. government contracts, disqualification from bidding on future U.S. government contracts and suspension or debarment from U.S. government contracting. u The U.S. government may adopt new contract rules and regulations or revise its procurement practices in a manner adverse to us at any time. u Application of the U.S. government's organizational conflict of interest (OCI) rules could limit our ability to successfully compete for new contracts or task orders, which would adversely affect our results of operations. u As a U.S. government contractor, our partners and we are subject to reviews, audits and cost adjustments by the U.S. government, which could adversely affect our profitability, cash position or growth prospects if resolved unfavorably to us. u Our business is subject to governmental review and investigation, which could adversely affect our financial position, operating results and growth prospects. u Investigations, audits, claims, disputes, enforcement actions, litigation, arbitration or other legal proceedings could require us to pay potentially large damage awards or penalties and could be costly to defend, which would adversely affect our cash balances and profitability, and could damage our reputation. u Our business and operations expose us to numerous legal and regulatory requirements, and any violation of these requirements could harm our business. u Our business is subject to complex and evolving laws and regulations regarding data privacy and security which could subject us to investigations, claims or monetary penalties against us, require us to change our business practices or otherwise adversely affect our revenues and profitability. u Misconduct of employees, subcontractors, agents, suppliers, business partners or joint ventures and others working on our behalf could cause us to lose existing contracts or customers and adversely affect our ability to obtain new contracts and could have a material adverse impact on our business, reputation and future results. u A failure to attract, retain, and develop talent with critical skills, including our leadership team, would adversely affect our ability to execute our strategy and may disrupt our operations. u We may not realize the full amounts reflected in our backlog as revenues, which could adversely affect our expected future revenues and growth prospects. u Our earnings and profitability may vary based on the mix of our contracts and may be adversely affected by our failure to estimate and manage costs, time and resources accurately. u We use estimates in recognizing revenues, and if we make changes to estimates used in recognizing revenues, our profitability may be adversely affected. u Cybersecurity breaches and other information security incidents could negatively impact our business and financial results, impair our ability to effectively provide our services to our customers and cause harm to our reputation or competitive position. u Internal system or service failures, or failures in the systems or services of third parties on which we rely, could disrupt our business and impair our ability to effectively provide our services and products to our customers, which could damage our reputation and adversely affect our revenues and profitability. u Customer systems failures could damage our reputation and adversely affect our revenues and profitability. u Our success depends, in part, on our ability to work with complex and rapidly changing technologies to meet the needs of our customers. u We utilize artificial intelligence, which could expose us to liability or adversely affect our business, especially if we are unable to compete effectively with others in adopting artificial intelligence. u We have classified contracts with the U.S. government, which may limit investor insight into portions of our business. u We have made and continue to make acquisitions, investments, joint ventures and divestitures that involve numerous risks and uncertainties. u Joint ventures, other strategic alliances, and strategic business transactions may not achieve intended results.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Report, “Note 3—Summary of Significant Accounting Policies” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K, and “Note 3—Summary of Significant Accounting Policies” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K.
In addition, trade secrets are generally difficult to protect, and some courts inside and outside the United States may be less willing or unwilling to protect trade secrets. We may be unable to detect unauthorized use of our intellectual property or otherwise take appropriate steps to enforce our rights.
In addition, trade secrets are generally difficult to protect or enforce, and some courts inside and outside the United States may be less willing or unwilling to protect or enforce trade secrets. We may be unable to detect unauthorized use of our intellectual property or otherwise take appropriate steps to enforce our rights.
We may initiate claims or litigation against third parties for infringement, misappropriation, or other violations of our intellectual property or other proprietary rights or to establish the validity of our intellectual property or other proprietary rights, but outcomes in any such litigation can be difficult to predict and could be time-consuming, result in significant expense to us and divert the efforts of our technical and management personnel.
We may initiate claims or litigation against third parties for infringement, misappropriation, or other violations of our intellectual property or other proprietary rights or to establish the validity of our intellectual property or other proprietary rights, but outcomes in any such claims or litigation can be difficult to predict and could be time-consuming, result in significant expense to us and divert the efforts of our technical and management personnel.
In years when the U.S. government does not complete its appropriations before the beginning of the new fiscal year on October 1, government operations are typically funded pursuant to a “continuing resolution,” which allows federal government agencies to operate at spending levels approved in the previous appropriations cycle but does not authorize new spending initiatives.
In years when the U.S. government does not complete its appropriations before the beginning of the new fiscal year on October 1, government operations are typically funded pursuant to a “continuing resolution,” which allows federal government agencies to operate at spending levels approved in the previous appropriations cycle but does not authorize new spending initiatives. To the extent the U.S.
In the U.S., numerous federal, state, and local data privacy and security laws and regulations govern the collection, sharing, use, retention, disclosure, security, storage, transfer, and other processing of personal information, including protected health information. Numerous other states also are enacting or considering, comprehensive state-level data privacy and security laws.
In the U.S., numerous federal, state, and local data privacy and security laws and regulations govern the collection, sharing, use, retention, disclosure, security, storage, sale, transfer, and other processing of personal information, including protected health information. Numerous other states also are enacting or considering, comprehensive state-level data privacy and security laws. The U.S.
LEGAL AND REGULATORY RISKS Our failure to comply with various complex procurement rules and regulations could result in our being liable for penalties, including termination of our U.S. government contracts, disqualification from bidding on future U.S. government contracts and suspension or debarment from U.S. government contracting.
LEGAL AND REGULATORY RISKS Our failure to comply with various complex procurement rules and regulations could result in us being liable for penalties, including termination of our U.S. government contracts, disqualification from bidding on future U.S. government contracts and suspension or debarment from U.S. government contracting.
Adverse changes in fiscal and economic conditions, such as those related to federal budget cuts and the nation’s debt ceiling, deteriorating market conditions for companies in our industry and unfavorable changes in discount rates could result in an impairment of goodwill.
Adverse changes in fiscal and economic conditions, such as those related to federal budget cuts and the nation’s debt ceiling, deteriorating market conditions for companies in our industry and unfavorable changes in discount rates could also result in an impairment of goodwill.
Besides the expense and time to defend such claims and the cost of any large indemnity payments, any dispute with a customer with respect to such obligations could also have adverse effects on our relationship with that customer and other existing and new customers, requiring us to pay substantial royalty or licensing fees, and divert management’s attention, any of which could harm our business, financial condition and results of operations.
Besides the expense and time to defend such claims and the cost of any large indemnity payments, any dispute with a customer with respect to such obligations could also have adverse effects on our relationship with that customer and other existing and new customers, require us to pay substantial royalty or licensing fees, and divert management’s attention, any of which could harm our business, financial condition and results of operations.
For a variety of reasons, the global economy in which we operate has faced, and may continue to face, heightened inflationary pressure, impacting the cost of doing business in both supply and labor markets. Although inflation has moderated somewhat in 2024, these inflationary pressures have been and could continue to be exacerbated by geopolitical turmoil and economic policy actions.
For a variety of reasons, the global economy in which we operate has faced, and may continue to face, heightened inflationary pressure, impacting the cost of doing business in both supply and labor markets. Although inflation has moderated somewhat in 2025, these inflationary pressures have been and could continue to be exacerbated by geopolitical turmoil and economic policy actions.
Acquisitions, investments and joint ventures pose many other risks that could adversely affect our reputation, operations, or financial results, including that: u we may not be able to identify, compete effectively for or complete suitable acquisitions and investments at prices we consider attractive; u we may not be able to accurately estimate the financial effect of acquisitions and investments on our business or realize anticipated synergies, business growth, or profitability and may be unable to recover investments in any such acquisitions and investments; u we may not be able to manage the integration process for acquisitions successfully, and the integration process may divert management time and focus from operating our business, including as a result of incompatible accounting, information management, or other control systems; u acquired technologies, capabilities, products, and service offerings, particularly those that are still in development when acquired, may not perform as expected, may have defects or may not be integrated into our business as expected; u we may have trouble retaining key employees and customers of an acquired business; u we may need to implement or improve controls, procedures and policies at a business that prior to the acquisition may have lacked sufficiently effective controls, procedures and policies, including those relating to financial reporting, revenue recognition or other financial or control deficiencies; u we may assume legal or regulatory risks, particularly with respect to smaller businesses that have immature business processes and compliance programs, or may be required to comply with additional laws and regulations or to engage in remediation efforts to cause the acquired company to comply with applicable laws and regulations, or result in liabilities resulting from the acquired company’s failure to comply with applicable laws or regulations; u we may face litigation or material liabilities that were not identified or were underestimated as part of our due diligence or for which we are unable to receive a purchase price adjustment or reimbursement through indemnification, including intellectual property claims and disputes or claims from terminated employees, customers, former stockholders or other third parties, or there may be other unanticipated write-offs or charges; u we may be required to spend a significant amount of cash or to incur debt, resulting in limitations on other potential uses for cash, increased fixed payment obligations or covenants or other restrictions on us, or issue shares of our common stock or convertible debt, resulting in dilution of ownership; u we may not be able to influence the operations of our joint ventures effectively, or we may be exposed to certain liabilities if our joint venture partners do not fulfill their obligations; and u if our acquisitions, investments, or joint ventures fail, perform poorly, or their value is otherwise impaired for any reason, including contractions in credit markets and global economic conditions, our business and financial results could be adversely affected.
Annual Report Table of Contents PART I u we may not be able to identify, compete effectively for or complete suitable acquisitions and investments at prices we consider attractive; u we may not be able to accurately estimate the financial effect of acquisitions and investments on our business or realize anticipated synergies, business growth, or profitability and may be unable to recover investments in any such acquisitions and investments; u we may not be able to manage the integration process for acquisitions successfully, and the integration process may divert management time and focus from operating our business, including as a result of incompatible accounting, information management, or other control systems; u acquired technologies, capabilities, products, and service offerings, particularly those that are still in development when acquired, may not perform as expected, may have defects or may not be integrated into our business as expected; u we may have trouble retaining key employees and customers of an acquired business; u we may need to implement or improve controls, procedures and policies at a business that prior to the acquisition may have lacked sufficiently effective controls, procedures and policies, including those relating to financial reporting, revenue recognition or other financial or control deficiencies; u we may assume legal or regulatory risks, particularly with respect to smaller businesses that have immature business processes and compliance programs, or may be required to comply with additional laws and regulations or to engage in remediation efforts to cause the acquired company to comply with applicable laws and regulations, or result in liabilities resulting from the acquired company’s failure to comply with applicable laws or regulations; u we may face litigation or material liabilities that were not identified or were underestimated as part of our due diligence or for which we are unable to receive a purchase price adjustment or reimbursement through indemnification, including intellectual property claims and disputes or claims from terminated employees, customers, former stockholders or other third parties, or there may be other unanticipated write-offs or charges; u we may be required to spend a significant amount of cash or to incur debt, resulting in limitations on other potential uses for cash, increased fixed payment obligations or covenants or other restrictions on us, or issue shares of our common stock or convertible debt, resulting in dilution of ownership; u we may not be able to influence the operations of our joint ventures effectively, or we may be exposed to certain liabilities if our joint venture partners do not fulfill their obligations; and u if our acquisitions, investments, or joint ventures fail, perform poorly, or their value is otherwise impaired for any reason, including contractions in credit markets and global economic conditions, our business and financial results could be adversely affected.
Such claims could also subject us to injunctions and significant liability for damages, potentially including treble damages if we are found to have willfully infringed a third party’s intellectual property rights. In addition, our contracts generally indemnify our customers for third-party claims for intellectual property infringement by our services and products.
Such claims could also subject us to injunctions and significant liability for damages, potentially including treble damages if we are found to have willfully infringed a third party’s intellectual property rights. In addition, our contracts typically indemnify our customers for third-party claims for intellectual property infringement by our services and products.
To varying degrees, each of our contract types involves some risk of underestimating the costs and resources necessary to fulfill the contract. While FFP contracts allow us to benefit from cost savings, these contracts also increase our exposure to the risk of cost overruns. Revenues from FFP contracts represented approximately 43% of our total revenues for fiscal 2024.
To varying degrees, each of our contract types involves some risk of underestimating the costs and resources necessary to fulfill the contract. While FFP contracts allow us to benefit from cost savings, these contracts also increase our exposure to the risk of cost overruns. Revenues from FFP contracts represented approximately 43% of our total revenues for fiscal 2025.
Although our employees and contractors are subject to confidentiality obligations and use restrictions, this protection may be inadequate to deter or prevent them from infringing, misappropriating, or otherwise violating our confidential information, technology, or other intellectual property or proprietary rights, and can be difficult to enforce.
Although our employees and contractors are subject to confidentiality obligations and use restrictions, this protection may be inadequate to deter or prevent them or other third parties from infringing, misappropriating, or otherwise violating our confidential information, technology, or other intellectual property or proprietary rights, and can be difficult to enforce.
Third parties may also, from time to time, claim that we have infringed the intellectual property rights of others, resulting in claims against our customers or us, or we may face allegations that we or our service providers, suppliers, subcontractors, or customers have violated the intellectual property rights of others.
Third parties may also, from time to time, claim that we have infringed or misappropriated their intellectual property rights or the intellectual property rights of others, resulting in claims against our customers or us, or we may face allegations that we or our service providers, suppliers, subcontractors, or customers have violated the intellectual property rights of others.
U.S. government contractors (including their subcontractors and others with whom they do business) operate in a highly regulated environment and are routinely audited and reviewed by the U.S. government and its agencies, including the DCAA, DCMA, the DoD Inspector General, and others.
U.S. government contractors (including their subcontractors and others with whom they do business) operate in a highly regulated environment and are routinely audited and reviewed by the U.S. government and its agencies, including the DCAA, DCMA, the DoW Inspector General, and others.
If we are not able to maintain these relationships, or if these parties fail to satisfy their obligations to us or the customer, our revenues, profitability and growth prospects could be adversely affected. u We could incur significant liabilities and suffer negative publicity if our inspection or detection systems fail to detect bombs, explosives, weapons, contraband or other threats. u We face risks associated with our international business. u Changes in tax laws and regulations or exposure to additional tax liabilities could adversely affect our financial results. 16 Leidos Holdings, Inc.
