Part I - Financial Information [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The unaudited condensed consolidated financial statements for the period ended July 4, 2025, reflect revenue growth, increased net income, higher total assets, and positive cash flow from operations Condensed Consolidated Statements of Operations Highlights (in millions, except per share data) | Metric | Three Months Ended July 4, 2025 | Three Months Ended June 28, 2024 | Six Months Ended July 4, 2025 | Six Months Ended June 28, 2024 | | :--- | :--- | :--- | :--- | :--- | | **Revenues** | $4,253 | $4,132 | $8,498 | $8,107 | | **Operating Income** | $571 | $475 | $1,101 | $890 | | **Net Income Attributable to Leidos** | $391 | $322 | $754 | $606 | | **Diluted EPS** | $3.01 | $2.37 | $5.80 | $4.42 | Condensed Consolidated Balance Sheet Highlights (in millions) | Metric | July 4, 2025 | January 3, 2025 | | :--- | :--- | :--- | | **Total Current Assets** | $4,781 | $4,334 | | **Total Assets** | $13,549 | $13,010 | | **Total Current Liabilities** | $2,948 | $3,560 | | **Total Liabilities** | $8,842 | $8,550 | | **Total Stockholders' Equity** | $4,707 | $4,460 | Condensed Consolidated Statements of Cash Flows Highlights (in millions) | Metric | Six Months Ended July 4, 2025 | Six Months Ended June 28, 2024 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $544 | $494 | | **Net cash used in investing activities** | ($336) | ($33) | | **Net cash used in financing activities** | ($193) | ($387) | [Note 2–Revenues](index=13&type=section&id=Note%202%E2%80%93Revenues) Remaining Performance Obligations totaled **$16 billion**, with most revenue derived from U.S. government customers, and disaggregated revenues reached **$4.23 billion** for the quarter - Remaining Performance Obligations (RPO) stood at **$16 billion**, with approximately **61%** expected to be recognized as revenue in the next 12 months and **80%** within 24 months[36](index=36&type=chunk) Disaggregated Revenues by Customer-Type (Three Months Ended July 4, 2025, in millions) | Customer Type | National Security & Digital | Health & Civil | Commercial & International | Defense Systems | Total | | :--- | :--- | :--- | :--- | :--- | | DoD and U.S. Intelligence Community | $1,324 | $253 | $2 | $486 | $2,065 | | Other U.S. government agencies | $507 | $995 | $99 | $23 | $1,624 | | Commercial and non-U.S. customers | $26 | $19 | $465 | $34 | $544 | | **Total** | **$1,857** | **$1,267** | **$566** | **$543** | **$4,233** | [Note 3–Acquisitions, Goodwill and Intangible Assets](index=16&type=section&id=Note%203%E2%80%93Acquisitions%2C%20Goodwill%20and%20Intangible%20Assets) The acquisition of Kudu Dynamics for **$291 million** resulted in **$244 million** in goodwill and **$57 million** in intangible assets, contributing **$12 million** in revenue and increasing total goodwill to **$6.36 billion** - Completed the acquisition of Kudu Dynamics on May 23, 2025, for a preliminary purchase consideration of **$291 million**, net of cash[45](index=45&type=chunk) - The acquisition added **$244 million** in tax-deductible goodwill and **$57 million** in intangible assets, contributing **$12 million** in revenues to the National Security & Digital segment for the quarter[46](index=46&type=chunk) Goodwill by Reportable Segment (in millions) | Segment | Goodwill at Jan 3, 2025 | Acquisition | Goodwill at July 4, 2025 | | :--- | :--- | :--- | | National Security & Digital | $2,758 | $244 | $3,002 | | Health & Civil | $1,366 | $0 | $1,366 | | Commercial & International | $772 | $0 | $803 | | Defense Systems | $1,188 | $0 | $1,188 | | **Total** | **$6,084** | **$244** | **$6,359** | [Note 6–Debt](index=20&type=section&id=Note%206%E2%80%93Debt) Long-term debt increased to **$5.1 billion** due to a **$1 billion** senior note issuance, used for debt retirement and a **$500 million** share repurchase, while maintaining covenant compliance - On February 20, 2025, the company issued **$1 billion** in new senior notes: **$500 million** at **5.40%** due 2032 and **$500 million** at **5.50%** due 2035[65](index=65&type=chunk) - Proceeds from the new notes were used to retire **$500 million** of senior notes due May 2025 and to repurchase **$500 million** of common stock via an Accelerated Share Repurchase (ASR) agreement[65](index=65&type=chunk) - As of July 4, 2025, the company