Leidos Holdings Inc. (NYSE:LDOS) reported third-quarter adjusted earnings above Wall Street expectations on Tuesday, supported by higher net income, improved operating profitability and strong cash generation. However, revenue fell short of analyst forecasts, while the defence and technology contractor reduced its full-year sales guidance following changes to its business portfolio.
Adjusted earnings per share reached $3.62, exceeding the analyst consensus estimate of $3.05 by $0.57. Quarterly revenue increased approximately 4% to $4.6 billion from $4.47 billion in the corresponding period last year, but remained below market expectations of $4.71 billion.
Leidos shares were largely unchanged in premarket trading, edging 0.03% higher following the announcement.
Leidos delivered stronger profitability during the third quarter, with adjusted earnings per share exceeding consensus expectations by approximately 18.7%.
The company reported net income of $413 million, compared with $369 million in the same period of 2025, representing an increase of approximately 12%.
Diluted earnings per share rose to $3.28 from $2.82 a year earlier.
The improvement in reported earnings came despite revenue falling approximately $110 million short of analyst estimates.
Chief Executive Officer Tom Bell highlighted the company’s continued financial performance and its ability to improve annual earnings expectations.
“Leidos delivered another quarter of strong financial performance, allowing us to enhance our 2026 guidance for the third consecutive quarter,” Bell said.
The results reflected higher profitability alongside continued revenue growth, although the company’s updated sales outlook remained below market expectations.
Leidos reported adjusted EBITDA of $644 million for the third quarter, representing a 5% increase compared with the corresponding period last year.
The company’s adjusted EBITDA margin expanded to 13.9% from 13.8%, an improvement of 10 basis points.
The margin expansion indicates that Leidos generated slightly higher adjusted operating earnings relative to revenue.
The increase in adjusted EBITDA also outpaced the company’s approximately 4% revenue growth, reflecting improved operating profitability.
The performance contributed to stronger adjusted earnings per share and supported management’s decision to raise its annual earnings guidance.
Following its third-quarter performance, Leidos increased its adjusted earnings expectations for fiscal 2026.
The company now forecasts adjusted earnings per share of between $12.50 and $12.70.
The midpoint of $12.60 exceeds the analyst consensus estimate of $12.41, indicating that management anticipates stronger annual adjusted profitability than Wall Street had projected.
The revision marks the third consecutive quarter in which Leidos has improved its 2026 financial outlook, according to the company’s chief executive.
The higher earnings forecast follows a quarter in which adjusted EPS reached $3.62, supported by increased net income and adjusted EBITDA.
However, the company’s revised revenue guidance reflects changes to its business portfolio.
Leidos now expects full-year 2026 revenue of between $18.0 billion and $18.2 billion.
The midpoint of $18.1 billion is below the analyst consensus estimate of $18.31 billion.
The revised forecast also represents a reduction from the company’s previous guidance range of $18.2 billion to $18.4 billion.
Leidos attributed the downward adjustment to the contribution of certain businesses to a joint venture.
The change affects the company’s expected reported revenue for the year, even as management has increased its adjusted earnings outlook.
The differing revisions highlight the distinction between the company’s sales expectations and its projected profitability.
While the lower revenue forecast reflects the impact of the joint venture transaction, the higher adjusted EPS guidance indicates that management expects stronger earnings performance than previously anticipated.
Leidos generated $523 million in operating cash flow during the third quarter, providing financial resources for shareholder returns and other corporate priorities.
The company returned a total of $556 million to shareholders through share repurchases and dividends during the period.
The distributions exceeded the operating cash flow generated during the quarter, although the announcement did not provide a detailed breakdown of the financing sources used for the shareholder returns.
The combination of share buybacks and dividend payments reflects Leidos’ continued capital allocation activities.
Share repurchases can reduce the number of outstanding shares, potentially supporting earnings per share, while dividends provide direct cash distributions to shareholders.
The company’s cash generation remained an important component of its financial performance alongside higher earnings and improved margins.
Leidos’ third-quarter results demonstrated stronger profitability, with adjusted earnings per share of $3.62 exceeding analyst expectations and net income increasing to $413 million.
Revenue rose approximately 4% to $4.6 billion but fell below consensus forecasts, while adjusted EBITDA increased 5% to $644 million.
Management raised its full-year adjusted EPS outlook to $12.50–$12.70, marking its third consecutive quarterly guidance improvement.
However, the company lowered its annual revenue forecast to $18.0 billion–$18.2 billion following the contribution of certain businesses to a joint venture.
Investors will be monitoring whether Leidos can maintain its improved profitability, deliver on its higher earnings targets and sustain cash generation as it adjusts to changes in its business portfolio.
The company’s ability to balance revenue growth, operating margins and shareholder returns will remain an important consideration heading into 2027.
Leidos Holdings is a US-based technology, engineering and defence contractor providing solutions to government and commercial customers.
The company operates across areas including national security, defence, intelligence, digital modernisation and advanced technology services, supporting complex operational and technological requirements.
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