Leidos designs, builds, and operates the cyber, intelligence, health-data, and defense systems the U.S. government needs but doesn't build itself, collecting payment from federal budgets that make up 87% of its revenue.
How Leidos makes money
Leidos designs, builds, and operates the systems the U.S. government — mostly the Department of Defense and intelligence agencies — needs but doesn't build itself: cyber defense, reconnaissance hardware, space and maritime systems, and health-data processing. Its own engineers and scientists do the work directly, and the government pays out of its annual budget.
87% of revenue
Engineers design, build & operate systems
Cash, dividends, buybacks, reinvestment
Simplified. A dashed feedback loop of follow-on contracts and option exercises feeds a $49B backlog. Source: 10-K FY2025.
Where the revenue comes from
Revenue by segment — FY2025
Health & Civil is the most profitable segment at 23.7% operating margin, versus 10.0% for National Security & Digital and 7.2% each for the other two. Source: 10-K FY2025, Note 20.
Source: 10-K FY2025, p.76.
Customers and competitors
Leidos sells almost exclusively to government: 49% to defense and intelligence agencies, 38% to other federal and state agencies, and just 13% to commercial and international customers.
- Booz Allen Hamilton — stronger in consulting-oriented intelligence and cyber advisory work.
- SAIC — the closest direct competitor by scale and customer base.
- CACI International — focused on specific defense niches like signals intelligence and electronic warfare.
Source: 10-K FY2025, p.75.
The metric that matters most in this sector
For a government-services contractor, revenue can be lumpy quarter to quarter, but backlog — contracts already won — tells you what's coming one to two years out. If backlog grows faster than revenue, that's a signal growth will continue.
Backlog, five-year trend
Of the $49B total, $9.7B (about 20%) is funded backlog with budget already appropriated; the rest depends on option exercises. Total backlog is now about 2.8 times FY2025 revenue. Source: 10-K FY2021–FY2025.
Leadership and ownership
CEO Thomas A. Bell took over in May 2023, about three years ago, arriving from Rolls-Royce North America (chairman and CEO) and before that a career in Boeing's defense sales organization — a professional executive with no ties to founder Robert Beyster, who founded the company in 1969 and is no longer involved. Insider ownership is thin at 0.77%; the largest shareholders are institutional index managers Vanguard (about 12.2%) and BlackRock (about 6.8%).
Source: 10-K FY2025, p.40; DEF 14A 2026, p.125.
Capital returns
Leidos pays a dividend yielding 1.33% ($1.72 annually), with the per-share payout rising from $1.54 in FY2024 to $1.63 in FY2025, up 5.8%. Buybacks have grown sharply — from $250M in FY2023 to $910M in FY2024 to $940M in FY2025 — and shares outstanding actually fell 3.7% over the year (131.2M to 126.4M), meaning the repurchases are genuinely retiring shares rather than just offsetting new stock-based compensation. A 20-million-share buyback authorization was approved in February 2022.
Source: 10-K FY2025, p.42–43, 63.
How this company could fail
- Federal budget and debt-ceiling risk — defense and intelligence agencies alone are 49% of revenue; budget caps or debt-ceiling standoffs can delay contract awards directly.
- Contract termination and bid-protest risk — the government can terminate contracts "for convenience" at any time, and competitors can delay large awards by filing bid protests.
- Cybersecurity and data-breach risk — handling sensitive defense and intelligence data means a security incident could mean an immediate loss of trust-dependent contracts.
Source: 10-K FY2025, Risk Factors, p.16, 18, 26.
Five-year financials
| FY21 | FY22 | FY23 | FY24 | FY25 | |
|---|---|---|---|---|---|
| Revenue | 13.74 | 14.40 | 15.44 | 16.66 | 17.17 |
| YoY growth | — | +4.8% | +7.2% | +7.9% | +3.1% |
| Operating income | 1.15 | 1.09 | 0.62 | 1.83 | 2.11 |
| Operating margin | 8.4% | 7.6% | 4.0% | 11.0% | 12.3% |
| Free cash flow | 0.93 | 0.86 | 0.98 | 1.29 | 1.63 |
| Total debt | 5.08 | 4.92 | 4.68 | 4.67 | 4.65 |
Sources: 10-K FY2025, p.59–63; 10-K FY2024, p.62–66; 10-K FY2022, p.60–64. FCF = operating cash flow − capex.
What we still don't know
- How the January 2026 Entrust acquisition ($2.4B, funded with a $1.4B bridge loan) will affect leverage and margins once it closes isn't visible in this 10-K alone.
- How segment profitability shifts under the FY2026 reorganization into Intelligence & Digital, Health, Homeland, and Defense — replacing the current four segments — needs to be checked against upcoming quarterly filings.
- The status and outcome of a 2022 DOJ antitrust criminal investigation (grand jury subpoena) isn't disclosed in enough detail to determine here.
Frequently asked questions
What does Leidos do?
Leidos designs, builds, and directly operates systems the U.S. government needs but doesn't build itself — cyber defense, reconnaissance hardware, space and maritime systems, and health-data processing — for defense, intelligence, and civilian agencies.
How dependent is Leidos on the U.S. government?
About 87% of Leidos' revenue comes from the U.S. government, split between defense/intelligence agencies (49%) and other federal and state agencies (38%).
What is Leidos' market cap?
As of this article's data (Sept. 10, 2026 close), Leidos traded at $129.55 per share, for a market cap of roughly $16.26 billion.