If we are not able to maintain these relationships, or if these parties fail to satisfy their obligations to us or the customer, our revenues, profitability and growth prospects could be adversely affected. u We could incur significant liabilities and suffer negative publicity if our inspection or detection systems fail to detect bombs, explosives, weapons, contraband or other threats. u We face risks associated with our international business. u Changes in tax laws and regulations or exposure to additional tax liabilities could adversely affect our financial results.
A decline in the U.S. government budget, changes in spending or budgetary priorities or delays in contract awards may significantly and adversely affect our future revenues and limit our growth prospects. Revenues under contracts with the DoD and U.S.
A decline in the U.S. government budget, changes in spending or budgetary priorities or delays in contract awards may significantly and adversely affect our future revenues and limit our growth prospects. Revenues under contracts with the DoW and U.S.
Any significant claim may have an adverse effect on our industry and market reputation, leading to a substantial decrease in demand for our products and services and reduced revenues, making it more difficult for us to compete effectively, and could affect the cost and availability of insurance coverage at adequate levels in the future. Leidos Holdings, Inc.
Any significant claim may have an adverse effect on our industry and market reputation, leading to a substantial decrease in demand for our products and services and reduced revenues, making it more difficult for us to compete effectively, and could affect the cost and availability of insurance coverage at adequate levels in the future.
The governments of other jurisdictions in which we operate, such as the European Union and Canada, may also implement sanctions or other restrictive measures. These potential sanctions and export controls, as well as any responses from Russia, could adversely affect us and/or our supply chain, business partners, or customers.
The governments of other jurisdictions in which we operate, such as the European Union and Canada, may also implement sanctions or other restrictive measures. These potential sanctions and export controls, as well as any responses from Russia, could adversely affect us and/or our supply chain, business partners, or customers. Leidos Holdings, Inc.
In addition, changes to the federal or DoD acquisition system and contracting models could affect whether and how we pursue certain opportunities and the terms under which we are able to do so.
In addition, changes to the federal or DoW acquisition system and contracting models could affect whether and how we pursue certain opportunities and the terms under which we are able to do so.
We might also face the loss of current and future customer contracts, revocation of privileges, and other sanctions such as suspension or debarment from contracting with federal, state, or local government agencies. Any of these outcomes would adversely affect our business, reputation, and future results. Leidos Holdings, Inc.
We might also face the loss of current and future customer contracts, revocation of privileges, and other sanctions such as suspension or debarment from contracting with federal, state, or local government agencies. Any of these outcomes would adversely affect our business, reputation, and future results.
We utilize artificial intelligence, which could expose us to liability or adversely affect our business, especially if we are unable to compete effectively with others in adopting artificial intelligence.
We utilize artificial intelligence, which could expose us to liability or adversely affect our business, especially if we are unable to compete effectively with others in adopting artificial intelligence. We utilize AI in connection with our business.
Further, cybersecurity risks may be heightened as a result of ongoing global conflicts such as the military conflict between Russia and Ukraine and the related sanctions imposed by the United States and other countries, or the ongoing conflict in the Middle East, which continues to expand. Leidos Holdings, Inc.
Further, cybersecurity risks may be heightened as a result of ongoing global conflicts such as the military conflict between Russia and Ukraine and the related sanctions imposed by the United States and other countries, or the ongoing conflict in the Middle East, which continues to expand.
Litigation and other claims are subject to inherent uncertainties and management’s view of these matters may change in the future. For a description of our current legal proceedings, see “Item 3. Legal Proceedings” along with “Note 21—Commitments and Contingencies” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K.
Litigation and other claims are subject to inherent uncertainties and management’s view of these matters may change in the future. For a description of our current legal proceedings, see “Item 3. Legal Proceedings” along with “Note 21—Commitments and Contingencies” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K. 22 Leidos Holdings, Inc.
We expect to continue to derive most of our revenues from work performed under U.S. government contracts. Our reputation and relationships with the U.S. government, particularly with the agencies of the DoD and the U.S.
We expect to continue to derive most of our revenues from work performed under U.S. government contracts. Our reputation and relationships with the U.S. government, particularly with the agencies of the DoW and the U.S.
Our customers reducing, postponing, or canceling spending on projects in respect of which we provide services may reduce demand for our services quickly and with little warning, which could have a material adverse effect on our business, results of operations, and financial condition. Leidos Holdings, Inc.
Our customers reducing, postponing, or canceling spending on projects in respect of which we provide services may reduce demand for our services quickly and with little warning, which could have a material adverse effect on our business, results of operations, and financial condition.
Additionally, the DoD and other customers are increasingly pursuing rapid acquisition pathways and procedures for new technologies, including through so-called “other transaction authority” agreements ("OTAs").
Additionally, the DoW and other customers are increasingly pursuing rapid acquisition pathways and procedures for new technologies, including through so-called “other transaction authority” agreements ("OTAs").
More generally, any increased or unexpected costs or unanticipated delays in the performance of our contracts, including costs and delays caused by contractual disputes or other factors outside of our control, such as performance failures of our subcontractors, rising inflationary pressures, and fluctuations in interest rates, natural disasters or other force majeure events, could make our contracts less profitable than expected or unprofitable. 26 Leidos Holdings, Inc.
More generally, any increased or unexpected costs or unanticipated delays in the performance of our contracts, including costs and delays caused by contractual disputes or other factors outside of our control, such as performance failures of our subcontractors, rising inflationary pressures, and fluctuations in interest rates, natural disasters or other force majeure events, could make our contracts less profitable than expected or unprofitable.
Presidential Administration as a result of the recent election cycle, increasing political pressure and legislation, shifts in spending priorities from defense-related or other programs as a result of competing demands for federal funds, the number and intensity of military conflicts or other factors.
Presidential Administration, increasing political pressure and legislation, shifts in spending priorities from defense-related or other programs as a result of competing demands for federal funds, the number and intensity of military conflicts or other factors.
We may be expected to expend resources to monitor, report on, and adopt policies and practices that we believe will improve alignment with our evolving ESG strategy and goals, as well as ESG-related standards and expectations of legal regimes and stakeholders such as customers, investors, stockholders, raters, employees, and business partners. 24 Leidos Holdings, Inc.
We may be expected to expend resources to monitor, report on, and adopt policies and practices that we believe will improve alignment with our evolving ESG strategy and goals, as well as ESG-related standards and expectations of legal regimes and stakeholders such as customers, investors, stockholders, raters, employees, and business partners.
We are also experiencing increased competition, which impacts our ability to obtain contracts; see the risk factor “We face intense competition that can impact our ability to obtain contracts and, therefore, affect our future revenues and growth prospects.” Our failure to compete effectively in this procurement environment would adversely affect our revenues and profitability. 18 Leidos Holdings, Inc.
We are also experiencing increased competition, which impacts our ability to obtain contracts; see the risk factor “We face intense competition that can impact our ability to obtain contracts and, therefore, affect our future revenues and growth prospects.” Our failure to compete effectively in this procurement environment would adversely affect our revenues and profitability.
Department of Commerce’s Bureau of Industry and Security), sanctions, and other administrative, legislative or regulatory actions that could materially interfere with our ability to offer our products or services in certain countries or have an adverse impact on our business with the U.S. government, and expose us to risks and costs of noncompliance with such laws and regulations, in addition to administrative, civil or criminal penalties; u increased financial and legal risks arising, for example, from foreign exchange rate variability, imposition of tariffs or additional taxes, inflation, restrictive trade policies, longer payment cycles, delays or failures to collect amounts due to us and differing legal systems, and which may adversely affect the performance of our services, sale of our products or repatriation of our profits; u political or economic instability, international security concerns and geopolitical conflict in countries where we provide services and products in support of the U.S. government and other customers in countries, which increases the risk of an incident resulting in injury or loss of life, damage or destruction of property, inability to meet our contractual obligations or retaliatory measures taken in respect thereof; u the ongoing conflict between Russia and Ukraine, which has resulted in the imposition by the U.S. and other nations of restrictive actions against Russia, Belarus and certain banks, companies and individuals; and u the ongoing conflict in the Middle East, which continues to expand.
Department of Commerce’s Bureau of Industry and Security), sanctions, and other administrative, legislative or regulatory actions that could materially interfere with our ability to offer our products or services in certain countries or have an adverse impact on our business with the U.S. government, and expose us to risks and costs of noncompliance with such laws and regulations, in addition to administrative, civil or criminal penalties; u increased financial and legal risks arising, for example, from foreign exchange rate variability, imposition of tariffs or additional taxes, inflation, restrictive trade policies, longer payment cycles, delays or failures to collect amounts due to us and differing legal systems, and which may adversely affect the performance of our services, sale of our products or repatriation of our profits; u political or economic instability, international security concerns and geopolitical conflict in countries where we provide services and products in support of the U.S. government and other customers in countries, which increases the risk that our employees may suffer injury or bodily harm, or be killed or kidnapped while providing such services or products, or risk of an incident resulting in damage or destruction of property, inability to meet our contractual obligations or retaliatory measures taken in respect thereof; u the ongoing conflict between Russia and Ukraine, which has resulted in the imposition by the U.S. and other nations of restrictive actions against Russia, Belarus and certain banks, companies and individuals; and u the ongoing conflict in the Middle East.
Additional risks and uncertainties not currently known to us or that we currently believe are immaterial also may materially harm our business, financial condition or operating results. In that event, the trading price of our stock could decline, and you could lose part or all of your investment. 14 Leidos Holdings, Inc.
Additional risks and uncertainties not currently known to us or that we currently believe are immaterial also may materially harm our business, financial condition or operating results. In that event, the trading price of our stock could decline, and you could lose part or all of your investment.
Our revenues from contracts with the U.S. government (including all branches of the U.S. military), either as a prime contractor or a subcontractor to other contractors engaged in work for the U.S. government, generated approximately 87% of our total revenue in both fiscal 2024 and 2023, and 86% in fiscal 2022.
Our revenues from contracts with the U.S. government (including all branches of the U.S. military), either as a prime contractor or a subcontractor to other contractors engaged in work for the U.S. government, generated approximately 87% of our total revenue in fiscal 2025, 2024 and 2023.
We recognize revenue on our service-based contracts primarily over time as there is a continuous transfer of control to the customer throughout the contract as we perform the promised services, which generally requires estimates of total costs at completion, fees earned on the contract, or both.
We recognize revenue on our service-based contracts primarily over time as there is a continuous transfer of control to the customer throughout the contract as we perform the promised services, which could require estimates of total costs at completion, fees earned on the contract, or both.
Annual Report Table of Contents PART I INDUSTRY AND ECONOMIC RISKS We depend on government agencies as our primary customers and if our reputation or relationships with these agencies were harmed, our future revenues and growth prospects could be adversely affected.
Leidos Holdings, Inc. Annual Report 15 Table of Contents PART I INDUSTRY AND ECONOMIC RISKS We depend on government agencies as our primary customers and if our reputation or relationships with these agencies were harmed, our future revenues and growth prospects could be adversely affected.
They also review the adequacy of the contractor’s compliance with government standards for its business systems, including a contractor’s accounting system, earned value management system, estimating system, materials management and accounting system, property management system, and purchasing system.
They also review the adequacy of the contractor’s compliance with government standards for its business systems, including a contractor’s accounting system, earned value management system, estimating system, materials management and accounting system, property management system, and purchasing system. Leidos Holdings, Inc.
Although our international operations have historically generated a small proportion of our revenues, we are seeking to grow our international business. Our exposure for violating these laws will increase as our non-U.S. presence expands and as we increase sales and operations in foreign jurisdictions. 34 Leidos Holdings, Inc.
Although our international operations have historically generated a small proportion of our revenues, we are seeking to grow our international business. Our exposure for violating these laws will increase as our non-U.S. presence expands and as we increase sales and operations in foreign jurisdictions.
Annual Report 19 Table of Contents PART I Moreover, instability in the credit or capital markets in the U.S. and related market-wide reduction in liquidity, or concerns or rumors about events of these kinds or similar risks, could affect the availability of credit or our credit ratings, making it relatively difficult or expensive to obtain additional capital at competitive rates, on commercially reasonable terms or in sufficient amounts, or at all, thus making it more difficult or expensive for us to access funds or refinance our existing indebtedness, or obtain financing for strategic projects and acquisitions.
Moreover, instability in the credit or capital markets in the U.S. and related market-wide reduction in liquidity, or concerns or rumors about events of these kinds or similar risks, could affect the availability of credit or our credit ratings, making it relatively difficult or expensive to obtain additional capital at competitive rates, on commercially reasonable terms or in sufficient amounts, or at all, thus making it more difficult or expensive for us to access funds or refinance our existing indebtedness, or obtain financing for strategic projects and acquisitions.
Annual Report Table of Contents PART I If our practices and disclosures do not meet evolving rules and regulations or our stakeholder expectations and standards (or if we are viewed negatively based on positions we do or do not take or work we do or do not perform or cannot publicly disclose for certain customers and industries), then our reputation, our ability to attract or retain leading experts, employees and other professionals and our ability to attract new business and customers could be negatively impacted, as could our attractiveness as an investment, service provider, employer, or business partner.
If our practices and disclosures do not meet evolving rules and regulations or our stakeholder expectations and standards (or if we are viewed negatively based on positions we do or do not take or work we do or do not perform or cannot publicly disclose for certain customers and industries), then our reputation, our ability to attract or retain leading experts, employees and other professionals and our ability to attract new business and customers could be negatively impacted, as could our attractiveness as an investment, service provider, employer, or business partner.
Intelligence Community, either as a prime contractor or subcontractor to other contractors, represented approximately 48% of our total revenues for fiscal 2024, 49% of our total revenues for fiscal 2023 and 44% of our total revenues for fiscal 2022. U.S. government and DoD spending levels are difficult to predict and subject to significant risk.
Intelligence Community, either as a prime contractor or subcontractor to other contractors, represented approximately 49% of our total revenues for fiscal 2025 and 2023, and 48% of our total revenues for fiscal 2024. U.S. government and DoW spending levels are difficult to predict and subject to significant risk.
Laws and plans adopted by the U.S. government relating to, along with pressures on and uncertainty surrounding the U.S. federal budget, potential changes in budgetary priorities and defense spending levels, the appropriations process and the permissible federal debt limit, could adversely affect the funding for individual programs and delay purchasing or payment decisions by our customers.
