Leidos Holdings (LDOS) — Q2 2026 Earnings Preview

1. Earnings Preview

Key Takeaway: The setup is mixed-to-cautious — management explicitly guided Q2 as the low point of the year for both revenue growth and margins, making the bar achievable but the optics challenging; the single biggest swing factor is whether the back-half acceleration thesis holds and whether book-to-bill rebounds above 1.0x.

Heading into the Q2 2026 print, consensus expects revenue of ~$4.44B and operating EPS of ~$2.91, both representing modest year-over-year growth against a period where management pre-signaled softness. The bar is intentionally low: on the Q1 call, management explicitly framed Q2 as the trough, citing a Q1 revenue pull-forward, the absence of a one-time insurance reimbursement benefit, and elevated near-term growth investments — meaning a beat is achievable but the magnitude of any upside is likely constrained. Guidance tone remains constructive on the full year ($18.0–$18.4B revenue, $12.10–$12.50 non-GAAP EPS), and estimates have been essentially stable since the Q1 raise, suggesting the Street has already absorbed the ENTRUST acquisition contribution and is not pricing in incremental upside. The stock has been a dramatic underperformer since the Q1 print — down ~13.5% vs. ITA +14.3% and SPY +4.7% — driven by sector rotation into pure-play defense hardware names and investor skepticism about the elevated CapEx cycle and the SES security detection JV overhang; the multiple has compressed meaningfully, which paradoxically creates a lower-risk entry if Q2 confirms the trough narrative. The key wildcard is book-to-bill: a Q1 ratio of only 0.8x (TTM 1.1x) raised questions about award momentum, and a Q2 reading above 1.0x — supported by management's expectation that awards pick up significantly in the second half — would be the single most important signal for the stock's re-rating.

2. KPIs & Consensus Expectations

Key Takeaway: Consensus sets a low bar for Q2 given management's explicit trough guidance; revenue is the bigger swing factor given the Q1 pull-forward dynamic, while adjusted EBITDA margin will be watched closely for signs of the investment spend peak management described.

Table 1 — Current Quarter Snapshot (Q2 2026)

Source: Visible Alpha consensus and actuals data. Q2 2026 consensus as of August 3, 2026. All VA-sourced figures cited per Visible Alpha Consensus and Actuals Data.

Table 2 — Beat/Miss History (Last 8 Quarters)

Revenue

Adjusted Operating EPS

Pattern: LDOS has beaten EPS consensus in all 8 of the last 8 quarters, with an average beat of ~17% — a remarkably consistent track record. Revenue beats are also the norm (6 of 8 quarters), with the only miss in Q4 2025 driven by a seasonal step-down. The EPS beat pattern reflects structural margin outperformance vs. Street models; however, the magnitude of beats has been compressing as the Street has caught up, and Q2 2026 consensus already embeds the management-guided trough, making a large upside surprise harder to achieve.

Source: Visible Alpha Consensus and Actuals Data.

3. Guidance & Commentary Evolution

Key Takeaway: Guidance was raised across all metrics at Q1 2026 earnings (May 5, 2026) primarily to incorporate the ENTRUST acquisition; no post-earnings guidance revisions have been issued since. Management tone is constructive on the full year but explicitly cautious on Q2, framing it as a deliberate investment trough before a second-half step-up.

4. Guidance vs. Estimate Revision Tracker

Key Takeaway: Estimates for Q2 2026 and FY 2026 have been essentially stable since the Q1 earnings raise, with only marginal drift; the Street is tracking guidance closely and not pricing in incremental upside, which means the risk/reward is more balanced than the stock's underperformance implies.

Estimates have been remarkably stable since the Q1 2026 raise — essentially flat across revenue, EPS, and EBITDA for both Q2 and the full year. This tells two stories: (1) the Street has fully digested the ENTRUST contribution and is not modeling incremental upside, and (2) there is no estimate risk to the downside either, as the trough was pre-signaled. The FY 2027 estimates have drifted marginally lower (-0.2% to -0.5%), suggesting some caution about the back-half acceleration thesis extending into next year.

Source: Visible Alpha Consensus and Actuals Data. Post-earnings baseline as of May 12, 2026 (5 trading days after Q1 2026 earnings on May 5, 2026).

5. Stock Performance

Key Takeaway: LDOS has dramatically underperformed since Q1 earnings — down ~13.5% vs. ITA +14.3% and SPY +4.7% — driven by multiple compression and sector rotation into pure-play defense hardware names, not by estimate cuts; the stock's de-rating creates a lower-risk setup heading into Q2 if management confirms the trough narrative.

LDOS vs. ITA (iShares U.S. Aerospace & Defense ETF) vs. S&P 500 (SPY) — Indexed to 100 at Q1 2026 Earnings (May 5, 2026). Source: Stock Price Data.