was in compliance with all financial covenants for its debt facilities[69](index=69&type=chunk) [Note 8–Earnings Per Share](index=21&type=section&id=Note%208%E2%80%93Earnings%20Per%20Share) A **$500 million** Accelerated Share Repurchase (ASR) on February 20, 2025, led to the retirement of **3.6 million** shares at an average price of **$138.44** per share - On February 20, 2025, the company entered into a **$500 million** Accelerated Share Repurchase (ASR) agreement[72](index=72&type=chunk) - The ASR resulted in the total repurchase of **3.6 million** shares at an average price of **$138.44** per share, which were subsequently retired[72](index=72&type=chunk) [Note 9–Income Taxes](index=22&type=section&id=Note%209%E2%80%93Income%20Taxes) The OBBBA enactment on July 4, 2025, introduced immediate R&D expensing and **100%** bonus depreciation, decreasing income taxes payable by **$150 million** and deferred tax assets by **$130 million** - The enactment of the OBBBA tax legislation on July 4, 2025, allows for immediate expensing of U.S. R&D costs and reinstates **100%** bonus depreciation[75](index=75&type=chunk) - The immediate impact of the OBBBA was a **$150 million** decrease in income taxes payable and a **$130 million** decrease in deferred tax assets[75](index=75&type=chunk) - The estimated full-year fiscal 2025 impact is a decrease of approximately **$280 million** to income taxes payable and a **$245 million** decrease to net deferred taxes[75](index=75&type=chunk) [Note 10–Business Segments](index=22&type=section&id=Note%2010%E2%80%93Business%20Segments) All four business segments reported revenue growth, with Health & Civil being the most profitable at **$311 million** in operating income, and Commercial & International showing a significant turnaround Segment Revenues and Operating Income (Three Months Ended, in millions) | Segment | Revenues (Q2 2025) | Revenues (Q2 2024) | Operating Income (Q2 2025) | Operating Income (Loss) (Q2 2024) | | :--- | :--- | :--- | :--- | :--- | | National Security & Digital | $1,872 | $1,813 | $188 | $183 | | Health & Civil | $1,272 | $1,263 | $311 | $307 | | Commercial & International | $566 | $561 | $40 | ($11) | | Defense Systems | $543 | $495 | $41 | $34 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Revenue increased by **2.9%** for the quarter, operating margin improved to **13.4%**, total backlog grew to **$46.2 billion**, and liquidity remains strong with **$930 million** in cash, aided by tax benefits Consolidated Results of Operations Highlights (in millions) | Metric | Three Months Ended July 4, 2025 | Three Months Ended June 28, 2024 | % Change | | :--- | :--- | :--- | :--- | | **Revenues** | $4,253 | $4,132 | 2.9% | | **Operating Income** | $571 | $475 | 20.2% | | **Operating Margin** | 13.4% | 11.5% | N/A | - Corporate operating loss decreased significantly, primarily due to a **$25 million** insurance reimbursement for legal costs[114](index=114&type=chunk) - The OBBBA tax legislation is anticipated to decrease federal and state tax payments by approximately **$150 million** in fiscal 2025[134](index=134&type=chunk) [Bookings and Backlog](index=29&type=section&id=Bookings%20and%20Backlog) Net bookings reached **$3.9 billion** for the quarter, increasing total backlog to **$46.2 billion** due to new awards and a policy change to include sole-source IDIQ estimates - Effective Q1 2025, the company changed its backlog policy to include estimated future revenue on task orders expected under sole-source IDIQ contracts[121](index=121&type=chunk) Total Backlog by Segment (in millions) | Segment | July 4, 2025 | June 28, 2024 (Recast) | | :--- | :--- | :--- | | National Security & Digital | $24,861 | $22,385 | | Health & Civil | $10,788 | $10,622 | | Commercial & International | $5,099 | $4,585 | | Defense Systems | $5,462 | $3,959 | | **Total** | **$46,210** | **$41,551** | [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintained strong liquidity with **$930 million** in cash and a **$1 billion** credit facility, generating **$544 million** in operating cash flow, while using cash for acquisitions, share repurchases, and dividends - Cash and cash equivalents stood at **$930 million**, with an additional **$1 billion** available under the revolving credit facility[126](index=126&type=chunk) - Net cash from operating activities for the six months ended July 4, 2025, increased to **$544 million** from **$494 million** in the prior year, driven by higher earnings and tax benefits from the OBBBA[136](index=136&type=chunk)[137](index=137&type=chunk) - Investing activities were primarily driven by the **$285 million** net cash paid for the Kudu Dynamics acquisition[138](index=138&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes in market risk exposure were reported compared to the previous Annual Report on Form 10-K - There were no material changes in market risk exposure during the quarter[153](index=153&type=chunk) [Item 4. Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective, excluding the Kudu Dynamics acquisition from the Q2 internal control evaluation - Management concluded that disclosure controls and procedures were effective as of July 4, 2025[154](index=154&type=chunk) - The recently acquired Kudu Dynamics was excluded from the evaluation of internal control over financial reporting for the second quarter of fiscal 2025[155](index=155&type=chunk) Part II - Other Information [Item 1. Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) Details on legal proceedings, including claims, lawsuits, and government investigations, are provided in Note 11 of the condensed consolidated financial statements - Details on legal proceedings are provided in "Note 11–Commitments and Contingencies" of the financial statements[158](index=158&type=chunk) [Item 1A. Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors were reported compared to the disclosures in the Annual Report on Form 10-K - No material changes to risk factors were reported for the quarter[159](index=159&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=35&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased **589,667** shares at an average price of **$138.97** per share, primarily through an ASR, with **3.8 million** shares remaining authorized for repurchase Share Repurchases for the Quarter Ended July 4, 2025 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 5 - April 30, 2025 | — | $— | | May 1 - May 31, 2025 | 569,772 | $138.44 | | June 1 - June 30, 2025 | 19,895 | $153.96 | | July 1 - July 4, 2025 | — | $— | | **Total** | **589,667** | **$138.97** | - As of July 4, 2025, **3,793,813** shares may yet be purchased under the publicly announced repurchase program[161](index=161&type=chunk)

Core Insights - Leidos reported $4.25 billion in revenue for Q2 2025, a year-over-year increase of 2.9%, with an EPS of $3.21 compared to $2.63 a year ago, resulting in a surprise of +0.52% over the Zacks Consensus Estimate [1] - The EPS surprise was +22.05% compared to the consensus estimate of $2.63 [1] Revenue Breakdown - Health & Civil revenues were $1.27 billion, slightly below the average estimate of $1.28 billion, reflecting a year-over-year change of +0.7% [4] - National Security and Digital revenues reached $1.87 billion, exceeding the average estimate of $1.86 billion, with a year-over-year increase of +3.3% [4] - Commercial & International revenues were $566 million, below the average estimate of $584.26 million, showing a year-over-year change of +0.9% [4] - Defense Systems revenues amounted to $543 million, surpassing the average estimate of $514.06 million, with a year-over-year increase of +9.7% [4] Operating Income Analysis - Defense Systems operating income was $41 million, exceeding the average estimate of $33.31 million [4] - Non-GAAP operating income for Defense Systems was $53 million, compared to the average estimate of $45.61 million [4] - National Security & Digital operating income was $188 million, closely matching the average estimate of $188.13 million [4] - Non-GAAP operating income for Health & Civil was $317 million, significantly above the average estimate of $270.25 million [4] - Non-GAAP operating income for National Security and Digital was $195 million, exceeding the average estimate of $185.47 million [4] - Non-GAAP operating income for Commercial & International was $48 million, slightly above the average estimate of $47.82 million [4] - Health & Civil operating income was $311 million, above the average estimate of $289.99 million [4] - Commercial & International operating income was $40 million, exceeding the average estimate of $34.83 million [4] Stock Performance - Leidos shares have returned -2.1% over the past month, while the Zacks S&P 500 composite has changed by +1% [3] - The stock currently holds a Zacks Rank 2 (Buy), indicating potential outperformance in the near term [3]

