Leidos Q1 2025: Unpacking Contradictions on Macroeconomic Impact, Segment Performance, and Growth Prospects

Impact of macroeconomic actions, Health and Civil segment performance, Managed health services and VA headcount reductions, Commercial & International segment growth, and budget acceleration for VA EHR modernization are the key contradictions discussed in Leidos' latest 2025Q1 earnings call.



Strong Q1 Performance Amidst Growth Pillars:
- Leidos reported a strong Q1 2025 with organic revenue increase of 7% year-over-year, adjusted EBITDA margins improved to 14.2%, and non-GAAP diluted earnings per share rose 30%.
- This performance was driven by the implementation of their NorthStar 2030 strategy, focusing on five growth pillars aligned with the new administration's priorities.

Acquisition and Strategic Investments:
- Leidos signed a definitive agreement to acquire a leader in full-spectrum cyber, marking their first acquisition in two and a half years.
- This acquisition is aligned with their NorthStar 2030 strategy to strengthen their cyber growth pillar, as cyber threats continue to rise and customer demands become more complex.

Backlog and Market Opportunities:
- Leidos ended the quarter with a total backlog of $46.3 billion, up about $3 billion from the previous quarter, despite a 1.3 book-to-bill ratio.
- The increased backlog is attributed to the team's ability to navigate macroeconomic challenges and a robust pipeline of $226 billion in opportunities.

Defense and Strategic Partnerships:
- Leidos is positioned to contribute to key national priorities such as the next-generation multi-layer mission defense shield (Golden Dome) and air traffic control modernization.
- These opportunities arise from the administration's clear preference for commercial terms focused on outcomes and Leidos's strategic alignment with these priorities.