Laws and plans adopted by the U.S. government relating to, along with pressures on and uncertainty surrounding the U.S. federal budget, potential changes in budgetary priorities, including initiatives aimed at improving governmental efficiency, and defense spending levels, the appropriations process and the permissible federal debt limit, could adversely affect the funding for individual programs and delay purchasing or payment decisions by our customers.
Any failure or perceived failure by us, our service providers, suppliers, subcontractors, or other business partners to comply with applicable laws, regulations, our public privacy policies and other public statements about data privacy and security and other obligations in these areas could result in regulatory or government actions lawsuits against us (including civil claims, such as representative actions and other class action-type litigation), legal liability, monetary penalties, fines, sanctions, damages and other costs, orders to cease or change our processing of data, changes to our business practices, diversion of internal resources, and harm to our reputation, all of which could adversely affect our business, financial condition and results of operations.
Any failure or perceived failure by us, our service providers, suppliers, subcontractors, or other business partners to comply with applicable laws, regulations, our public privacy policies and other public statements about data privacy and security and other obligations in these areas could result in regulatory or government actions lawsuits against us (including civil claims, such as representative actions and other class action-type litigation), legal liability, monetary penalties, fines, sanctions, damages and other costs, orders to cease or change our processing of data, changes to our business practices, diversion of internal resources, and harm to our reputation, Leidos Holdings, Inc.
Legal Proceedings” along with “Note 21—Commitments and Contingencies” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K. 22 Leidos Holdings, Inc.
Legal Proceedings” along with “Note 21—Commitments and Contingencies” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K.
Our operating results could also be adversely affected by spending caps or changes in the U.S. government or the DoD’s budgetary priorities, as well as delays in program starts or the award of contracts or task orders under contracts. Leidos Holdings, Inc.
Our operating results could also be adversely affected by spending caps or changes in the U.S. government or the DoW’s budgetary priorities, as well as delays in program starts or the award of contracts or task orders under contracts.
For example, the conflicts between Russia and Ukraine and in the Middle East have resulted in increased security assistance to each of Ukraine and Israel to help preserve their territorial integrity, secure their borders, and with respect to the Russia/Ukraine conflict, improve interoperability with NATO. Changes in the priorities of the U.S.
For example, the conflicts between Russia and Ukraine and in the Middle East have resulted in increased security assistance to each of Ukraine and Israel to help preserve their territorial integrity, secure their borders, and with respect to the Russia/Ukraine conflict, improve interoperability with NATO. Changes in the priorities 16 Leidos Holdings, Inc.
We may from time to time enter into foreign currency contracts, foreign currency borrowings or other techniques intended to hedge a portion of our foreign currency exchange rate risks. These hedging activities may not completely offset the adverse financial effects of unfavorable movements in foreign currency exchange rates during the time hedges are in place.
We may from time to time enter into foreign currency contracts, foreign currency borrowings or other techniques intended to hedge a portion of our foreign currency exchange rate risks. These hedging activities may not completely offset the adverse financial effects of unfavorable movements in foreign currency exchange rates during the 36 Leidos Holdings, Inc.
Annual Report Table of Contents PART I The U.S. government may terminate, cancel, modify, renew on less favorable terms or curtail our contracts at any time prior to their completion, and if we do not replace them, this may adversely affect our future revenues and profitability.
The U.S. government may terminate, cancel, modify, renew on less favorable terms or curtail our contracts at any time prior to their completion, and if we do not replace them, this may adversely affect our future revenues and profitability.
Global supply chain issues and inflationary pressures have disrupted supply and increased the prices of goods and services, which could raise the costs associated with providing our services, diminish our ability to compete for new contracts or task orders and reduce customer buying power.
Annual Report 19 Table of Contents PART I Global supply chain issues and inflationary pressures have disrupted supply and increased the prices of goods and services, which could raise the costs associated with providing our services, diminish our ability to compete for new contracts or task orders and reduce customer buying power.
Annual Report Table of Contents PART I Investigations, audits, claims, disputes, enforcement actions, litigation, arbitration, or other legal proceedings could require us to pay potentially large damage awards or penalties and could be costly to defend, which would adversely affect our cash balances and profitability, and could damage our reputation.
Investigations, audits, claims, disputes, enforcement actions, litigation, arbitration, or other legal proceedings could require us to pay potentially large damage awards or penalties and could be costly to defend, which would adversely affect our cash balances and profitability, and could damage our reputation.
Annual Report 17 Table of Contents PART I The U.S. government also conducts periodic reviews of U.S. defense strategies and priorities, which may shift DoD or other budgetary priorities, reduce overall U.S. government spending, or delay contract or task order awards for defense-related or other programs from which we would otherwise expect to derive a significant portion of our future revenues.
The U.S. government also conducts periodic reviews of U.S. defense strategies and priorities, which may shift DoW or other budgetary priorities, reduce overall U.S. government spending, or delay contract or task order awards for defense-related or other programs from which we would otherwise expect to derive a significant portion of our future revenues.
Misconduct of employees, subcontractors, agents, suppliers, business partners or joint ventures and others working on our behalf could cause us to lose existing contracts or customers and adversely affect our ability to obtain new contracts and could have a material adverse impact on our business, reputation and future results.
Annual Report Table of Contents PART I BUSINESS AND OPERATIONAL RISKS Misconduct of employees, subcontractors, agents, suppliers, business partners or joint ventures and others working on our behalf could cause us to lose existing contracts or customers and adversely affect our ability to obtain new contracts and could have a material adverse impact on our business, reputation and future results.
As a result of increased scrutiny on contractors and U.S. government agencies, audits and reviews are conducted rigorously and the applicable standards are strictly interpreted, increasing the likelihood of an audit or review resulting in an adverse outcome.
Annual Report 21 Table of Contents PART I As a result of increased scrutiny on contractors and U.S. government agencies, audits and reviews are conducted rigorously and the applicable standards are strictly interpreted, increasing the likelihood of an audit or review resulting in an adverse outcome.
Annual Report Table of Contents PART I us requiring approval by the holders of a majority of the voting power of such securities that are not owned by the related person unless approved by a majority of continuing directors or certain other exceptions; our stockholders may not act by written consent; our Board may issue, without stockholder approval, shares of undesignated preferred stock, the terms of which may be determined by the Board; and we are also subject to certain restrictions on business combinations under Section 203 of the Delaware General Corporation Law, which imposes additional requirements for business combinations, and may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in a takeover context.
These restrictions, which may also make it more difficult for our stockholders to elect directors not endorsed by our current directors and management, include mergers and certain other business combinations between a related person and us requiring approval by the holders of a majority of the voting power of such securities that are not owned by the related person unless approved by a majority of continuing directors or certain other exceptions; our stockholders may not act by written consent; our Board may issue, without stockholder approval, shares of undesignated preferred stock, the terms of which may be determined by the Board; and we are also subject to certain restrictions on business combinations under Section 203 of the Delaware General Corporation Law, which imposes additional requirements for business combinations, and may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in a takeover context.
A finding of significant control deficiencies in our business system audits or other reviews can result in the suspension of payments or lower billing rates to our U.S. government customers until the control deficiencies are corrected and the DCMA accepts our remediations.
A finding of material weakness in our business system audits or other reviews can result in the suspension of payments or lower billing rates to our U.S. government customers until the material weakness is corrected and the DCMA accepts our remediations.
Annual Report 33 Table of Contents PART I We face risks associated with our international business. During fiscal 2024, revenue attributable to our services provided outside of the United States to non-U.S. customers was approximately 8% of our total revenue. Our international business operations may be subject to additional and different risks than our U.S. business.
We face risks associated with our international business. During fiscal 2025, revenue attributable to our services provided outside of the United States to non-U.S. customers was approximately 8% of our total revenue. Our international business operations may be subject to additional and different risks than our U.S. business.
Our payment of dividends and share repurchases could vary from historical practices or our stated expectations. A change in our dividend or share repurchase programs could have an adverse effect on the market price of our common stock. Provisions in our charter documents and under Delaware law could delay or prevent transactions that many stockholders may favor.
A change in our dividend or share repurchase programs could have an adverse effect on the market price of our common stock. Provisions in our charter documents and under Delaware law could delay or prevent transactions that many stockholders may favor.
It does not contain all of the information that may be important to you, and you should read this risk factor summary together with the more detailed discussion of risks and uncertainties set forth following this summary.
SUMMARY OF RISK FACTORS This risk factor summary contains a high-level summary of risks associated with our business. It does not contain all of the information that may be important to you, and you should read this risk factor summary together with the more detailed discussion of risks and uncertainties set forth following this summary.
Annual Report 27 Table of Contents PART I We do not control our service providers and our ability to monitor their cybersecurity is limited, so we cannot ensure the cybersecurity measures they take will be sufficient to protect any information we share with them.
We do not control our service providers and our ability to monitor their cybersecurity is limited, so we cannot ensure the cybersecurity measures they take will be sufficient to protect any information we share with them.
We could also incur significant costs to improve the climate resiliency of our infrastructure and supply chain and otherwise prepare for, respond to, and mitigate the effects of climate change. Additionally, transitioning to a low-carbon economy may entail extensive policy, legal, technology and market initiatives.
We could also incur significant costs to improve the climate resiliency of our infrastructure and supply chain and otherwise prepare for, respond to, and mitigate the effects of climate 28 Leidos Holdings, Inc. Annual Report Table of Contents PART I change. Additionally, transitioning to a low-carbon economy may entail extensive policy, legal, technology and market initiatives.
In addition, some of our work sites put our employees and others in close proximity with mechanized 32 Leidos Holdings, Inc. Annual Report Table of Contents PART I equipment, moving vehicles, chemical and manufacturing processes, and highly regulated materials. On some work sites, we may be responsible for safety and have an obligation to implement effective safety procedures.
In addition, some of our work sites put our employees and others in close proximity with mechanized equipment, moving vehicles, chemical and manufacturing processes, and highly regulated materials. On some work sites, we may be responsible for safety and have an obligation to implement effective safety procedures.
A termination for default could eliminate a revenue source, expose us to liability and have an adverse effect on our ability to compete for future contracts and task orders, especially if the customer is an agency of the U.S. government.
A termination for default could eliminate a revenue source, expose us 32 Leidos Holdings, Inc. Annual Report Table of Contents PART I to liability and have an adverse effect on our ability to compete for future contracts and task orders, especially if the customer is an agency of the U.S. government.
Any decisions by the U.S. government to not exercise contract options or to terminate, cancel, modify, renew on less favorable terms or curtail our major programs or contracts would adversely affect our revenues, revenue growth and profitability. In addition, we have experienced performance issues under certain of our contracts.
Any decisions by the U.S. government to not exercise contract options or to terminate, cancel, modify, renew on less favorable terms or curtail our major programs or contracts would adversely affect our revenues, revenue growth and profitability.
We are limited in the amount of insurance we can obtain to cover certain risks, such as cybersecurity risks and natural hazards, including earthquakes, fires, and extreme weather conditions, some of which can be worsened by climate change and pandemics.
We are limited in the amount of insurance we can obtain to cover certain risks, such as cybersecurity risks and natural hazards, including earthquakes, fires, Leidos Holdings, Inc. Annual Report 33 Table of Contents PART I and extreme weather conditions, some of which can be worsened by climate change and pandemics.
Congress appropriates funds on an annual fiscal year basis for many programs, even though the program performance period may extend over several years. Consequently, programs are often partially funded initially, and additional funds are committed only as Congress makes further appropriations.
Congress appropriates funds on an annual fiscal year basis for many programs, even though the program performance period may extend over several years. Consequently, programs are often partially funded initially, and additional funds are committed only as Congress makes further appropriations. If we incur costs in excess of funds obligated Leidos Holdings, Inc.
See also the risk factor “Internal system or service failures, or failures in the systems or services of third parties on which we rely, could disrupt our business and impair our ability to effectively provide our services and products to our customers, which could damage our reputation and adversely affect our revenues and profitability.” The occurrence of any unauthorized access to, attacks on cybersecurity breaches of other information security threats to our or our service providers’, suppliers’ or subcontractors’ information technology infrastructure, systems or networks or data, or our failure to make adequate or timely disclosure to the public, regulators, or law enforcement agencies following any such event, could disrupt our infrastructure, systems, or networks or those of our customers, impair our ability to provide services to our customers and may jeopardize the security of data collected, stored, transmitted or otherwise processed through our information technology infrastructure, systems and networks.
Annual Report 27 Table of Contents PART I ability to effectively provide our services and products to our customers, which could damage our reputation and adversely affect our revenues and profitability.” The occurrence of any unauthorized access to, attacks on cybersecurity breaches of other information security threats to our or our service providers’, suppliers’ or subcontractors’ information technology infrastructure, systems or networks or data, or our failure to make adequate or timely disclosure to the public, regulators, or law enforcement agencies following any such event, could disrupt our infrastructure, systems, or networks or those of our customers, impair our ability to provide services to our customers and may jeopardize the security of data collected, stored, transmitted or otherwise processed through our information technology infrastructure, systems and networks.
Considerable uncertainty exists regarding how future budget and program decisions will unfold, including the defense spending priorities of the U.S. Presidential Administration and Congress and what challenges potential budget reductions will present for us and our industry generally. Current U.S. government spending levels for defense-related or other programs may not be sustained.
Considerable uncertainty exists regarding how future budget and program decisions will unfold, including the defense spending priorities of the U.S. Presidential Administration and Congress and what challenges potential budget reductions will present for us and our industry generally.
Our business and operations expose us to numerous legal and regulatory requirements, and any violation of these requirements could harm our business.
Annual Report Table of Contents PART I Our business and operations expose us to numerous legal and regulatory requirements, and any violation of these requirements could harm our business.
In addition, negative publicity, including reports from the press or social media coverage, regardless of accuracy or completeness, and which could pertain to employee or subcontractor misconduct, conflicts of interest, poor contract performance, deficiencies in services, reports, products or other deliverables, security breaches or other security incidents or other aspects of our business, could harm our reputation with these agencies and with certain non-U.S. customers.
