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What factors drove the changes in Leidos Holdings's revenue and profit?

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What does Leidos Holdings do and what are its main business segments?

- **Q3 Growth**: 7% revenue rise, 13.8% EBITDA margin, $711M operating cash flow. Full-year EPS guidance raised to $11.55-11.75.
- **AI-Driven Efficiency**: Skywire AI cuts project costs by 30%, driving 50%+ revenue growth in energy infrastructure.
- **Defense Expansion**: 11% YoY growth in Defense Systems, with 10+ franchise programs ($15B+ pipeline) in hypersonics and maritime autonomy.
- **Capital Deployment**: $100M share buyback, 7.5% dividend hike, and $450M debt payoff.
- **Shutdown Resilience**: Minimal impact; 27% sequential backlog growth shows customer momentum.

**【CEO Summary Section】**
- **Q3 2025 Performance**: Revenue grew 7% YoY to $4.47 billion, with adjusted EBITDA margin of 13.8% and operating cash flow of $711 million. Full-year guidance raised for EBITDA and EPS, reflecting second guidance increase of the year.
- **Government Shutdown Resilience**: Minimal impact due to mission-essential programs, funded contracts, and non-discretionary budgets. 27% sequential increase in funded backlog highlights customer momentum.
- **NorthStar 2030 Strategy**: Energy infrastructure pillar driving growth, with AI-powered Skywire tool reducing project costs by 30% and enabling 50% revenue growth on top accounts. Expansion into nuclear energy resilience and cyber-hardened grids.
- **Strategic Investments**: $100M share buyback, $450M debt payoff, and 7.5% dividend increase. Divestiture of non-core Varec asset to focus on growth pillars.

**【CFO Financial Commentary】**
- **Segment Performance**: Defense Systems grew 11% YoY (7th consecutive quarter of growth), driven by hypersonic missiles and radar systems. Health & Civil margins hit 25.7% due to medical exam volumes and cost efficiencies. Commercial & International energy infrastructure led growth with 8% organic revenue increase.
- **Cash Flow Strength**: $680M free cash flow (171% conversion), $4.7B debt with 2x gross leverage. No principal payments until 2028, enabling M&A and share buybacks.
- **Updated Guidance**: 2025 revenue $17-17.25B, EBITDA margin >13.8%, EPS $11.55-11.75 (up $0.30 midpoint). FY26 outlook includes $69B pipeline and $24B bids awaiting adjudication.

**【Q&A Highlights】**
- **M&A Strategy**: Focused on NorthStar 2030 growth pillars (e.g., energy infrastructure, defense tech). Kudu Dynamics acquisition ($26M first-quarter contribution) exemplifies AI-driven M&A.
- **Defense Systems Growth**: 10+ franchise programs ($15B+ potential) in hypersonics, counter-UAS, and maritime autonomy. Australia and UK programs mirror US priorities.
- **Health Services Sustainability**: Record margins (25.7%) via AI-driven efficiency. Expansion into rural and behavioral health under CMS funding.
- **Shutdown Assumptions**: Guidance accounts for up to 3-month shutdown impact, with collections delays potentially affecting 2026 cash flow.
- **International Expansion**: Australia and UK businesses align with growth pillars, focusing on mission systems and cyber-hardened solutions.

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