Leidos Holdings 2025 Q1 Earnings Strong Performance as Net Income Surges 29%

Leidos Holdings (LDOS) reported its fiscal 2025 Q1 earnings on May 5, with revenues rising by 6.8% to $4.25 billion, compared to $3.98 billion in the same quarter last year. The company's net income increased by 29% to $365 million, reflecting robust earnings growth. Leidos reaffirmed its full-year guidance, projecting revenue between $16.9 billion and $17.3 billion. The company continues to focus on expanding its technological capabilities, including a strategic acquisition in the cyber sector, expected to close in Q2 2025.

Revenue

Leidos Holdings reported a revenue increase of 6.8%, reaching $4.25 billion for Q1 2025. The National Security & Digital segment contributed significantly with $1.88 billion in revenue. The Health & Civil sector followed, generating $1.29 billion, while Commercial & International operations brought in $568 million. The Defense Systems segment added $508 million to the overall revenue. This growth was driven by heightened demand across all customer segments.

Earnings/Net Income

Leidos Holdings' EPS rose notably to $2.79 in Q1 2025 from $2.09 in Q1 2024, representing a 33.5% increase. Net income also saw a significant rise, reaching $365 million, up from $283 million in the previous year. This performance highlights the company's ongoing profitability, underpinned by strong operational resilience and effective cost management.

Price Action

The stock price of Leidos Holdings edged up 0.22% on the latest trading day, increased by 1.50% over the past week, and climbed 3.50% month-to-date.

Post-Earnings Price Action Review

Investors employing a strategy of buying Leidos Holdings (LDOS) shares post-earnings release and holding for 30 days experienced an average return of 29.18% over the past five years. However, this was below the benchmark return of 60.39%, resulting in an excess return of -31.21%. The strategy's compound annual growth rate (CAGR) was 5.60%, with a maximum drawdown of -30.28% and a Sharpe ratio of 0.34. This indicates moderate returns and risk, suggesting that while the approach has yielded positive outcomes, it underperforms compared to broader market benchmarks.

CEO Commentary

"Our robust first quarter results build on the momentum from 2024, demonstrating the team's ability to execute in a dynamic environment that demands agility and innovation," said Tom Bell, Chief Executive Officer of Leidos Holdings. The company experienced a 7% year-over-year revenue increase, driven by enhanced demand across all customer segments. Bell emphasized the alignment of their NorthStar 2030 Strategy with the new Administration's priorities and highlighted ongoing investments in technology, particularly in expanding cyber capabilities through a strategic acquisition. He expressed confidence in the company's positioning and future opportunities, underscored by a $500 million accelerated share repurchase.

Guidance

Leidos anticipates continued revenue growth aligned with its strategic goals, supported by investments in technology and a strong backlog of $46.3 billion, including $7.3 billion funded. The company expects to finalize a key acquisition in the cyber sector in the second quarter of 2025, reinforcing its market position. Management remains optimistic about future performance, as evidenced by the commitment to delivering smarter and more efficient customer outcomes.

Additional News

Leidos Holdings announced a $500 million accelerated share repurchase agreement, signaling strong confidence in the company’s future. Additionally, the company issued $1 billion in senior notes to fund this repurchase and retire maturing debt. Furthermore, Leidos entered into a definitive agreement to acquire a cybersecurity company specializing in offensive and defensive platforms for $300 million, a strategic move to enhance its cyber capabilities. The transaction is expected to close in the second quarter of 2025, subject to customary closing conditions.