LDOS opened the post-earnings period with an immediate ~8% gap down on May 5, 2026, as investors focused on the Q2 trough guidance and the Q1 pull-forward framing rather than the headline beat. The stock continued to drift lower through June, reaching a trough of ~$100 (indexed) in late June, as the defense sector rotated sharply into hardware/product names (ITA +14% over the same period) while LDOS — perceived as more services-oriented despite its growing product mix — was left behind. A partial recovery in late July/early August (stock recovering to ~$118 by Aug 4) coincided with BAH's Q1 FY2027 earnings (July 24) showing improving funding trends and a 1.5x book-to-bill, which served as a positive read-through for the sector. The ITA ETF is the appropriate sector benchmark for LDOS given its defense and government technology exposure. No analyst rating changes were recorded in the period.

6. Peer Commentaries — Read-Through (Last 60 Days, Q2 2026 Relevant)

Key Takeaway: Peer commentary from CACI, SAIC, and BAH over the last 60 days paints a picture of a gradually improving but uneven demand environment — funding is recovering, award activity is picking up from shutdown lows, and book-to-bill is rebounding — all of which are directionally positive read-throughs for LDOS's Q2 and H2 2026 outlook. The key risk flagged across peers is near-term award delays as the government transitions to fixed-price procurement.

Note: Only commentary from the last 60 days (since ~June 4, 2026) that speaks to the current Q2 2026 reporting period or the forward demand environment is included below. Prior-quarter earnings commentary about prior-quarter results is excluded.

Booz Allen Hamilton (BAH) — Q1 FY2027 Earnings (July 24, 2026, covering calendar Q2 2026)

Relevance to LDOS: BAH is LDOS's closest peer in national security IT and defense technology. BAH's Q1 FY2027 covers the same calendar quarter as LDOS's Q2 2026 (April–June 2026), making this the most direct read-through available.

• Funding improving materially: BAH reported funding up 17% year-over-year in Q1 (calendar Q2 2026), with overall funding across the business up 18% YoY in both civil and national security. Management stated "no funding pull forward" — the improvement is genuine. This is a strong positive read-through for LDOS's Q2 funded backlog and book-to-bill.
• Book-to-bill rebounded sharply: BAH reported a 1.5x book-to-bill for the quarter (TTM 1.1x), with national security funded backlog up 23% YoY. This is a direct positive signal for LDOS, which had a 0.8x Q1 book-to-bill and where management guided for awards to "pick up significantly" in H2.
• Award environment strengthening: BAH noted the award environment is "strong" and demand is "picking up across the entire business." OTA pipeline up 18% YoY. However, management flagged that the government's fast-tracking of fixed-price contract reform "could lead to near-term delays in awards as customers adjust" — a risk that applies equally to LDOS.
• Civil remains challenged; national security strong: BAH's civil revenue declined 16% YoY in Q1 FY2027, while national security grew 1% YoY. For LDOS, the civil/health exposure is more limited, but the intelligence and digital segment (which overlaps with BAH's national security) should benefit from the same tailwinds.
• Caution on H2 budget dynamics: BAH flagged four congressional items (NDAA, CR, reconciliation bill, supplemental) as potential sources of funding uncertainty in H2, particularly given the midterm election year. Management expressed "cautious optimism" but declined to update guidance. This is a relevant risk for LDOS's back-half acceleration thesis.
• Cyber demand accelerating: BAH stated "2026 is a year where cyber demand is going to accelerate across all of our markets" due to offensive cyber tools "agentifying faster than defensive cyber tools." LDOS's intelligence and digital segment (including Kudu Dynamics) is directly exposed to this tailwind.

CACI International — Wells Fargo Industrials & Materials Conference (June 10, 2026)

Relevance to LDOS: CACI is a direct peer in national security IT and defense technology. Conference commentary in June 2026 speaks directly to the Q2 2026 demand environment.