Financial Data and Key Metrics Changes - The company reported robust revenue growth of 4.8% year to date, with Q2 revenues reaching $4.25 billion, up 3% year over year [8][28] - Adjusted EBITDA for the quarter was $647 million, reflecting a 16% year-over-year increase, with an EBITDA margin of 15.2%, the highest ever by 100 basis points [29][30] - Non-GAAP diluted EPS grew 22% to $3.21, surpassing the previous record of $2.97 [29] Business Line Data and Key Metrics Changes - National Security and Digital revenues increased by 3% year over year, with a non-GAAP operating income margin of 10.4% [31] - Health and Civil revenues saw a 1% year-over-year increase, maintaining a non-GAAP operating income margin of 24.9% [33] - Defense Systems revenue experienced the highest growth at 10% year over year, driven by increased volumes in various defense programs [34] Market Data and Key Metrics Changes - The company noted a strong snapback in the book-to-bill ratio to 0.9 in Q2, with more than half of the awards being new and takeaway business [21][22] - The pipeline of opportunities is robust, with expectations for a greater awards pace in the latter half of the year [22][38] Company Strategy and Development Direction - The company is executing its North Star 2030 strategy, focusing on five growth pillars: space and maritime, energy infrastructure, digital modernization and cyber, mission software, and managed health services [10][24] - The administration's funding priorities align with the company's growth pillars, providing significant opportunities in areas such as air traffic control modernization and border security [11][56] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the improving customer decision environment and the potential for increased awards in the second half of the year [21][38] - The company raised its full-year guidance for 2025, reflecting confidence in future cash flows and ongoing investments [39] Other Important Information - The company completed the Kudu Dynamics acquisition, adding $400 million in pipeline opportunities and enhancing its capabilities [23][36] - The company ended the quarter with $5.1 billion in debt and a gross leverage ratio of 2.2 times, indicating a strong balance sheet for future capital deployment [37] Q&A Session Summary Question: Potential financial impact of GSA initiative - Management views the GSA's increased role in procurement positively, seeing it as an opportunity for growth rather than a threat [41][42] Question: Opportunities for organic investment in maritime space - Management is excited about opportunities in the maritime sector, particularly in unmanned autonomous vehicles, and is investing in prototypes [53][56] Question: Opportunities in the reconciliation bill - Management identified billions in near-term addressable funding across various sectors, including FAA modernization and border security [65][66] Question: Impact of large contract awards to competitors - Management does not see large awards to competitors as a significant threat but rather as an opportunity to leverage their own capabilities in AI and commercial technology [88][90] Question: Update on Dynetics acquisition - Management expressed confidence in the Dynetics acquisition, noting improved performance and growth potential in defense capabilities [99][101]

Financial Data and Key Metrics Changes - The company reported Q2 revenues of $4.25 billion, up 3% year-over-year, and adjusted EBITDA of $647 million, up 16% year-over-year, with an EBITDA margin of 15.2%, the highest ever by 100 basis points [27][28][37] - Non-GAAP diluted EPS grew 22% to $3.21, surpassing the previous record of $2.97 [28] - Operating cash flow was $486 million, with free cash flow of $457 million, resulting in a free cash flow conversion of 110% [34] Business Line Data and Key Metrics Changes - National Security and Digital revenues increased by 3% year-over-year, with a non-GAAP operating income margin of 10.4% [30] - Health and Civil revenues increased by 1% year-over-year, with a non-GAAP operating income margin of 24.9% [32] - Defense Systems revenue saw the highest growth at 10% year-over-year, with