In addition, negative publicity, including sustained or recurring media coverage, social media commentary, or other public communications that criticize our business practices, the nature of our products or services, or the defense industry more broadly, regardless of accuracy or completeness, and which could pertain to employee or subcontractor misconduct, conflicts of interest, poor contract performance, deficiencies in investment, prioritization, and production, deficiencies in services, reports, products or other deliverables, security breaches or other security incidents or other aspects of our business, could harm our reputation with these agencies and with certain non-U.S. customers.
As of January 3, 2025, indirect cost audits by the DCAA remain open for fiscal 2022 and subsequent fiscal years.
As of January 2, 2026, indirect cost audits by the DCAA remain open for fiscal 2023 and subsequent fiscal years.
Future spending and program authorizations may not increase or may decrease or shift to programs in areas where we do not provide services or are less likely to be awarded contracts.
Current U.S. government spending levels for defense-related or other programs may not be sustained. Future spending and program authorizations may not increase or may decrease or shift to programs in areas where we do not provide services or are less likely to be awarded contracts.
Leidos Holdings, Inc. Annual Report 21 Table of Contents PART I Similarly, OCIs remain an active area of bid protest litigation, increasing the likelihood that competitors may leverage such arguments in an attempt to overturn agency award decisions.
Similarly, OCIs remain an active area of bid protest litigation, increasing the likelihood that competitors may leverage such arguments in an attempt to overturn agency award decisions.
Annual Report Table of Contents PART I We use estimates in recognizing revenues, and if we make changes to estimates used in recognizing revenues, our profitability may be adversely affected.
We use estimates in recognizing revenues, and if we make changes to estimates used in recognizing revenues, our profitability may be adversely affected.
Therefore, we are continuously exposed to unauthorized attempts to compromise access, release or otherwise compromise such information through cyber-attacks and other information security threats, including, among other things, physical break-ins, theft, denial-of-service attacks, worms, computer viruses, software bugs, malicious or destructive code, social engineering, phishing attacks and impersonating authorized users, credential stuffing, account takeovers, insider threats, malfeasance or improper access by employees or service providers, human error, fraud, use of AI, “bots” or other automation software, or other similar disruptions.
Annual Report Table of Contents PART I information security threats, including, among other things, physical break-ins, theft, denial-of-service attacks, worms, computer viruses, software bugs, malicious or destructive code, social engineering, phishing attacks and impersonating authorized users, credential stuffing, account takeovers, insider threats, malfeasance or improper access by employees or service providers, human error, fraud, use of AI, “bots” or other automation software, or other similar disruptions.
See also the risk factor: “Cybersecurity breaches and other information security incidents could negatively impact our business and financial results, impair our ability to effectively provide our services to our customers and cause harm to our reputation or competitive position.” While we have established policies, procedures, training programs, and other compliance controls designed to prevent and detect misconduct, these measures may not be effective, exposing us to unforeseen risks or losses.
See also the risk factor: “Cybersecurity breaches and other information security incidents could negatively impact our business and financial results, impair our ability to effectively provide our services to our customers and cause harm to our reputation or competitive position.” While we have established policies, procedures, training programs, and other compliance controls designed to prevent and detect misconduct, individuals may circumvent these measures and we may be unable to prevent our employees, subcontractors, agents, suppliers, business partners or joint ventures and others working on our behalf from engaging in misconduct, fraud or other improper activities, exposing us to unforeseen risks or losses.
Leidos Holdings, Inc. Annual Report 35 Table of Contents PART I Changes in tax laws and regulations or exposure to additional tax liabilities could adversely affect our financial results. We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Changes in U.S.
Changes in tax laws and regulations or exposure to additional tax liabilities could adversely affect our financial results. We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Changes in U.S.
Presidential Administration in respect thereto could have an adverse impact on our results. In addition, if government funding relating to our contracts with the U.S. government or DoD becomes unavailable, or is reduced or delayed, or planned orders are reduced, our contracts or subcontracts under such programs may be terminated or adjusted by the U.S. government or the prime contractor.
In addition, if government funding relating to our contracts with the U.S. government or DoW becomes unavailable, or is reduced or delayed, or planned orders are reduced, our contracts or subcontracts under such programs may be terminated or adjusted by the U.S. government or the prime contractor.
If any of our subcontractors fail to meet their contractual obligations in a timely manner or have regulatory compliance or other problems, our ability to fulfill our obligations as a prime contractor or higher tier subcontractor may be jeopardized. Significant losses could arise in future periods and subcontractor performance deficiencies could result in our termination for default.
If any of our subcontractors fail to meet their contractual obligations in a timely manner or have regulatory compliance or other problems, our ability to fulfill our obligations as a prime contractor or higher tier subcontractor may be jeopardized.
The FCPA or other applicable laws and regulations also require that we keep accurate books and records and maintain internal controls and compliance procedures designed to prevent any such actions.
The FCPA or other applicable laws and regulations also require that we keep accurate books and 34 Leidos Holdings, Inc. Annual Report Table of Contents PART I records and maintain internal controls and compliance procedures designed to prevent any such actions.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur efforts include regular monitoring of Leidos-managed systems and networks for internal and external cybersecurity threats, providing cybersecurity training to our employees during the onboarding process and annually, and continually reviewing and refining formal policies and procedures designed to deter, identify and remediate cybersecurity incidents.
Biggest changeAnnual Report 37 Table of Contents PART I and mitigate cybersecurity risks. Our efforts include regular monitoring of Leidos-managed systems and networks for internal and external cybersecurity threats, providing cybersecurity training to our employees during the onboarding process and annually, and continually reviewing and refining formal policies and procedures designed to deter, identify and remediate cybersecurity incidents.
We also conduct periodic internal and third-party assessments to test our cybersecurity controls, perform cyber simulations and exercises, and continually evaluate our internal governing policies and procedures to help detect and respond to cybersecurity events in order to reduce harms or impacts from breaches and other information security incidents. Leidos Holdings, Inc.
We also conduct periodic internal and third-party assessments to test our cybersecurity controls, perform cyber simulations and exercises, and continually evaluate our internal governing policies and procedures to help detect and respond to cybersecurity events in order to reduce harms or impacts from breaches and other information security incidents.
BOARD’S ROLES AND RESPONSIBILITIES We have a Technology and Information Security Committee, comprised of six board members, with relevant backgrounds and experience, that oversees and advises the Board and management on matters involving the Company’s overall strategic direction and significant business risks and opportunities in the areas of technology and information security.
BOARD’S ROLES AND RESPONSIBILITIES We have a Technology and Information Security Committee, comprised of six board members, with relevant backgrounds and experience, that oversees and advises the Board and management on matters involving the Company’s overall strategic direction and significant business risks and opportunities in the areas of technology and information security. 38 Leidos Holdings, Inc.
Cybersecurity is critical to maintaining the trust of our customers and business partners, and we are committed to protecting our and their confidential and sensitive information, including personal information, and mitigating cybersecurity risks that impact our systems and networks. We maintain technologies, programs and processes designed to assess, identify, manage and mitigate cybersecurity risks.
Cybersecurity is critical to maintaining the trust of our customers and business partners, and we are committed to protecting our and their confidential and sensitive information, including personal information, and mitigating cybersecurity risks that impact our systems and networks. We maintain technologies, programs and processes designed to assess, identify, manage Leidos Holdings, Inc.
At least quarterly, management provides our Board and the Technology and Information Security Committee with updates about our cybersecurity and related risk exposures, our policies and procedures to mitigate such exposures and the status of projects to strengthen our information security infrastructure and program maturity and defend against and respond to cybersecurity threats.
Annual Report Table of Contents PART I At least quarterly, management provides our Board and the Technology and Information Security Committee with updates about our cybersecurity and related risk exposures, our policies and procedures to mitigate such exposures and the status of projects to strengthen our information security infrastructure and program maturity and defend against and respond to cybersecurity threats.
Annual Report 37 Table of Contents PART I GOVERNANCE MANAGEMENT’S RESPONSIBILITIES Our global information security program is led by our corporate Chief Information Security Officer, who works closely with key corporate functional and line of business stakeholders.
GOVERNANCE MANAGEMENT’S RESPONSIBILITIES Our global information security program is led by our corporate Chief Information Security Officer, who works closely with key corporate functional and line of business stakeholders.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAs of January 3, 2025, we owned the following properties: Location Number of buildings Square footage Acreage Huntsville, Alabama 7 801,000 90.7 Columbia, Maryland 1 95,000 7.3 Orlando, Florida 1 85,000 8.5 Oak Ridge, Tennessee 1 83,000 8.4 Decatur, Alabama 1 50,000 5.0 The nature of our business is such that there is no practicable way to relate occupied space to our reportable segments. 38 Leidos Holdings, Inc.
Biggest changeAs of January 2, 2026, we owned the following properties: Location Number of buildings Square footage Acreage Huntsville, Alabama 7 801,000 90.7 Columbia, Maryland 1 95,000 7.3 Orlando, Florida 1 85,000 8.5 Oak Ridge, Tennessee 1 83,000 8.4 Decatur, Alabama 1 50,000 5.0 The nature of our business is such that there is no practicable way to relate occupied space to our reportable segments.
Our major locations are in the Washington, D.C., metropolitan area, where we occupy a combination of leased and owned floor space of approximately 1.8 million square feet. We also have employees working at customer sites throughout the United States and in other countries.
Our major locations are in the Washington, D.C., metropolitan area, where we occupy a combination of leased and owned floor space of approximately 1.9 million square feet. We also have employees working at customer sites throughout the United States and in other countries.
Item 2. Properties As of January 3, 2025, we conducted our operations in 412 locations in 44 states, the District of Columbia and various foreign countries. We occupy approximately 8.4 million square feet of floor space. Of this amount, we own approximately 1.1 million square feet, and the remaining balance is leased.
Item 2. Properties As of January 2, 2026, we conducted our operations in 361 locations in 43 states, the District of Columbia and various foreign countries. We occupy approximately 8.8 million square feet of floor space. Of this amount, we own approximately 1.1 million square feet, and the remaining balance is leased.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeAnnual Report T able of Contents EXECUTIVE OFFICERS OF THE REGISTRANT Name of Officer Age Position(s) with the company and prior business experience Roy Stevens 56 Mr. Stevens has served as President for the National Security Sector since January 2024.
Biggest changeHe currently serves on the Board of Directors for Cornerstones and the Intelligence and National Security Alliance, as well as the Board of Advisors for the Center for a New American Security. 40 Leidos Holdings, Inc. Annual Report Table of Contents EXECUTIVE OFFICERS OF THE REGISTRANT Name of Officer Age Position(s) with the company and prior business experience Thomas C.
Hull served as the CIO of the Lockheed Martin Corporation’s Information Systems & Global Solutions business area from January 2013 through August 2016, ensuring operations and security of IT systems for over 20,000 employees. Mr. Hull has over 30 years of experience in the IT field. 42 Leidos Holdings, Inc. Annual Report Table of Contents Part II
Hull served as the CIO of the Lockheed Martin Corporation’s Information Systems & Global Solutions business area from January 2013 through August 2016, ensuring operations and security of IT systems for over 20,000 employees. Mr. Hull has over 30 years of experience in the IT field. Leidos Holdings, Inc. Annual Report 41 Table of Contents Part II
All such persons have been elected to serve until their successors are elected and qualified or until their earlier resignation or removal. Name of Officer Age Position(s) with the company and prior business experience Thomas A. Bell 64 Mr. Bell serves as the Chief Executive Officer of Leidos. He joined Leidos as CEO on May 3, 2023. Mr.
All such persons have been elected to serve until their successors are elected and qualified or until their earlier resignation or removal. Name of Officer Age Position(s) with the company and prior business experience Thomas A. Bell 65 Mr. Bell serves as the Chief Executive Officer of Leidos. He joined Leidos as CEO on May 3, 2023. Mr.
He held a variety of leadership roles at MWH, including as Associate General Counsel, Director of Risk Management for the Middle East, and completed a two-year assignment in the UK in operational capacity, where he led the integration of a strategic acquisition and assumed the role of International Managing Director. Elizabeth M. Porter 54 Ms.
He held a variety of leadership roles at MWH, including as Associate General Counsel, Director of Risk Management for the Middle East, and completed a two-year assignment in the UK in operational capacity, where he led the integration of a strategic acquisition and assumed the role of International Managing Director. Elizabeth M. Porter 55 Ms.
She served as Vice President and General Manager of the Missile and Weapon Systems (“MWS”), division of Boeing Defense, Space & Security, from April 2021 to November 2022, and prior to that role, as Vice President of Weapons for the MWS division from October 2018 to April 2021. Steve Hull 55 Mr.
She served as Vice President and General Manager of the Missile and Weapon Systems (“MWS”), division of Boeing Defense, Space & Security, from April 2021 to November 2022, and prior to that role, as Vice President of Weapons for the MWS division from October 2018 to April 2021. Steve Hull 56 Mr.
Bell was President of Rolls-Royce Defense Aerospace, having joined as President, Customer Business, North America in mid-2012. Christopher R. Cage 53 Mr. Cage has served as Executive Vice President and Chief Financial Officer since July 2021.
Bell was President of Rolls-Royce Defense Aerospace, having joined as President, Customer Business, North America in mid-2012. Christopher R. Cage 54 Mr. Cage has served as Executive Vice President and Chief Financial Officer since July 2021.
Sanglier has also served as a member of The IIA’s Audit Committee, Guidance Development Committee, North American Publications Advisory Committee and multiple task forces. Leslie Fautsch 52 Ms. Fautsch has served as Chief Human Resources Officer of Leidos since October 2024. Ms.
Sanglier has also served as a member of The IIA’s Audit Committee, Guidance Development Committee, North American Publications Advisory Committee and multiple task forces. Leslie Fautsch 53 Ms. Fautsch has served as Chief Human Resources Officer of Leidos since October 2024. Ms.
Annual Report 39 Table of Contents Executive Officers of the Registrant The following is a list of the names and ages (as of February 11, 2025) of our executive officers, indicating all positions and offices held by each such person and each such person’s business experience during at least the past five years.
Annual Report 39 Table of Contents Executive Officers of the Registrant The following is a list of the names and ages (as of February 17, 2026) of our executive officers, indicating all positions and offices held by each such person and each such person’s business experience during at least the past five years.