• Award activity recovering but not fully normalized: CACI noted the acquisition mechanism is "returning to normal after the shutdown activities, but is not completely there yet." The amount submitted and awaiting decision is ~$4B ("unusually small"), while expected submissions in the next 180 days have grown to $22B ("larger than average") — a "bow wave" of awards is anticipated. This supports LDOS management's expectation of H2 award acceleration.
• Book-to-bill below 1x for three consecutive quarters, yet beating guidance: CACI acknowledged its book-to-bill has been below 1x for the last three quarters, yet the company has been "beating and raising guidance" and "crushing the free cash flow estimate." This is a direct read-through for LDOS: a sub-1x book-to-bill does not necessarily signal deterioration when the backlog is long-duration and programs are ramping.
• Long-duration backlog provides visibility: CACI noted the average duration of contracts added to backlog over the last few quarters is 6 years, providing "4- to 6-quarter horizon visibility." LDOS's funded backlog of ~$9.6B similarly provides near-term revenue visibility despite the lower Q1 book-to-bill.
• Golden Dome and Big Beautiful Bill: CACI highlighted that less than 20% of the Big Beautiful Bill Act had been appropriated, with the balance expected to be freed up shortly. This is a positive catalyst for LDOS's defense segment, which management has flagged as a potential participant in Golden Dome/space layer programs.
• Counter-UAS demand very strong: CACI cited "very strong demand impulses" for counter-UAS systems, particularly for the World Cup, Olympics, and critical infrastructure. LDOS has counter-UAS exposure through its defense technology segment.

CACI International — Bank of America Industrials Conference (May 12, 2026)

Relevance to LDOS: Conference commentary from May 12, 2026 (one week post-LDOS Q1 earnings) provides early read on Q2 2026 demand conditions.

• Award activity still below pre-shutdown levels: CACI noted that even after the broader government shutdown ended, "we have not seen a full return to pre-shutdown activity levels, particularly as it relates to awards." Administrative work (invoicing, funding) returned quickly, but "awards and acquisition progress has been a little bit slower." This validates LDOS management's Q2 trough framing.
• Budget resilience in national security: CACI emphasized that the exact appropriated budget amount is "relatively not particularly relevant" because their focus areas (intelligence, sensing, counter-UAS, electromagnetic spectrum) have "strong bipartisan support." LDOS's defense and intelligence segments benefit from the same dynamic.
• Technology/outcome-based procurement alignment: CACI's shift to ~60% technology / 40% expertise is "very much aligned with the current administration's procurement strategies." LDOS's NorthStar 2030 strategy similarly emphasizes outcome-based, technology-differentiated solutions — a structural tailwind for both companies.
• ARKA acquisition driving space business growth: CACI raised FY2026 revenue guidance by $150M for ARKA. LDOS's ENTRUST acquisition is a similar inorganic growth driver, and the integration-ahead-of-schedule narrative is consistent with CACI's experience.

SAIC — Q1 FY2027 Earnings (June 1, 2026, covering fiscal Q1 ending May 1, 2026)

Relevance to LDOS: SAIC is a direct peer in government IT services. SAIC's fiscal Q1 FY2027 (ending May 1, 2026) covers the early part of LDOS's Q2 2026 period and provides a read on the demand environment entering the quarter.

• Growth environment improving but uneven: SAIC reported organic growth of 0.5% in Q1 FY2027, "better than expected due to timing of materials and the RITS extension." Management noted the growth environment is "improving, although it's still uneven" and maintained a cautious posture on "unknown unknowns." This is consistent with LDOS's Q2 trough framing.
• Appropriations starting to flow: SAIC noted appropriations are "starting to flow from last year's legislation, albeit unevenly," with specific traction in Navy, Army (Next-Gen C2, M-SHORAD), and Space/Intel programs. LDOS's defense segment (IFPC, ABADS-MD, MUSV) is exposed to similar program ramps.
• Book-to-bill 1.1x quarterly, 1.0x TTM: SAIC reported a 1.1x quarterly book-to-bill and expects to finish the year "comfortably over 1.0x." This is a positive directional signal for LDOS's expected Q2 book-to-bill recovery from 0.8x.
• Enterprise IT commoditization risk: SAIC is actively de-emphasizing "commoditized enterprise IT" and pivoting to mission-critical, outcome-based work. LDOS faces a similar dynamic in its digital modernization segment, though management has been more explicit about AI-enabled differentiation as a moat.
• Civil funding at a trough: SAIC stated civil funding is "at a trough" and "probably not going to materially deteriorate from here." LDOS's health segment (flat YoY in Q1) faces a similar dynamic, with management guiding for health to inflect to growth beyond 2026.
• EBITDA guidance raised 20bps: SAIC raised FY2027 EBITDA margin guidance to 10.1%–10.3% and EPS guidance by ~4%. While SAIC's margins are structurally lower than LDOS's mid-13s, the direction of travel (margin expansion through AI-enabled efficiency) is a positive read-through for LDOS's margin sustainability thesis.

Overall Read-Through Summary: The peer mosaic is constructive for LDOS's Q2 print and H2 outlook. Funding is recovering (BAH +17-18% YoY), book-to-bill is rebounding (BAH 1.5x, SAIC 1.1x), and the award pipeline is building toward a bow wave (CACI $22B in 180-day submissions). The primary risk is near-term award delays from fixed-price procurement reform and midterm election-year budget uncertainty — both of which management has already flagged. The peer data supports the trough narrative and makes a Q2 beat on book-to-bill the most likely positive catalyst.