non-GAAP operating margins of 9.8% [33] Market Data and Key Metrics Changes - The company noted a robust pipeline of opportunities amounting to $70 billion, with approximately 75% being new work rather than recompete [102] - The administration's funding priorities are expected to drive significant opportunities in areas such as FAA modernization and border security [61][62] Company Strategy and Development Direction - The company is executing its North Star 2030 strategy, focusing on five growth pillars: space and maritime, energy infrastructure, digital modernization and cyber, mission software, and managed health services [8][22] - The company is actively seeking constructive acquisitions that align with its growth pillars and enhance shareholder value [22][23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the improving customer decision environment and the expected increase in awards in the second half of the year [20][21] - The company raised its full-year guidance for 2025, reflecting confidence in funding trajectories and ongoing contract reviews [36][37] Other Important Information - The company completed the Kudu Dynamics acquisition, adding $400 million in pipeline opportunities and enhancing its competitive position [22][34] - The company is focused on leveraging AI and automation to drive down costs and improve operational efficiency [29][16] Q&A Session Summary Question: Impact of GSA initiative on financials - Management views the GSA's increased role in procurement positively, as it aligns with the company's capabilities and focus on mission systems [41][42][46] Question: Opportunities for organic investment in maritime space - Management highlighted strong demand signals and ongoing investments in unmanned autonomous vehicles, particularly in the Indo-Pacific region [55][56] Question: Scale of opportunities in scanning business - Management identified billions in addressable funding related to FAA modernization and border security, emphasizing the company's readiness to capture these opportunities [61][62] Question: Competitive landscape and recent large awards - Management acknowledged the competitive landscape but emphasized their unique capabilities in deploying AI and mission systems, viewing it as an opportunity rather than a threat [82][84] Question: Update on Dynetics acquisition and growth - Management expressed confidence in the Dynetics acquisition, noting improved performance and growth potential in defense capabilities [90][92]

Company Performance - Leidos reported quarterly earnings of $3.21 per share, exceeding the Zacks Consensus Estimate of $2.63 per share, and showing an increase from $2.63 per share a year ago, resulting in an earnings surprise of +22.05% [1] - The company achieved revenues of $4.25 billion for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 0.52% and up from $4.13 billion year-over-year [2] - Over the last four quarters, Leidos has consistently surpassed consensus EPS estimates and revenue estimates [2] Stock Performance - Leidos shares have increased approximately 11.7% since the beginning of the year, outperforming the S&P 500's gain of 7.6% [3] - The stock currently holds a Zacks Rank 2 (Buy), indicating expectations for it to outperform the market in the near future [6] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $2.63 on revenues of $4.28 billion, and for the current fiscal year, it is $10.81 on revenues of $17.14 billion [7] - The outlook for the Computers - IT Services industry, where Leidos operates, is currently in the bottom 39% of Zacks industries, which may impact stock performance [8]

Financial Performance - Revenue increased by 2.9% from $4,132 million in Q2 FY24 to $4,253 million in Q2 FY25[14] - Adjusted EBITDA margin improved by 170 bps from 13.5% in Q2 FY24 to 15.2% in Q2 FY25[14] - Non-GAAP diluted EPS increased by 22.1% from $2.63 in Q2 FY24 to $3.21 in Q2 FY25[14] - Non-GAAP free cash flow was $457 million, driven by strong EBITDA generation and resulting in a free cash flow conversion of 110%[17] Segment Performance - National Security & Digital segment revenue increased by 3.3% from $1,813 million to $1,872 million[16] - Health & Civil segment revenue increased by 0.7% from $1,263 million to $1,272 million[16] - Commercial & International segment revenue increased by 0.9% from $561 million to $566 million[16] - Defense Systems segment revenue increased by 9.7% from $495 million to $543 million[16] - Commercial & International Non-GAAP OI % increased by 780 bps from 0.7% to 8.5%[16] Guidance - Revenue guidance is $17.00 - $17.25 billion[18] - Adjusted EBITDA margin guidance is mid 13%[18] - Non-GAAP Diluted EPS guidance is $11.15 - $11.45[18] - Cash Flows Provided by Operating Activities guidance is approximately $1.65 billion[18]