He has served in several capacities throughout his 25-year tenure with Leidos, including Senior Vice President, Chief Accounting Officer and Corporate Controller, Senior Vice President for Financial Planning and Analysis and Chief Financial Officer for the Health Group. Daniel Atkinson 46 Mr. Atkinson has served as the Senior Vice President, Chief Accounting Officer and Corporate Controller since 2024.
He has served in several capacities throughout his 26-year tenure with Leidos, including Senior Vice President, Chief Accounting Officer and Corporate Controller, Senior Vice President for Financial Planning and Analysis and Chief Financial Officer for the Health Group. Daniel Atkinson 47 Mr. Atkinson has served as the Senior Vice President, Chief Accounting Officer and Corporate Controller since 2024.
Previously, he served as the Company's Assistant Corporate Controller since June 2021. Prior to joining Leidos, Mr. Atkinson was Director of Technical Accounting and Revenue Recognition at Booz Allen Hamilton from April 2018 until June 2021. He also held key leadership roles within the controller's organization at CSRA, Inc. from October 2016 to April 2018. Gerard A. Fasano 59 Mr.
Previously, he served as the Company's Assistant Corporate Controller since June 2021. Prior to joining Leidos, Mr. Atkinson was Director of Technical Accounting and Revenue Recognition at Booz Allen Hamilton from April 2018 until June 2021. He also held key leadership roles within the controller's organization at CSRA, Inc. from October 2016 to April 2018. Daniel J. Antal 54 Mr.
Prior to that role, Ms. Porter served as the Department of Defense Information Networks & Mission Partner Program Director. Prior to joining Leidos, Ms. Porter served Lockheed Martin Corporation in several capacities, most recently as Director of Energy Initiatives, Corporate Engineering and Technology. 40 Leidos Holdings, Inc.
Prior to that role, Ms. Porter served as the Department of Defense Information Networks & Mission Partner Program Director. Prior to joining Leidos, Ms. Porter served Lockheed Martin Corporation in several capacities, most recently as Director of Energy Initiatives, Corporate Engineering and Technology. Roy Stevens 58 Mr. Stevens has served as President for the National Security Sector since January 2024.
He serves on the Board of Directors for the Intelligence and National Security Alliance and Cornerstones as well as the Advisory Board for the Center for a New American Security. Thomas C. Sanglier 64 Mr. Sanglier has served as Senior Vice President and Chief Audit Executive since July 2022. Prior to joining Leidos, Mr.
Sanglier 65 Mr. Sanglier has served as Senior Vice President and Chief Audit Executive since July 2022. Prior to joining Leidos, Mr.
Stevens served Lockheed Martin Corporation in a variety of executive level positions for over 20 years, most recently as Vice President of Global Solutions under the Information Systems & Global Solutions business, and has also been integral to the merger and acquisition of several companies during his career.
O’Connor served Lockheed Martin Corporation in a variety of executive level positions for over 25 years, including Vice President of National Solutions and Vice President of Engineering & Chief Technology Officer for Intelligence under the Information Systems & Global Solutions business. Cindy Gruensfelder 60 Ms. Gruensfelder has served as the President of the Defense Systems Sector since January 2024. Ms.
Removed
Fasano has served as Executive Vice President, Chief Growth Officer since January 2024. Previously, he served as President for our Defense Group since October 2018. Mr.
Added
Mr. Stevens has been a Leidos corporate officer since 2018 serving in a variety of executive roles prior to this including Chief Growth Officer and Intelligence Group President. Before joining Leidos, Mr. Stevens served in several senior leadership positions at Lockheed Martin Corporation over 20 years.
Removed
Fasano also served as the Company’s Chief of Business Development and Strategy Officer, and led the separation from the Lockheed Martin Corporation and the integration of the Information Systems & Global Solutions Business into Leidos. Prior to joining Leidos, Mr. Fasano served Lockheed Martin Corporation for over 30 years. Daniel J. Antal 53 Mr.
Added
Jason O'Connor 56 Mr. O’Connor has served as Senior Vice President for our Cyber and Analytics business area since January 2024, and before that, led numerous business areas including National Solutions, Homeland Security, and served as Deputy President for our Advanced Solutions Group. Prior to joining Leidos, Mr.
Removed
Previously, he served as President for our Intelligence Group since July 2021, and before that, as Chief of Business Development and Strategy. Prior to joining Leidos, Mr.
Removed
James F. Carlini 59 Mr. Carlini has served as Chief Technology Officer of Leidos since June 2019. Prior to joining Leidos, Mr. Carlini founded and operated a national security consultancy from May 2006 to October 2018. Previously, Mr.
Removed
Carlini served at Northrop Grumman Electronic Systems from July 2002 to May 2006, with his last position being Vice President of Advanced Development Programs. He also served at the Defense Advanced Research Projects Agency (DARPA) for six years, with his last position being Director of the Special Projects Office. Mr.
Removed
Carlini is a former member of the United States Army Science Board and the United States Air Force Scientific Advisory Board. He is currently a member of the Department of Defense’s Defense Science Board. M. Victoria Schmanske 62 Ms. Schmanske has served as the President of the Commercial and International Sector since January 2024.
Removed
Previously, she served as the Executive Vice President of Leidos Corporate Operations since July 2021, and before that, as President for the Intelligence Group. Ms. Schmanske has also served as the Leidos Chief Administrative Officer and Deputy President and Chief Operations Officer for the Health Group. Prior to joining Leidos, Ms.
Removed
Schmanske served Lockheed Martin Corporation for over 30 years, most recently as Vice President for Operations IS&GS. She serves on multiple outside boards to include the University of Virginia School of Data Science Advisory Board, the Virginia Engineering Foundation Board of Directors, and The Women’s Center. Leidos Holdings, Inc.
Removed
Annual Report 41 T able of Contents EXECUTIVE OFFICERS OF THE REGISTRANT Name of Officer Age Position(s) with the company and prior business experience Cindy Gruensfelder 59 Ms. Gruensfelder has served as the President of the Defense Systems Sector since January 2024. Ms.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeS&P 500 Composite Index S&P 500 IT Services Index Company/Market/Peer Group 1/3/2020 1/1/2021 12/31/2021 12/30/2022 12/29/2023 1/3/2025 Leidos Inc. $ 100.00 $ 107.22 $ 91.99 $ 110.43 $ 115.41 $ 158.58 S&P 500 Composite Index $ 100.00 $ 116.11 $ 147.34 $ 118.69 $ 147.45 $ 183.70 S&P 500 IT Services Index $ 100.00 $ 120.77 $ 125.47 $ 100.99 $ 132.74 $ 147.85 PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS The following table presents information related to the repurchases of our common stock during the quarter ended January 3, 2025: Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Repurchase Plans or Programs Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (2) September 28, 2024 - September 30, 2024 62.00 $ 157.06 — 9,819,502 October 1, 2024 - October 31, 2024 — — — 9,819,502 November 1, 2024 - November 30, 2024 1,471,766 169.86 1,471,766 8,347,736 December 1, 2024 - December 31, 2024 942,326 159.18 942,326 7,405,410 January 1, 2025 - January 3, 2025 — — — 7,405,410 Total 2,414,154 $ 165.69 2,414,092 (1) The total number of shares purchased includes shares surrendered to satisfy statutory tax withholding obligations related to vesting of restricted stock units.
Biggest changeS&P 500 Composite Index S&P 500 IT Services Index Company/Market/Peer Group 1/1/2021 12/31/2021 12/30/2022 12/29/2023 1/3/2025 1/2/2026 Leidos Holdings, Inc. $ 100.00 $ 85.80 $ 103.00 $ 107.64 $ 147.91 $ 186.30 S&P 500 Composite Index $ 100.00 $ 126.89 $ 102.22 $ 126.99 $ 158.21 $ 182.60 S&P 500 IT Services Index $ 100.00 $ 103.89 $ 83.62 $ 109.91 $ 122.42 $ 117.44 PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS The following table presents information related to the repurchases of our common stock during the quarter ended January 2, 2026: Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Repurchase Plans or Programs Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (2) October 4, 2025 - October 31, 2025 — — — 3,234,632 November 1, 2025 - November 30, 2025 830,800 190.99 830,800 2,403,832 December 1, 2025 - December 31, 2025 760,116 188.84 748,138 1,655,694 January 1, 2026 - January 2, 2026 — — — 1,655,694 Total 1,590,916 $ 189.96 1,578,938 (1) The total number of shares purchased includes shares surrendered to satisfy statutory tax withholding obligations related to vesting of restricted stock units.
The comparisons in the graph are required by the SEC, based upon historical data and are not intended to forecast or be indicative of possible future performance of Leidos common stock. Leidos Holdings, Inc. Annual Report 43 Table of Contents PART II COMPARISON OF CUMULATIVE TOTAL RETURN Leidos Holdings, Inc.
The comparisons in the graph are required by the SEC, based upon historical data and are not intended to forecast or be indicative of possible future performance of Leidos common stock. 42 Leidos Holdings, Inc. Annual Report Table of Contents PART II COMPARISON OF CUMULATIVE TOTAL RETURN Leidos Holdings, Inc.
The number of stockholders of record of our common stock is not representative of the number of beneficial owners due to the fact that many shares are held by depositories, brokers or nominees. DIVIDEND POLICY During fiscal 2024 and 2023, we declared and paid quarterly dividends totaling $1.54 and $1.46 per share, respectively, of Leidos common stock.
The number of stockholders of record of our common stock is not representative of the number of beneficial owners due to the fact that many shares are held by depositories, brokers or nominees. DIVIDEND POLICY During fiscal 2025 and 2024, we declared and paid quarterly dividends totaling $1.63 and $1.54 per share, respectively, of Leidos common stock.
The following graph compares the total cumulative five-year return on Leidos common stock through January 3, 2025, to two indices: (i) the Standard & Poor’s 500 Composite index and (ii) the Standard & Poor’s 500 IT Services Industry index. The graph assumes an initial investment of $100 on January 3, 2020, and that dividends, if any, have been reinvested.
The following graph compares the total cumulative five-year return on Leidos common stock through January 2, 2026, to two indices: (i) the Standard & Poor’s 500 Composite index and (ii) the Standard & Poor’s 500 IT Services Industry index. The graph assumes an initial investment of $100 on January 1, 2021, and that dividends, if any, have been reinvested.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is listed on the New York Stock Exchange (“NYSE”) under the ticker symbol “LDOS.” HOLDERS OF COMMON STOCK As of February 4, 2025, there were approximately 16,202 holders of record of Leidos common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is listed on the New York Stock Exchange (“NYSE”) under the ticker symbol “LDOS.” HOLDERS OF COMMON STOCK As of February 10, 2026, there were approximately 15,268 holders of record of Leidos common stock.
There is no assurance as to the number of shares that will be repurchased, and the repurchase program may be suspended or discontinued at any time at our Board of Directors’ discretion. This share repurchase authorization replaces the previous share repurchase authorization announced in February 2018. 44 Leidos Holdings, Inc. Annual Report Table of Contents PART II
There is no assurance as to the number of shares that will be repurchased, and the repurchase program may be suspended or discontinued at any time at our Board of Directors’ discretion. This share repurchase authorization replaces the previous share repurchase authorization announced in February 2018.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

64 edited+32 added−46 removed21 unchanged
Biggest changeAnnual Report 47 Table of Contents PART II RESULTS OF OPERATIONS Our results of operations for the periods presented were as follows: Year Ended 2024 to 2023 2023 to 2022 (dollars in millions) January 3, 2025 December 29, 2023 December 30, 2022 Percent change Percent change Revenues $ 16,662 $ 15,438 $ 14,396 8 % 7 % Cost of revenues 13,864 13,194 12,312 5 % 7 % Selling, general and administrative expenses 983 942 951 4 % (1) % Acquisition, integration and restructuring costs 16 24 17 (33) % 41 % Goodwill impairment charges — 596 — NM NM Asset impairment charges 11 91 40 (88) % 128 % Equity earnings of non-consolidated subsidiaries (39) (30) (12) (30) % (150) % Operating income 1,827 621 1,088 194 % (43) % Non-operating expense, net (188) (218) (202) (14) % (8) % Income before income taxes 1,639 403 886 NM (55) % Income tax expense (388) (195) (193) 99 % 1 % Net income 1,251 208 693 NM (70) % Less: net (loss) income attributable to non-controlling interest (3) 9 8 (133) % 13 % Net income attributable to Leidos common stockholders $ 1,254 $ 199 $ 685 NM (71) % Operating margin 11.0 % 4.0 % 7.6 % NM - Not meaningful SEGMENT AND CORPORATE RESULTS Year Ended 2024 to 2023 2023 to 2022 National Security & Digital (dollars in millions) January 3, 2025 December 29, 2023 December 30, 2022 Percent change Percent change Revenues $ 7,365 $ 7,196 $ 6,745 2 % 7 % Operating income 720 672 606 7 % 11 % Operating margin 9.8 % 9.3 % 9.0 % The increase in revenues for fiscal 2024 as compared to fiscal 2023, was primarily attributable to a net increase in volumes on certain programs, program wins and net write-ups, partially offset by the completion of certain contracts.
Biggest changeAnnual Report 45 Table of Contents PART II RESULTS OF OPERATIONS Our results of operations for the periods presented were as follows: Year Ended (dollars in millions) January 2, 2026 January 3, 2025 Percent change Revenues $ 17,174 $ 16,662 3 % Cost of revenues 14,075 13,864 2 % Selling, general and administrative expenses 999 983 2 % Acquisition, integration and restructuring costs 18 16 13 % Asset impairment charges 5 11 (55) % Equity earnings of non-consolidated subsidiaries (32) (39) (18) % Operating income 2,109 1,827 15 % Non-operating expense, net (200) (188) (6) % Income before income taxes 1,909 1,639 16 % Income tax expense (447) (388) 15 % Net income 1,462 1,251 17 % Less: net income (loss) attributable to non-controlling interest 14 (3) (567) % Net income attributable to Leidos common stockholders $ 1,448 $ 1,254 15 % Operating margin 12.3 % 11.0 % SEGMENT AND CORPORATE RESULTS Year Ended National Security & Digital (dollars in millions) January 2, 2026 January 3, 2025 Percent change Revenues $ 7,611 $ 7,365 3 % Operating income 760 720 6 % Operating margin 10.0 % 9.8 % The increase in revenues for fiscal 2025 as compared to fiscal 2024, was primarily attributable to program wins, a net increase in volumes and $60 million recognized from the acquisition of Kudu Dynamics, partially offset by program completions and a net decrease in contract write-ups in the current year.
