Abstract

Leidos will report quarterly results on February 17, 2026 Pre-Market, with consensus pointing to modest revenue growth and stronger earnings per share amid recent contract wins and strategic initiatives.

Market Forecast

Based on the latest forecasts, Leidos projects revenue of 4.31 billion in the current quarter, up 4.37% year over year, with adjusted EPS of 2.61, up 14.65% year over year, and EBIT of 0.49 billion, up 9.45% year over year. The main business outlook indicates steady execution in National Security and Digital, supported by recently awarded federal work and accelerated artificial intelligence governance initiatives. The most promising segment is Commercial and International with last quarter revenue of 0.57 billion within a company-level year-over-year revenue increase of 6.66% last quarter, signaling scope for incremental growth from portfolio expansion.

Last Quarter Review

Leidos delivered last quarter revenue of 4.47 billion, a gross profit margin of 18.37%, GAAP net profit attributable to the parent company of 0.37 billion, a net profit margin of 8.21%, and adjusted EPS of 3.05, up 4.10% year over year. Revenue exceeded the prior-quarter estimate by 0.19 billion and adjusted EPS topped expectations by 0.34, while GAAP net profit declined 6.14% quarter on quarter. National Security and Digital contributed 2.02 billion, Health and Civil 1.30 billion, Defense Systems 0.58 billion, and Commercial and International 0.57 billion, with total company revenue up 6.66% year over year, underscoring balanced growth across the portfolio.

Current Quarter Outlook

Main Business: National Security and Digital

National Security and Digital remains the core revenue engine, accounting for 2.02 billion last quarter, and the quarter-to-date news flow points to durable demand visibility. On February 9, 2026, Leidos announced a 142.00 million award from the U.S. Defense Information Systems Agency to upgrade IT operations for the Compartmented Enterprise Services Office, which directly supports high-security environments and should translate into near-term revenue conversion within this fiscal window. On January 22, 2026, management highlighted a collaboration to build AI for federal agencies, positioning Leidos to accelerate delivery cycles, enhance solution productivity, and potentially support margin resilience in digital modernization programs. On February 4, 2026, the company unveiled a partnership to compress AI governance intake from weeks to hours, improving compliance throughput and helping avoid costly delays on complex deployments. The combination of fresh awards, operational accelerators in AI governance, and a strong execution track record suggests stable backlog burn and project momentum that can underpin the 4.37% year-over-year revenue growth forecast and the 9.45% year-over-year EBIT expansion implied in current-quarter estimates. Key variables to watch include the pace of award-to-revenue conversion and any mix shift between services and higher-margin technology integrations, which would influence how far adjusted EPS can outgrow revenue, consistent with the 14.65% year-over-year EPS forecast. While last quarter’s gross margin printed at 18.37% and net margin at 8.21%, the operational improvements in AI governance and workflow automation may help mitigate cost overheads on secure systems work, which could be reflected in EBIT leverage if program execution remains timely and efficient.

Most Promising Business: Commercial and International

Commercial and International posted 0.57 billion last quarter and is poised for incremental expansion via portfolio enhancement and cross-selling opportunities. On January 26, 2026, Leidos announced an agreement to buy Entrust Solutions for 2.40 billion in cash, a strategic transaction that broadens Leidos’ capabilities in utility-focused services and infrastructure solutions. That acquisition can extend Leidos’ reach into regulated utility markets and infrastructure modernization programs, opening routes to multi-year service contracts and programmatic expansions that complement existing commercial offerings. Over time, integrating Entrust Solutions could support revenue diversification and reduce variance tied to federal procurement cycles, especially if management can drive operating efficiency and align offerings with Leidos’ established enterprise capabilities in data, cybersecurity, and mission operations tooling. The near-term focus will be integration planning, governance alignment, customer retention, and cross-sell activation, all of which determine the pace at which revenue synergies materialize and where margins settle for the combined portfolio. Given last quarter’s company-level 6.66% year-over-year revenue growth and this quarter’s forecast for revenue growth of 4.37%, Commercial and International stands to benefit if the Entrust transaction closes on plan, with potential uplift in backlog breadth and a more balanced revenue mix that can help stabilize earnings variability over the next few quarters.

Factors Most Impacting Stock Price This Quarter

Earnings quality versus expectations will be central: the market is monitoring whether adjusted EPS of 2.61 can translate from the stronger EBIT forecast while preserving margin discipline relative to last quarter’s 18.37% gross margin and 8.21% net margin. Revenue conversion from recent awards and contracts, such as the 142.00 million DISA program and AI-driven acceleration initiatives, will shape views on backlog durability and top-line resilience. Integration signals for Entrust Solutions—timelines, cost discipline, early customer engagement, and synergy roadmaps—will influence sentiment around medium-term growth and margin trajectory. Analyst commentary suggests valuation sensitivity to consistency in earnings beats and margin execution; stronger-than-expected EPS growth, supported by operational efficiencies from AI governance and program delivery, would be viewed favorably. Conversely, any indication of integration costs exceeding plan, or award conversion slipping against timelines, may affect short-term price reactions. Investors are also attuned to management’s qualitative guidance on program mix and the cadence of large contract awards, as that context is likely to shape expectations for EBIT sustainability and the capacity to compound adjusted EPS beyond the current 14.65% year-over-year forecast.

Analyst Opinions

Neutral/Hold views are the prevailing stance across recent updates, outweighing buys in ratio and framing a measured outlook for the current quarter. On January 15, 2026, UBS maintained a Neutral rating and adjusted its price target to 204.00, signaling balanced near-term expectations around earnings consistency, revenue trajectory, and integration visibility. On January 16, 2026, TD Cowen reiterated a Hold rating with a 190.00 price target, noting that the setup supports modest top-line expansion and improving EPS but underscoring the need to see sustained margin execution and evidence of integration progress to re-rate meaningfully. On January 9, 2026, Stifel downgraded the shares to Hold, which added caution on valuation after a strong run and pointed to watch items including program timing and the revenue mix’s effect on margin prints. These neutral-to-hold perspectives collectively emphasize a “show-me” posture: the market wants confirmation that this quarter’s forecasted 4.37% year-over-year revenue growth and 14.65% year-over-year EPS growth will translate into continued beats without undue dilution from integration, working capital dynamics, or program mix. They also stress that while the recent federal award momentum and AI governance accelerators are positive developments, the translation into margin expansion must be observed in reported results, especially in light of last quarter’s 18.37% gross margin and 8.21% net margin, and the quarter-on-quarter decline in GAAP net profit of 6.14%. In the event management pairs in-line revenue delivery with above-consensus adjusted EPS and a credible integration update on Entrust Solutions—demonstrating synergy activation and clear operational milestones—neutral holders indicate potential openness to upward revisions, but they prefer confirmation via reported execution rather than forward narratives alone. As the company reports on February 17, 2026, the majority neutral/hold camp will gauge the quality of earnings and operational details—award conversion pacing, AI governance impact on delivery and compliance cycles, and integration plans—before shifting stances.