Defense Giant Leidos Delivers Record Cash Flow, Secures $2.4B Acquisition

Leidos Holdings (NYSE: LDOS | LDOS Price Prediction) reported mixed fourth-quarter results on February 17, 2026, beating earnings expectations while missing on revenue. The defense technology contractor delivered non-GAAP diluted EPS of $2.76, exceeding the consensus estimate of $2.66 by 3.8%. However, revenue came in at $4.21 billion, falling short of the $4.40 billion estimate by 4.4%.

Shares retreated 5.1% in early trading Tuesday, but the stock is still up 26.5% year over year.

Revenue Miss Driven by Timing Factors

The revenue shortfall reflected a 3.6% year-over-year decline, which management attributed to an extra work week in the prior year quarter and a six-week government shutdown that created an estimated 7 percentage point headwind. CEO Tom Bell emphasized operational strength despite the timing challenges: “Our performance this quarter and throughout the year underscores the incredible resilience of our team and the power of our strategy in action.”

Profitability and Cash Flow Shine

Where Leidos truly impressed was on the bottom line. Net income surged 18% year-over-year to $335 million, with margins expanding 150 basis points to 8.0%. Operating cash flow of $495 million marked the company’s best Q4 performance ever, up 66% year-over-year. Free cash flow more than doubled to $452 million, achieving 127% conversion.

For the full year, Leidos posted $17.17 billion in revenue (up 3%) and $11.99 in non-GAAP EPS (up 17%), with free cash flow climbing 26% to $1.63 billion.

Strategic Expansion and Strong Backlog

The company announced a $2.4 billion acquisition of Entrust, a power design firm that will expand Leidos’s energy infrastructure capabilities. This follows notable contract wins, including a $2.2 billion Air Force air base defense systems award and a position on the MDA’s SHIELD IDIQ with a $151 billion ceiling. Total backlog reached $49.0 billion on a 1.3x book-to-bill ratio in Q4.

Management issued fiscal 2026 guidance calling for revenue of $17.2 billion to $17.8 billion and non-GAAP EPS of $12.10 to $12.60, suggesting continued margin expansion and earnings growth.