For the next 12 months, we anticipate that we will be able to meet our liquidity needs, including servicing our debt, through cash generated from operations, available cash balances, borrowings from our commercial paper program and, if needed, sales of accounts receivable and borrowings from our revolving credit facility. 52 Leidos Holdings, Inc.
For the next 12 months, we anticipate that we will be able to meet our liquidity needs, including servicing our debt, through cash generated from operations, available cash balances, borrowings from our commercial paper program and, if needed, sales of accounts receivable and borrowings from our revolving credit facility.
For the impacts of changes in estimates on our contracts, see “Note 3—Summary of Significant Accounting Policies” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K. Leidos Holdings, Inc.
For the impacts of changes in estimates on our contracts, see “Note 3—Summary of Significant Accounting Policies” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K.
Our future payments do not include $162 million of income tax liabilities, primarily as a result of uncertain tax positions, and the timing of such payments, if any, cannot be reasonably estimated. For additional information, see “Note 18—Income Taxes” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K. Leidos Holdings, Inc.
Our future payments do not include $104 million of income tax liabilities, primarily as a result of uncertain tax positions, and the timing of such payments, if any, cannot be reasonably estimated. For additional information, see “Note 18—Income Taxes” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K.
As of January 3, 2025, future scheduled interest payments on our outstanding debt and finance leases were $208 million, expected to be paid in fiscal 2025 and $1.1 billion expected to be paid thereafter.
As of January 2, 2026, future scheduled interest payments on our outstanding debt and finance leases were $208 million, expected to be paid in fiscal 2026 and $1.3 billion expected to be paid thereafter.
Stock repurchases of Leidos common stock may be made on the open market or in privately negotiated transactions with third parties including through accelerated share repurchase (“ASR”) agreements. Whether repurchases are made and the timing and actual number of shares repurchased depends on a variety of factors including price, corporate capital requirements, other market conditions and regulatory requirements.
Stock repurchases of Leidos common stock may be made on the open market or in privately negotiated transactions with third parties including through ASR agreements. Whether repurchases are made and the timing and actual number of shares repurchased depends on a variety of factors including price, corporate capital requirements, other market conditions and regulatory requirements.
Senior unsecured Registered Notes issued by Leidos, Inc.: $500 million 3.625% notes, due May 2025 $750 million 4.375% notes, due May 2030 $1,000 million 2.300% notes, due February 2031 $750 million 5.750% notes, due March 2033 Leidos Holdings, Inc. has also fully and unconditionally guaranteed debt securities of Leidos, Inc. that were issued pursuant to transactions that were not registered under the Securities Act of 1933, as amended.
Senior unsecured Registered Notes issued by Leidos, Inc.: $750 million 4.375% notes, due May 2030 $1,000 million 2.300% notes, due February 2031 $500 million 5.400% notes, due March 2032 $750 million 5.750% notes, due March 2033 $500 million 5.500% notes, due March 2035 Leidos Holdings, Inc. has also fully and unconditionally guaranteed debt securities of Leidos, Inc. that were issued pursuant to transactions that were not registered under the Securities Act of 1933, as amended.
The increase was primarily due to a $625 million increase in stock repurchases, a $35 million increase in shares withheld for tax obligations, partially offset by a decrease of $291 million in net payments made on debt activities. Net cash used in financing activities decreased $150 million for fiscal 2023 as compared to fiscal 2022.
Net cash used in financing activities increased $369 million for fiscal 2024 as compared to fiscal 2023. The increase was primarily due to a $625 million increase in stock repurchases, a $35 million increase in shares withheld for tax obligations, partially offset by a decrease of $291 million in net payments made on debt activities.
Intelligence Community, the U.S. Department of Homeland Security, the Federal Aviation Administration, the Department of Veterans Affairs, National Aeronautics and Space Administration (“NASA”) and many other U.S. civilian, state and local government agencies, foreign government agencies and commercial businesses. Approximately 8% of our revenues are generated by entities located outside of the United States.
Department of Homeland Security, the Federal Aviation Administration, the Department of Veterans Affairs and many other U.S. civilian, state and local government agencies, foreign government agencies and commercial businesses. Approximately 8% of our revenues are generated by entities located outside of the United States.
Our credit facility, term loan facility, commercial paper notes and notes outstanding as of January 3, 2025, contain financial covenants and customary restrictive covenants. We were in compliance with all covenants as of January 3, 2025. We paid dividends of $208 million, $201 million and $199 million for fiscal 2024, 2023 and 2022, respectively.
Our credit facility, term loan facility, commercial paper notes and notes outstanding as of January 2, 2026, contain financial covenants and customary restrictive covenants. We were in compliance with all covenants as of January 2, 2026. We paid dividends of $211 million, $208 million and $201 million for fiscal 2025, 2024 and 2023, respectively.
Intercompany balances and transactions between the Issuer and Guarantor have been eliminated from the financial information below. Investments in the consolidated subsidiaries of the Issuer and Guarantor that do not guarantee the senior unsecured notes have been excluded from the financial information. Intercompany payables represent amounts due to non-guarantor subsidiaries of the Issuer.
Investments in the consolidated subsidiaries of the Issuer and Guarantor that do not guarantee the senior unsecured notes have been excluded from the financial information. Intercompany payables represent amounts due to non-guarantor subsidiaries of the Issuer.
As of January 3, 2025, and December 29, 2023, we did not have any commercial paper notes outstanding. We made principal payments, excluding the impacts of our Commercial Paper Notes, on our debt of $18 million, $2,045 million and $545 million during fiscal 2024, 2023 and 2022, respectively.
As of January 2, 2026, and January 3, 2025, we did not have any commercial paper notes outstanding. We made principal payments, excluding the impacts of our Commercial Paper Notes, on our debt of $1,019 million, $18 million and $2,045 million during fiscal 2025, 2024 and 2023, respectively.
RECENTLY ADOPTED AND ISSUED ACCOUNTING PRONOUNCEMENTS For a discussion of these items, see “Note 2—Accounting Standards” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K. 56 Leidos Holdings, Inc. Annual Report Table of Contents PART II
RECENTLY ADOPTED AND ISSUED ACCOUNTING PRONOUNCEMENTS For a discussion of these items, see “Note 2—Accounting Standards” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K.
As of January 3, 2025, future payments on our deferred compensation arrangements and purchase obligations for long-term purchases and service agreements were $65 million, expected to be paid in fiscal 2025, and $371 million expected to be paid thereafter.
As of January 2, 2026, future payments on our deferred compensation arrangements and purchase obligations for long-term purchases and service agreements were $101 million, expected to be paid in fiscal 2026, and $429 million expected to be paid thereafter.
Net bookings represent the estimated amount of revenue to be earned in the future from funded and unfunded contract awards that were received during the year, net of any adjustments to previously awarded backlog amounts.
Net bookings represent the estimated amount of revenue to be earned in the future from funded and unfunded contract awards and modifications and unissued task orders on sole source IDIQ contracts that were received during the year, net of any adjustments to previously awarded backlog amounts.
We have identified the following accounting policies as critical because they require significant judgments and assumptions about highly complex and inherently uncertain matters and the use of reasonably different estimates and assumptions could have a material impact on our results of operations or financial condition. u Revenue Recognition u Goodwill REVENUE RECOGNITION We perform work under various types of contracts, which include FFP, T&M, FPLOE, cost-plus-fixed-fee, cost-plus-award-fee, cost-plus-incentive-fee and fixed-price-incentive-fee contracts.
Annual Report Table of Contents PART II We have identified the following accounting policies as critical because they require significant judgments and assumptions about highly complex and inherently uncertain matters and the use of reasonably different estimates and assumptions could have a material impact on our results of operations or financial condition. u Revenues u Goodwill REVENUES We perform work under various types of contracts, which include firm-fixed-price ("FFP"), time-and-materials ("T&M"), fixed- price-level-of-effort ("FPLOE"), cost-plus-fixed-fee ("CPFF"), cost-plus-award-fee ("CPAF"), cost-plus-incentive-fee ("CPIF") and fixed-price-incentive-fee ("FPIF").
Funded backlog for contracts with non-U.S. government entities and commercial customers represents the estimated value on contracts, which may cover multiple future years, under which we are obligated to perform, less revenues previously recognized on the contracts. 50 Leidos Holdings, Inc. Annual Report Table of Contents PART II u Negotiated Unfunded Backlog.
Funded backlog for contracts with non-U.S. government entities and commercial customers represents the estimated value on contracts, which may cover multiple future years, under which we are obligated to perform, less revenues previously recognized on the contracts. u Negotiated Unfunded Backlog.
The repurchase program may be accelerated, suspended, delayed or discontinued at any time. During fiscal 2024 and 2023, we made open market repurchases of our common stock for an aggregate purchase price of $850 million and $225 million, respectively. There were no open market share repurchases in fiscal 2022.
The repurchase program may be accelerated, suspended, delayed or discontinued at any time. During fiscal 2025, 2024, and 2023, we made open market repurchases of our common stock for an aggregate purchase price of $400 million, $850 million and $225 million, respectively. Leidos Holdings, Inc.
The decrease was primarily due to lower capital expenditures of $58 million in the current year. Net cash used in investing activities decreased $102 million for fiscal 2023 as compared to fiscal 2022.
Net cash used in investing activities decreased $69 million for fiscal 2024 as compared to fiscal 2023. The decrease was primarily due to lower capital expenditures of $58 million in the current year. 50 Leidos Holdings, Inc.
Actual results could differ from these estimates under different assumptions and conditions.
Actual results could differ from these estimates under different assumptions and conditions. 52 Leidos Holdings, Inc.
The following is a list of unregistered debt securities guaranteed by Leidos, Inc. Senior unsecured unregistered debt securities issued by Leidos Holdings, Inc.: $300 million 5.950% notes, due December 2040 The following summarized financial information includes the assets, liabilities and results of operations for the Guarantor and Issuer of the Registered Notes described above.
Senior unsecured unregistered debt securities issued by Leidos Holdings, Inc.: $300 million 5.950% notes, due December 2040 The following summarized financial information includes the assets, liabilities and results of operations for the Guarantor and Issuer of the Registered Notes described above. Intercompany balances and transactions between the Issuer and Guarantor have been eliminated from the financial information below.
GOVERNMENT MARKETS We generated approximately 87% of our total revenues from contracts with the U.S. government in fiscal 2024 and 2023 as compared to 86% of our total revenues from contracts with the U.S. government in fiscal 2022, either as a prime contractor or a subcontractor to other contractors engaged in work for the U.S. government.
GOVERNMENT MARKETS We generated approximately 87% of our total revenues from contracts with the U.S. government in both fiscal 2025 and 2024, either as a prime contractor or a subcontractor to other contractors engaged in work for the U.S. government. Revenues under contracts with the DoW and U.S. Intelligence Community, including subcontracts under which the DoW or the U.S.
Annual Report 53 Table of Contents PART II GUARANTORS AND ISSUERS OF GUARANTEED SECURITIES Leidos Holdings, Inc. (“Guarantor”) has fully and unconditionally guaranteed the debt securities of its subsidiary, Leidos, Inc. (“Issuer”), that were issued pursuant to transactions that were registered under the Securities Act of 1933, as amended (collectively, the “Registered Notes”).
GUARANTORS AND ISSUERS OF GUARANTEED SECURITIES Leidos Holdings, Inc. (“Guarantor”) has fully and unconditionally guaranteed the debt securities of its subsidiary, Leidos, Inc. (“Issuer”), that were issued pursuant to transactions that were registered under the Securities Act of 1933, as amended (collectively, the “Registered Notes”). The following is a list of the Registered Notes guaranteed by Leidos Holdings, Inc.
Sales Trend . For fiscal 2024, revenues increased $1.2 billion, or 8%, compared to fiscal 2023, the increase was primarily due to a net increase in volumes on certain programs and program wins, partially offset by the completion of certain contracts.
Sales Trend . For fiscal 2025, revenues increased $0.5 billion, or 3%, compared to fiscal 2024, the increase was primarily due to program wins and a net increase in volumes, partially offset by the completion of certain contracts. Operating Expenses and Income Trend . For fiscal 2025, operating expenses increased by $223 million, or 1%, compared to fiscal 2024.
Net cash provided by operating activities increased $227 million for fiscal 2024 as compared to fiscal 2023. The increase was primarily due to higher earnings and favorable timing of payroll and employee benefit accruals. Net cash provided by operating activities increased $173 million for fiscal 2023 as compared to fiscal 2022.
The increase was primarily due to higher earnings and favorable timing of payroll and employee benefit accruals. Net cash used in investing activities increased $263 million for fiscal 2025 as compared to fiscal 2024.
The increase in operating income for fiscal 2024 as compared to fiscal 2023, was primarily attributable to program wins and improved program execution on certain programs, partially offset by a one-time write-down related to program assets.
The increase in operating income for fiscal 2025 as compared to fiscal 2024, was primarily attributable to a net increase in volumes, a prior year one-time write-down related to program assets, program wins and lower amortization expense. The increase was partially offset by the completion of programs.
Our international customers include foreign governments and their agencies. Our international business increases our exposure to international markets and the associated international regulatory, foreign currency exchange rate and geopolitical risks.
INTERNATIONAL MARKETS Sales to customers in international markets represented approximately 8% of total revenues for fiscal 2025 and 2024. Our international customers include foreign governments and their agencies. Our international business increases our exposure to international markets and the associated international regulatory, foreign currency exchange rate and geopolitical risks.
For a discussion of these items, see “Note 10—Leases” and “Note 21—Commitments and Contingencies” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K.
COMMITMENTS AND CONTINGENCIES We are subject to a number of reviews, investigations, claims, lawsuits, other uncertainties and future obligations related to our business. For a discussion of these items, see “Note 10—Leases” and “Note 21—Commitments and Contingencies” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K.
