Raised 2026 guidance on revenue, EPS, and cash flow
Leidos reported a strong Q1 FY2026, raising its full-year guidance as the Entrust acquisition closes quickly and demonstrates immediate accretion. Management provided detailed commentary on defense tech demand, growing cyber and energy pipelines, and a strategic shift in the security products business into a JV with Analogic. Raises FY2026 revenue, EPS, and operating cash flow guidance.
Buzzberg readRaised 2026 guidance on revenue, EPS, and cash flowLeidos reported a strong Q1 FY2026, raising its full-year guidance as the Entrust acquisition closes quickly and demonstrates immediate accretion. Management provided detailed commentary on defense tech demand, growing cyber and energy pipelines, and a strategic shift in the security products business into a JV with Analogic. Raises FY2026 revenue, EPS, and operating cash flow guidance.Read full analysisCollapse analysis
Leidos reported a strong Q1 FY2026, raising its full-year guidance as the Entrust acquisition closes quickly and demonstrates immediate accretion. Management provided detailed commentary on defense tech demand, growing cyber and energy pipelines, and a strategic shift in the security products business into a JV with Analogic. Raises FY2026 revenue, EPS, and operating cash flow guidance.
Announces the creation of a joint venture with Analogic for its security products business (SES).
Signals Q2 FY2026 could be the low point for revenue growth and margins due to a pull-forward of demand and higher investments.
Cites strong defense tech momentum with over $9B in awards in the trailing 15 months.
Revenue$4.4B
+5% QoQ
EPS$3.13
+13% QoQ
Gross margin17.3%
reported
Op margin11.55%
reported
What changed this quarter
01
Guidance
Raised 2026 guidance on revenue, EPS, and cash flow
Guidance · revenue to $18.2B
02
AI
AI is an accelerant, not a threat, to Leidos
Management emphasized that AI is an accelerant to their business model, not a threat, and highlighted their position as trusted mission AI experts, leveraging scale in digital infrastructure and privileged access to customer environments to deploy AI securely. They also noted…
03
M&A
Entrust integration ahead of schedule, accretive in 2026
Announces the creation of a joint venture with Analogic for its security products business (SES).
04
Defense
Path to production of thousands of small cruise missiles
Signals Q2 FY2026 could be the low point for revenue growth and margins due to a pull-forward of demand and higher investments.
AI, capex & demand read
AI
Platform & monetization
Management emphasized that AI is an accelerant to their business model, not a threat, and highlighted their position as trusted mission AI experts, leveraging scale in digital infrastructure and privileged access to customer environments to deploy AI securely. They also noted AI tools like Skywire are being deployed across new acquisitions to improve efficiency and delivery.
Demand
Bookings & conversion
Cyber pipeline surges 21% to $24 billion. Management repeatedly described the quarter as a 'very strong start' and 'playing offense,' and raised full-year guidance, citing momentum, portfolio moves, and AI-driven growth.
Capex
Investment and capacity
Management increased 2026 capex guidance to $350 million, but noted Q1 capex was only $31 million and that spending will be triggered by program needs. They expect capex to be elevated this year but not in perpetuity, with investments focused on production programs and growth initiatives.
Tone · Upbeat
Management repeatedly described the quarter as a 'very strong start' and 'playing offense,' and raised full-year guidance, citing momentum, portfolio moves, and AI-driven growth.
Supply-chain alpha
A1
Leidos management explicitly warns that Q1 revenue strength was a pull-forward from Q2 and expects Q2 to be the low point for revenue growth and margins before a step-function improvement in Q3/Q4.
“we see Q2 as the likely low point this year in revenue growth and margin. At this point, we view Q1 revenue overperformance as a pull forward from the second quarter...”
Leidos has seen a surge in demand for non-kinetic cyber effects (from KUDU acquisition) resulting in a $24 billion pipeline, a 21% increase since the acquisition.
“We currently see a total cyber pipeline valued at $24 billion, a 21% increase since the acquisition of Kudu.”
The SES JV with Analogic is designed to avoid Leidos from having to fund the capital-intensive growth of the security products business, freeing up cash for its core growth pillars.
“One of the reasons we purposefully formed that joint venture was because that business wasn't one of our growth pillars, we didn't want to start leaning into the capital intensity that that business would require...”