7. Material News & Developments

Key Takeaway: The most important development since Q1 earnings is the SES security detection JV with Analogic (Altaris) — a portfolio rationalization that removes a non-core business from consolidated revenue but retains upside through a minority stake; the Q2 print will be the first to reflect the JV's accounting treatment if it has closed.

• May 5, 2026 — Q1 2026 Earnings Beat & Full-Year Guidance Raised: LDOS reported Q1 revenue of $4.40B (+2.8% vs. consensus) and adj. operating EPS of $3.13 (+7.9% vs. consensus). Full-year revenue guidance raised by $500M to $18.0B–$18.4B; EPS guidance raised $0.05 to $12.10–$12.50; operating cash flow guidance raised $50M to ~$1.8B. ENTRUST integration described as ahead of schedule and immediately accretive.
• May 5, 2026 — Security Detection JV with Analogic (Altaris) Announced: LDOS announced a definitive agreement to contribute its Security Enterprise Solutions (SES) business into a joint venture with Analogic (backed by Altaris Capital). LDOS retains a significant minority stake; the JV will operate under the Analogic brand. Expected to close in H2 2026. Implication: Upon close, SES revenue exits LDOS's consolidated P&L; LDOS's share of JV net income will be reflected as equity method income. Q2 2026 will likely still include SES in consolidated results if the JV has not yet closed, but investors will be watching for any update on timing.
• May 5, 2026 — $100M Venture Investment in PE Firm (AI/Cyber/Autonomy): LDOS committed a multiyear $100M investment in a marquee PE firm focused on AI, advanced cyber, and autonomy. Framed as early-stage technology access strategy. Implication: Signals continued capital deployment toward NorthStar 2030 growth pillars; modest near-term cash flow impact but strategically important for technology pipeline.
• May 6, 2026 — Shareholders Approve New Incentive & ESPP Plans (8-K): Routine governance approval; no material financial impact.
• July 7, 2026 — Q2 2026 Earnings Call Scheduled for August 4, 2026: LDOS confirmed the earnings date, consistent with prior cadence. No pre-announcement or guidance update issued.
• July 24, 2026 — BAH Q1 FY2027 Earnings (Positive Sector Read-Through): BAH reported funding up 17% YoY, book-to-bill of 1.5x, and national security funded backlog up 23%. Implication: Strongest positive read-through for LDOS's Q2 book-to-bill and H2 award acceleration thesis; LDOS stock recovered ~$10 in the week following BAH's print.
• Ongoing — Golden Dome / Big Beautiful Bill Act: CACI (June 10) noted less than 20% of the Big Beautiful Bill Act had been appropriated, with the balance expected to be freed up shortly. LDOS management has flagged Golden Dome/space layer participation as a potential growth catalyst. Implication: Any update on Golden Dome program awards or LDOS's specific role would be a positive catalyst on the Q2 call.
• Ongoing — FAA Air Traffic Management Modernization: Management guided at Q1 2026 for "line-of-sight clarity" on FAA ATM contract opportunities within the next quarter or two. Domestic and international ATM was cited as a Q1 revenue driver in the Homeland segment. Implication: Any formal award announcement or RFP update on FAA modernization would be a meaningful catalyst; watch for commentary on the Q2 call.
• Ongoing — VBA Recompete (Health Segment): VBA MDE industry day was held in May 2026. LDOS management remains bullish on health as a long-term growth pillar, with the VBA recompete a key 2027+ catalyst. Implication: No near-term revenue impact, but any update on VBA recompete timeline or LDOS's positioning would be watched closely.

8. Insider Transaction Activity

Key Takeaway: The only open-market sale in the period was a discretionary sale by Director Gary Stephen May on May 7, 2026 (two days post-earnings), involving 1,484 shares (~$194K) — modest in size and not a meaningful signal. All other activity consists of routine equity award grants (code A) and tax withholding dispositions (code F) associated with vesting events; no open-market purchases were recorded.

The insider picture is benign. The only open-market sale — Director Gary May's 1,484-share sale on May 7 — was part of a routine option exercise-and-sell transaction and is not a meaningful negative signal given its small size (~$194K vs. a $108K+ CEO share position). Notably, CEO Thomas Bell's only transaction was a tax withholding on earnings day (not a discretionary sale), and the CFO's activity was limited to routine deferred compensation plan accruals. There are no clustered open-market buys or unusual sale patterns. The absence of any open-market purchases is not alarming given the stock's post-earnings decline, but it is also not a positive signal.

Source: SEC Form 4 Filings Database (Insider Transaction Data). Transactions cover May 1, 2026 – August 3, 2026.