Core Insights - Leidos Holdings, Inc. reported strong financial results for Q2 FY2025, with significant growth in earnings and revenue, driven by a differentiated portfolio and alignment with government priorities [2][4][8] Financial Performance - Revenues for Q2 FY2025 reached $4.25 billion, a 3% increase from $4.13 billion in Q2 FY2024, attributed to heightened demand across all customer segments, particularly in Defense Systems [4][8] - Net income for the quarter was $393 million, or $3.01 per diluted share, reflecting year-over-year increases of 21% and 27%, respectively [4][8] - Adjusted EBITDA was $647 million, up 16% year-over-year, with an adjusted EBITDA margin of 15.2%, compared to 13.5% in the prior year [5][8] Cash Flow and Capital Management - The company generated $486 million in net cash from operating activities, with free cash flow of $457 million for the quarter [6][8] - Leidos made a strategic acquisition of Kudu Dynamics for $291 million, enhancing its capabilities in artificial intelligence-enabled cyber solutions [6][8] Business Awards and Backlog - Net bookings totaled $3.9 billion, resulting in a backlog of $46.2 billion, with $7.1 billion funded [8][9] - Significant contract awards included a $1.3 billion contract from the Intelligence Community and a $350 million subcontract for the U.S. Air Force [9][10] Forward Guidance - The company raised its fiscal year 2025 guidance, projecting revenues between $17.00 billion and $17.25 billion, and non-GAAP diluted EPS between $11.15 and $11.45 [11][8]

EXHIBIT 99.1 Leidos Posts Strong Second Quarter Results and Raises Full-Year Guidance RESTON, Va., August 5, 2025 – Leidos Holdings, Inc. (NYSE: LDOS) today reported financial results for the second quarter of fiscal year 2025, highlighted by robust earnings and revenue growth. "Our second quarter results showcase the strength of our differentiated portfolio and the alignment of our NorthStar 2030 strategy with the priorities of the new Administration," said Leidos Chief Executive Officer Tom Bell. "With re ...

Analysts on Wall Street project that Leidos (LDOS) will announce quarterly earnings of $2.63 per share in its forthcoming report, representing no change year over year. Revenues are projected to reach $4.23 billion, increasing 2.4% from the same quarter last year. The current level reflects a downward revision of 0.8% in the consensus EPS estimate for the quarter over the past 30 days. This demonstrates how the analysts covering the stock have collectively reappraised their initial projections over this per ...

Company Overview - Leidos (LDOS) is expected to report flat earnings of $2.63 per share for the quarter ended June 2025, with revenues projected at $4.23 billion, reflecting a 2.4% increase year-over-year [3][12] - The consensus EPS estimate has been revised down by 0.76% over the last 30 days, indicating a reassessment by analysts [4] Earnings Expectations - The earnings report is anticipated to be released on August 5, and the stock may rise if actual results exceed expectations, while a miss could lead to a decline [2] - Leidos has an Earnings ESP of +1.46%, suggesting a likelihood of beating the consensus EPS estimate, supported by a Zacks Rank of 2 (Buy) [12][10] Historical Performance - In the last reported quarter, Leidos exceeded the expected earnings of $2.47 per share by delivering $2.97, resulting in a surprise of +20.24% [13] - The company has consistently beaten consensus EPS estimates in the last four quarters [14] Industry Context - DXC Technology, another player in the IT services industry, is expected to report a decline in earnings per share to $0.64, a year-over-year decrease of -13.5%, with revenues projected at $3.07 billion, down 5.2% [18][19] - DXC Technology has an Earnings ESP of -3.13% and a Zacks Rank of 2 (Buy), making it challenging to predict a beat on the consensus EPS estimate [20]