We now operate in the following reportable segments: National Security & Digital, Health & Civil, Commercial & International and Defense Systems. We also separately present the unallocated costs associated with corporate functions as Corporate.
Our business is aligned into four reportable segments that are focused on specific, defined capability sets we bring to our customers. We operate in the following reportable segments: National Security & Digital, Health & Civil, Commercial & International and Defense Systems. We also separately present the unallocated costs associated with corporate functions as Corporate.
The increase in operating income for fiscal 2024 as compared to fiscal 2023, was primarily attributable to improved program execution on certain programs, a net increase in volumes and program wins, partially offset by the completion of certain contracts.
The increase in operating income for fiscal 2025 as compared to fiscal 2024, was primarily driven by prior year write-downs on certain programs within our UK operations, program wins and a net increase in volumes, partially offset by the completion of programs and increased in indirect expenses.
Year Ended 2024 to 2023 2023 to 2022 Corporate (dollars in millions) January 3, 2025 December 29, 2023 December 30, 2022 Percent change Percent change Operating loss $ (186) $ (130) $ (108) (43) % (20) % The increase in operating loss for fiscal 2024 as compared to fiscal 2023, was primarily attributable to an increase in research and development activities and general and administrative costs.
Year Ended Corporate (dollars in millions) January 2, 2026 January 3, 2025 Percent change Operating loss $ (175) $ (186) 6 % The decrease in operating loss for fiscal 2025 as compared to fiscal 2024, was primarily attributable to a decrease in legal costs, partially offset by an increase in research and development activities.
The decrease was partially offset by program wins, a net increase in volumes on certain programs and lower amortization expenses. From a macroeconomic perspective, our industry is under general competitive pressures associated with spending from our largest customer, the U.S. government, and requires a high level of cost management focus to allow us to remain competitive. Although the U.S.
Annual Report Table of Contents PART II From a macroeconomic perspective, our industry is under general competitive pressures associated with spending from our largest customer, the U.S. government, and requires a high level of cost management focus to allow us to remain competitive. Although the U.S.
Revenues by contract type as a percentage of our total revenues for the periods presented were as follows: Year Ended January 3, 2025 December 29, 2023 December 30, 2022 Cost-reimbursement and fixed-price-incentive-fee 44 % 48 % 50 % Firm-fixed-price 43 % 39 % 38 % Time-and-materials and fixed-price-level-of-effort 13 % 13 % 12 % Total 100 % 100 % 100 % Leidos Holdings, Inc.
Revenues by contract type as a percentage of our total revenues for the periods presented were as follows: Year Ended January 2, 2026 January 3, 2025 Cost-reimbursement and fixed-price-incentive-fee 44 % 44 % Firm-fixed-price 43 % 43 % Time-and-materials and fixed-price-level-of-effort 13 % 13 % Total 100 % 100 % LIQUIDITY AND CAPITAL RESOURCES OVERVIEW OF LIQUIDITY As of January 2, 2026, we had $1,108 million in cash and cash equivalents.
For a discussion of the types of contracts under which we generate revenues, see “Business—Contract Types” in Part I of this Annual Report on Form 10-K.
Annual Report Table of Contents PART II CONTRACT TYPES Our earnings and profitability may vary materially depending on changes in the proportionate amount of revenues derived from each type of contract. For a discussion of the types of contracts under which we generate revenues, see “Business—Contract Payment Types” in Part I of this Annual Report on Form 10-K.
Revenues under contracts with the DoD and U.S. Intelligence Community, including subcontracts under which the DoD or the U.S. Intelligence Community is the ultimate purchaser, represented approximately 48%, 49% and 44% of our total revenues for fiscal 2024, 2023 and 2022, respectively.
Intelligence Community is the ultimate purchaser, represented approximately 49% and 48% of our total revenues for fiscal 2025 and 2024, respectively.
Annual Report Table of Contents PART II Year Ended 2024 to 2023 2023 to 2022 Health & Civil (dollars in millions) January 3, 2025 December 29, 2023 December 30, 2022 Percent change Percent change Revenues $ 5,015 $ 4,238 $ 3,945 18 % 7 % Operating income 1,095 574 448 91 % 28 % Operating margin 21.8 % 13.5 % 11.4 % The increase in revenues for fiscal 2024 as compared to fiscal 2023, was primarily attributable to a net increase in volumes and case complexity within the managed health services business, an increase in net write-ups on certain programs and program wins.
Year Ended Health & Civil (dollars in millions) January 2, 2026 January 3, 2025 Percent change Revenues $ 5,069 $ 5,015 1 % Operating income 1,202 1,095 10 % Operating margin 23.7 % 21.8 % The increase in revenues for fiscal 2025 as compared to fiscal 2024, was primarily attributable to a net increase in write-ups on certain programs primarily within the managed health services business, partially offset by a net decrease in volumes.
Annual Report Table of Contents PART II STATEMENT OF OPERATIONS INFORMATION FOR THE GUARANTOR AND ISSUER OF REGISTERED NOTES (in millions) January 3, 2025 Revenues, net $ 10,564 Operating income 807 Net income attributable to Leidos common stockholders 119 CRITICAL ACCOUNTING ESTIMATES Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
BALANCE SHEET INFORMATION FOR THE GUARANTOR AND ISSUER OF REGISTERED NOTES (in millions) January 2, 2026 Total current assets $ 3,036 Goodwill 5,666 Other long-term assets 1,250 Total assets $ 9,952 Total current liabilities $ 1,954 Long-term debt, net of current portion 4,628 Intercompany payables 4,706 Other long-term liabilities 942 Total liabilities $ 12,230 STATEMENT OF OPERATIONS INFORMATION FOR THE GUARANTOR AND ISSUER OF REGISTERED NOTES (in millions) January 2, 2026 Revenues, net $ 10,696 Operating income 836 Net income attributable to Leidos common stockholders 5 CRITICAL ACCOUNTING ESTIMATES Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
The increase in revenues for fiscal 2023 as compared to fiscal 2022, was primarily attributable to a net increase in volumes on certain programs and program wins, partially offset by the completion of certain contracts.
The increase in operating income was primarily attributable to a program wins and a net increase in volumes on certain programs, partially offset by an increase in general & administrative expenses and the completion of programs. 44 Leidos Holdings, Inc.
Year Ended 2024 to 2023 2023 to 2022 Commercial & International (dollars in millions) January 3, 2025 December 29, 2023 December 30, 2022 Percent change Percent change Revenues $ 2,252 $ 2,126 $ 1,900 6 % 12 % Operating income (loss) 104 (560) 131 119 % NM Operating margin 4.6 % (26.3) % 6.9 % NM - Not meaningful The increase in revenues for fiscal 2024 as compared to fiscal 2023, was primarily attributable to program wins and a net increase in volumes on certain programs, partially offset by the impact of write-downs on certain programs within our UK operations for which cost and schedule were rebaselined as well as the completion of certain programs.
Annual Report Table of Contents PART II Year Ended Commercial & International (dollars in millions) January 3, 2025 January 3, 2025 Percent change Revenues $ 2,315 $ 2,252 3 % Operating income 166 104 60 % Operating margin 7.2 % 4.6 % The increase in revenues for fiscal 2025 as compared to fiscal 2024, was primarily attributable to program wins, prior year write-downs on certain programs within our UK operations and a $13 million favorable impact from exchange rate movements, partially offset by completion of programs.
We calculate net bookings as the year’s ending backlog, plus the year’s revenues, less the prior year’s ending backlog and any impacts from foreign currency or acquisitions and divestitures. Backlog represents the estimated amount of future revenues to be recognized under negotiated contracts. We segregate our backlog into two categories as follows: u Funded Backlog.
We calculate net bookings as the year’s ending backlog, plus the year’s revenues, less the prior year’s ending backlog and any impacts from foreign currency or acquisitions and divestitures.
These decisions, along with the delays in airline travel infrastructure projects and higher than anticipated servicing costs, contributed to a significant reduction in the reporting unit’s forecasted revenue and cash flows.
In fiscal 2023, SES restructured its portfolio by discontinuing select product offerings and ceasing operations in certain countries to better align with its strategic plan. These changes, along with delays in airline travel infrastructure projects and higher than anticipated servicing costs, contributed to a significant reduction in the reporting unit’s forecasted revenue and cash flows. Leidos Holdings, Inc.
Senior unsecured unregistered debt securities issued by Leidos, Inc.: $250 million 7.125% notes, due July 2032 $300 million 5.500% notes, due July 2033 Additionally, Leidos, Inc. has fully and unconditionally guaranteed debt securities of Leidos Holding, Inc. that were issued pursuant to transactions that were not registered under the Securities Act of 1933, as amended.
Annual Report 51 Table of Contents PART II Additionally, Leidos, Inc. has fully and unconditionally guaranteed debt securities of Leidos Holding, Inc. that were issued pursuant to transactions that were not registered under the Securities Act of 1933, as amended. The following is a list of unregistered debt securities guaranteed by Leidos, Inc.
Most of our contracts have cancellation terms that would permit us to recover all or a portion of our incurred costs and fees for work performed. CONTRACT TYPES Our earnings and profitability may vary materially depending on changes in the proportionate amount of revenues derived from each type of contract.
Most of our contracts have cancellation terms that would permit us to recover all or a portion of our incurred costs and fees for work performed. 48 Leidos Holdings, Inc.
General Services Administration (“GSA”) contract vehicles, have increased competition for U.S. government contracts, reduced backlogs by shortening periods of performance on contracts and increased pricing pressure. We expect that a majority of the business that we seek in the foreseeable future will be awarded through a competitive bidding process.
Trends in the U.S. government contracting process, including a shift towards multiple-awards contracts, in which certain contractors are preapproved using IDIQ and U.S. General Services Administration (“GSA”) contract vehicles, have increased competition for U.S. government contracts, reduced backlogs by shortening periods of performance on contracts and increased pricing pressure.
The increase in revenues for fiscal 2023 as compared to fiscal 2022, was primarily attributable to a net increase in volumes on certain programs and net write-ups, partially offset by the completion of certain contracts.
The increase in operating income for fiscal 2025 as compared to fiscal 2024, was primarily attributable to program wins and a net increase in volumes, partially offset by program completions and a net decrease in contract write-ups in the current year.
Annual Report Table of Contents PART II SUMMARY OF CASH FLOWS The following table summarizes cash flow information for the periods presented: Year Ended (in millions) January 3, 2025 December 29, 2023 December 30, 2022 Net cash provided by operating activities (1) $ 1,392 $ 1,165 $ 992 Net cash used in investing activities (142) (211) (313) Net cash used in financing activities (1,084) (715) (865) (1) Net cash provided by operating activities during the year ended December 30, 2022, was recast to present the effect of foreign exchange rate changes on cash, cash equivalents and restricted cash as a separate line in the consolidated statements of cash flows.
SUMMARY OF CASH FLOWS The following table summarizes cash flow information for the periods presented: Year Ended (in millions) January 2, 2026 January 3, 2025 December 29, 2023 Net cash provided by operating activities (1) $ 1,750 $ 1,435 $ 1,187 Net cash used in investing activities (405) (142) (211) Net cash used in financing activities (1,145) (1,084) (715) (1) Net cash provided by operating activities during the year ended January 3, 2025, and December 29, 2023, was recast to reflect a change in the accounting policy, see "Note 3—Summary of Significant Accounting Policies." Net cash provided by operating activities increased $315 million for fiscal 2025 as compared to fiscal 2024.
Annual Report 51 Table of Contents PART II LIQUIDITY AND CAPITAL RESOURCES OVERVIEW OF LIQUIDITY As of January 3, 2025, we had $943 million in cash and cash equivalents. We have a senior unsecured revolving credit facility which can provide up to $1.0 billion in additional borrowing, if required.
We have a senior unsecured revolving credit facility which can provide up to $1.0 billion in additional borrowing, if required. As of January 2, 2026, and January 3, 2025, there were no borrowings outstanding under any revolving credit facility. We had outstanding debt of $4.6 billion and $4.7 billion at January 2, 2026, and January 3, 2025, respectively.
The following is a list of unregistered debt securities guaranteed by Leidos Holdings, Inc.
The following is a list of unregistered debt securities guaranteed by Leidos Holdings, Inc. Senior unsecured unregistered debt securities issued by Leidos, Inc.: $250 million 7.125% notes, due July 2032 $300 million 5.500% notes, due July 2033 Leidos Holdings, Inc.
Our significant initiatives include the following: u achieving annual revenue growth through internal collaboration and better leveraging of key differentiators across our company and the deployment of resources and investments into profitable growth markets; u continued improvement in our back-office infrastructure and related business processes for greater effectiveness and efficiency across all business functions; and u disciplined deployment of our cash resources and use of our capital structure to enhance shareholder value while retaining an appropriate amount of financial leverage.
Our significant initiatives include the following: u achieving annual revenue growth guided by our NorthStar 2030 strategy focusing on the growth pillars aligned with our customers’ priorities; u continual improvements in the effectiveness and efficiency of our business processes driven by our enterprise transformation office leveraging artificial intelligence and automation; and u disciplined deployment of our cash resources and use of our capital structure to enhance shareholder value while retaining an appropriate amount of financial leverage.
We allocate the transaction price of a contract to its performance obligations primarily based upon the proportional individual selling prices. The standalone selling price of the performance obligations is generally based on an expected cost-plus margin approach.
We allocate the total contract price to each of the performance obligations within the contract proportionally based upon their individual standalone selling prices. We generally determine the standalone price by estimating the cost to perform the work and adding an expected profit margin.
The increase in operating income for fiscal 2023 as compared to fiscal 2022, was primarily attributable to net write-ups on certain programs. 48 Leidos Holdings, Inc.
The increase in operating income for fiscal 2025 as compared to fiscal 2024, was primarily due to operational efficiencies on certain programs and a net increase in write-ups primarily within the managed health services business, partially offset by increased general and administrative expenses. 46 Leidos Holdings, Inc.
In fiscal 2022, we entered into an ASR with a financial institution to repurchase shares of our outstanding common stock. We paid $500 million to the financial institution and received 4.8 million shares (see “Note 16—Earnings Per Share” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K). All shares delivered were immediately retired.
