Leidos (LDOS) Q3 2025 Earnings: Revenue Growth and a $47.7B Backlog

Leidos Holdings, Inc. (LDOS), a key player in the government technology services sector, recently released its financial results for the third quarter of 2025. For anyone tracking the defense, intelligence, and health IT markets, this quarterly 10-Q filing offers a valuable look into the company's health and trajectory. Let's break down the key numbers and see what they tell us about Leidos's performance.

A Snapshot of Q3 Performance

For the third quarter ending October 3, 2025, Leidos reported total revenues of $4.47 billion, a solid 6.7% increase from the $4.19 billion generated in the same quarter last year. This growth translated into an operating income of $535 million, up slightly from $516 million year-over-year.

While revenues grew, the company's operating margin—a key measure of profitability—saw a slight dip from 12.3% to 12.0%. However, net income attributable to shareholders remained steady at $367 million. Thanks to the company's share repurchase program, which reduces the number of outstanding shares, diluted earnings per share (EPS) increased to $2.82 from $2.68 a year ago.

To better visualize how Leidos generated its revenue and where the money went this quarter, the following flow diagram illustrates the company's income statement.

Strength in Key Segments

A company as diverse as Leidos is best understood by looking at its individual business segments. This quarter, performance was a story of strong growth in its core government-facing divisions.

• National Security & Digital: The company's largest segment, which provides technology and services to intelligence and defense agencies, saw revenues climb 8.0% to $2.02 billion. The company attributes this growth primarily to new program wins.
• Health & Civil: This segment, which supports federal health agencies and other civil government entities, also showed impressive results. Revenues grew 6.2% to $1.30 billion, but the real story is its profitability, with an operating margin of 25.2%, making it the company's most profitable division by a wide margin.
• Defense Systems: This division, focused on areas like airborne solutions and weapons systems, posted the strongest revenue growth, jumping 11.5% to $582 million. However, its operating income remained flat, suggesting that while the top line is growing, margins are being compressed.
• Commercial & International: This was the only segment to see a slight decline, with revenues dipping 1.2% to $571 million.

A Glimpse into the Future: Backlog

For government contractors, the backlog—the total value of contracts awarded but not yet completed—is a critical indicator of future revenue. Leidos reported a total backlog of $47.7 billion, an increase from $45.5 billion a year prior. This massive backlog provides significant revenue visibility for the coming years.

Of this total, $9.1 billion is funded, meaning Congress has appropriated the money and it's authorized for payment. The remaining $38.6 billion is unfunded, representing the total expected value of contracts that will be funded over time as the work is performed. According to the filing, the company expects to convert about 64% of its $17 billion in remaining performance obligations (a subset of the backlog) into revenue over the next 12 months, signaling a healthy pipeline of work.

Final Thoughts

Leidos's third-quarter results paint a picture of a company executing well in its primary markets. The consistent growth in its national security and health segments, coupled with a robust and growing backlog, suggests a stable outlook. While margin pressure in the Defense Systems segment is something to watch, the exceptional profitability of the Health & Civil division provides a strong counterbalance.

As Leidos navigates the federal contracting landscape, its ability to win new programs and manage costs across its diverse portfolio will remain key to its continued success. For now, the latest filing indicates the company is on a steady course.