Annual Report 49 Table of Contents PART II In fiscal 2025, we entered into an ASR 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.
The increase was primarily due to faster collections on receivables and favorable timing of customer advance payments, partially offset by higher tax payments of $260 million mainly in connection with the TCJA provision. Net cash used in investing activities decreased $69 million for fiscal 2024 as compared to fiscal 2023.
The increase was primarily due to an increase in tax benefits from the impacts of the OBBBA legislation and favorable changes in net working capital, partially offset by the timing of payroll and employee benefit payments. Net cash provided by operating activities increased $248 million for fiscal 2024 as compared to fiscal 2023.
For fiscal 2024, operating expenses increased by $27 million, or less than 1%, compared to fiscal 2023. Operating margin for fiscal 2024 was 11% compared to 4% for fiscal 2023. Operating income was $1,827 million, a $1,206 million increase compared to fiscal 2023.
Operating margin for fiscal 2025 was 12% compared to 11% for fiscal 2024. Operating income was $2,109 million, a $282 million increase compared to fiscal 2024.
Our quantitative analysis utilizes discounted cash flow models and market multiple valuation methods to estimate reporting unit fair values. Discounted cash flow analyses rely on significant judgment and assumptions about expected future cash flows, weighted-average cost of capital, discount rates, expected long-term growth rates and operating margins.
When we perform a quantitative analysis, we estimate the fair value of a reporting unit using discounted future cash flows and market multiple models. These models require us to make significant assumptions about future cash flows, discount rates, long-term growth, profit margins and in the identification of comparable public companies.
Annual Report 49 Table of Contents PART II The increase in revenues for fiscal 2024 as compared to fiscal 2023, was primarily attributable to program wins and a net increase in volumes on certain programs, partially offset by the completion of certain contracts.
Year Ended Defense Systems (dollars in millions) January 2, 2026 January 3, 2025 Percent change Revenues $ 2,179 $ 2,030 7 % Operating income 156 94 66 % Operating margin 7.2 % 4.6 % The increase in revenues for fiscal 2025 as compared to fiscal 2024, was primarily attributable to program wins and a net increase in volumes, partially offset by the completion of programs.
The goodwill impairment resulted in a lower difference between the fair value and carrying value for the SES reporting unit and therefore, in fiscal 2024, we performed a quantitative impairment analysis for the SES reporting unit, which resulted in no further impairment.
The analysis resulted in the fair value of the reporting unit exceeding the carrying value for both periods. In fiscal 2025 and 2024, we performed our annual test for impairment as of October 4, 2025, and September 28, 2024, respectively, which resulted in no impairments being identified.
These assumptions are based on estimates of future sales and earnings after considering such factors as general market conditions, customer budgets, existing firm and future orders, changes in working capital, long term business plans and recent operating performance.
These assumptions take into account expected future sales and earnings after considering market conditions, customer spending, existing and expected orders, working capital needs, long-term business plans and recent performance. Operations of the Security Enterprise Solutions (“SES”) reporting unit within the Commercial & International reportable segment rely heavily on the sales and servicing of security and detection products.
Non-operating expense, net increased by $16 million for fiscal 2023 as compared to fiscal 2022, primarily due to a net increase in interest expense driven by higher interest rates and refinancing activities. PROVISION FOR INCOME TAXES Our effective tax rate was 23.7%, 48.4% and 21.8% in fiscal 2024, 2023 and 2022, respectively.
PROVISION FOR INCOME TAXES Our effective tax rate was 23.4% in fiscal 2025 compared to 23.7% in fiscal 2024.
As of January 3, 2025, and December 29, 2023, goodwill represented 46% and 48% of our total assets, respectively. We may perform qualitative or quantitative analysis to test for impairment. Qualitative factors include macroeconomic, industry and market considerations, overall financial performance, industry, legal and other relevant events and factors affecting the reporting unit.
When testing goodwill for impairment, we use either a qualitative or quantitative analysis. The qualitative analysis considers factors such as overall economic conditions, industry and market trends, the financial performance of the business, and legal or other significant events that could affect the reporting unit.
For certain product sales, performance obligations may be allocated to a contract's transaction price based on prices observed in other standalone sales or the residual value method. Substantially all of our contracts do not contain a significant financing component, which would require an adjustment to the transaction price of the contract.
For some product sales, we may instead use the standalone prices of similar products or apply a residual value method. Nearly all of our contracts do not include a significant financing element, so we typically do not adjust the contract price for the timing of payments.
For more information on these risks and uncertainties, see “Risk Factors” in Part I of this Annual Report on Form 10-K. INTERNATIONAL MARKETS Sales to customers in international markets represented approximately 8% of total revenues for fiscal 2024, as compared to 9% and 8% of total revenues for fiscal 2023 and 2022, respectively.
We expect that a majority of the business that we seek in the foreseeable future will be awarded through a competitive bidding process. For more information on these risks and uncertainties, see “Risk Factors” in Part I of this Annual Report on Form 10-K.
Headquartered in Reston, Virginia, with 48,000, global employees, we bring domain-specific capabilities, technologies and insights to customers in each of these markets by leveraging seven technical core capabilities: trusted mission artificial intelligence, cyber operations, digital modernization, mission software systems, integrated systems, mission operations, and rapid prototyping and manufacturing. Our customers include the U.S. Department of Defense (“DoD”), the U.S.
Headquartered in Reston, Virginia, with 47,000 global employees, we pursue strategic growth across five pillars: space and maritime; energy infrastructure; digital modernization and cyber; mission software; and managed health services. Our customers include the U.S. Department of War (“DoW”), the U.S. Intelligence Community, the U.S.
In March 2023, we entered into a Credit Agreement with certain financial institutions, which provided for a senior unsecured term loan facility in an aggregate principal amount of $1.0 billion (the “Term Loan Facility”).
In connection with the stock purchase agreement, 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. (See "Note 22—Subsequent Events" of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K).
Removed
Unless indicated otherwise, references in this report to “we,” “us” and “our” refer collectively to Leidos and its consolidated subsidiaries. OVERVIEW Leidos is an industry and technology leader serving government and commercial customers with smarter, more efficient digital and mission innovations.
Added
Unless indicated otherwise, references in this report to “we,” “us” and “our” refer collectively to Leidos and its consolidated subsidiaries. In this section, we discuss our financial condition, changes in financial condition and results of our operations for the year ended January 2, 2026, compared to the year ended January 3, 2025.
Removed
Beginning in fiscal 2024, we realigned our business and operate in four reportable segments that are focused on specific, defined capability sets we bring to our customers. As a result of this change, prior year segment results and disclosures have been recast to reflect the current reportable segment structure.
Added
For a discussion and analysis comparing our results for the year ended January 3, 2025, to the year ended December 29, 2023, see our Annual Report on Form 10-K for the year ended January 3, 2025, filed with the SEC on February 11, 2025, under Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” OVERVIEW Leidos is an industry and technology leader serving government and commercial customers with smarter, more efficient digital and mission innovations.
Removed
For fiscal 2023, revenues increased $1.0 billion, or 7%, compared to fiscal 2022, primarily due to program wins, a net increase in volumes on certain programs and a net increase in revenues attributable to our business acquisitions. The increase was partially offset by the completion of certain contracts. Operating Expenses and Income Trend .
Added
On February 3, 2026, the House of Representatives passed five of the six remaining appropriations bills to fund the federal government for fiscal year 2026. On February 13, 2026, the Homeland Security bill was not passed and DHS was shutdown until another continuing resolution is agreed upon.
Removed
The increase in operating income was primarily attributable to the impairment and restructuring charges of $689 million at the SES reporting unit in fiscal 2023 as compared to $11 million of impairment charges for the facility rationalization effort in fiscal 2024 (see "Note 10—Leases" of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K) and a net increase in volumes on certain programs. 46 Leidos Holdings, Inc.
Added
NON-OPERATING EXPENSE, NET Non-operating expense, net increased by $12 million for fiscal 2025 as compared to fiscal 2024, primarily driven by a net increase in interest expense on borrowings, partially offset by a gain on an immaterial divested business that was not aligned to the Company's long term strategy.
Removed
Annual Report Table of Contents PART II For fiscal 2023, operating expenses increased by $1.5 billion, or 11%, compared to fiscal 2022. Operating margin for fiscal 2023 was 4.0% compared to 7.6% for fiscal 2022. Operating income was $621 million, a $467 million decrease compared to fiscal 2022.
Added
The decrease to the effective tax rate was primarily due to a decrease in unrecognized tax benefits, partially offset by the impacts from cross-border taxes resulting from the H.R.1 Reconciliation Act, commonly referred to as the One Big Beautiful Bill Act (the “OBBBA”).
Removed
The decrease was primarily attributable to impairment and restructuring charges of $689 million at the SES reporting unit in fiscal 2023 (see “Note 8—Goodwill and Intangible Assets” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K).
Added
BOOKINGS AND BACKLOG Effective fiscal 2025, we changed our backlog policy to include estimated future revenue on task orders expected to be awarded under sole source indefinite delivery/indefinite quantity ("IDIQ") contracts in our reported backlog. We believe this presentation provides enhanced visibility for investors and more accurately reflects the future revenues we expect to generate from our business.
Removed
On December 21, 2024, the U.S. federal government avoided a shutdown by passing into law a continuing resolution that provides government funding through March 14, 2025. The continuing resolution gives lawmakers additional time to consider the 12 appropriations bills for government fiscal year 2025.
Added
Leidos Holdings, Inc. Annual Report 47 Table of Contents PART II We had net bookings of $17.5 billion and $23.2 billion during fiscal 2025 and 2024, respectively.
Removed
Failure to pass the appropriations bills or another continuing resolution by March 14, 2025, will result in a partial or complete federal government shutdown. Trends in the U.S. government contracting process, including a shift towards multiple-awards contracts, in which certain contractors are preapproved using IDIQ and U.S.
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Backlog represents the revenues we expect to recognize under negotiated contracts and unissued task orders on sole source IDIQ contracts, to the extent we believe their execution and funding to be probable. Backlog does not include potential task orders expected to be awarded under multiple award IDIQ contracts. We segregate our backlog into two categories as follows: u Funded Backlog.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeFOREIGN CURRENCY RISK Although the majority of our transactions are denominated in U.S. dollars, some of our transactions are denominated in foreign currencies. Our foreign currency exchange rate risk relates to receipts from customers, payments to suppliers and certain intercompany transactions denominated in currencies other than our (or one of our subsidiaries’) functional currency.
Biggest changeOur foreign currency exchange rate risk relates to receipts from customers, payments to suppliers and certain intercompany transactions denominated in currencies other than our (or one of our subsidiaries’) functional currency. Our foreign operations represented 8% of total revenues for both fiscal 2025 and 2024, and 9% for fiscal 2023. Leidos Holdings, Inc.
CASH AND CASH EQUIVALENTS As of January 3, 2025, and December 29, 2023, our cash and cash equivalents included investments in several large institutional money market accounts. For fiscal 2024 and fiscal 2023, a hypothetical 10% interest rate movement would not have a significant impact on the value of our holdings or on interest income.
CASH AND CASH EQUIVALENTS As of January 2, 2026, and January 3, 2025, our cash and cash equivalents included investments in several large institutional money market accounts. For fiscal 2025 and fiscal 2024, a hypothetical 10% interest rate movement would not have a significant impact on the value of our holdings or on interest income. 54 Leidos Holdings, Inc.
DEBT AND DERIVATIVES At January 3, 2025, and December 29, 2023, we had $4.7 billion of debt, which included $1.0 billion related to our senior unsecured term loans that have a variable stated interest rate that is determined based on the Secured Overnight Financing Rate (“SOFR”) plus a margin. As a result, we may experience fluctuations in interest expense.
DEBT AND DERIVATIVES As of January 2, 2026, and January 3, 2025, we had $4.6 billion and $4.7 billion of debt, respectively, which included $500 million related to our senior unsecured term loans that have a variable stated interest rate that is determined based on the Secured Overnight Financing Rate (“SOFR”) plus a margin.
As of January 3, 2025, the notional value of the interest rate swap agreements was $500 million. The interest rate swap agreements effectively converted a portion of our variable rate borrowing to a fixed rate borrowing.
The interest rate swap agreements effectively converted a portion of our variable rate borrowing to a fixed rate borrowing. The fair value of our interest rate swap agreements with respect to our Variable Rate Loan was an asset of $4 million as of January 3, 2025. The interest rate swap agreements matured in August 2025.
We cannot predict future market fluctuations in interest rates and their impact on our interest rate swaps. A net hypothetical 10% movement in the one-month SOFR rate would not have a significant impact on our annual interest expense.
The counterparties to these agreements were financial institutions. We did not hold or issue derivative financial instruments for trading or speculative purposes. We cannot predict future market fluctuations in interest rates. A net hypothetical 10% movement in the one-month SOFR rate would not have a significant impact on our annual interest expense.
We have interest rate swap agreements to hedge the cash flows of a portion of our variable rate senior unsecured term loan (“Variable Rate Loan”). Under the terms of the interest rate swap agreements, we receive monthly variable interest payments based on the one-month SOFR rate and pay interest at a fixed rate.
As a result, we may experience fluctuations in interest expense. We had interest rate swap agreements to hedge the cash flows of a portion of our variable rate senior unsecured term loan (“Variable Rate Loan”).
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The fair value of our interest rate swap agreements with respect to our Variable Rate Loan was an asset of $4 million and $11 million as of January 3, 2025, and December 29, 2023, respectively. The counterparties to these agreements are financial institutions. We do not hold or issue derivative financial instruments for trading or speculative purposes.
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Under the terms of the interest rate swap agreements, we received monthly variable interest payments based on the one-month SOFR rate and paid interest at a fixed rate. As of January 3, 2025, the notional value of the interest rate swap agreements was $500 million.
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Our foreign operations represented 8%, 9% and 8% of total revenues for fiscal 2024, 2023 and 2022, respectively. Leidos Holdings, Inc. Annual Report 57 Table of Contents PART II
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Annual Report Table of Contents PART II FOREIGN CURRENCY RISK Although the majority of our transactions are denominated in U.S. dollars, some of our transactions are denominated in foreign currencies.
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Annual Report 55 Table of Contents PART II

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