Leidos returned $556 million to shareholders in its third quarter, including $504 million of share repurchases, against $476 million of free cash flow, according to its results release. Funded backlog stood at $11.1 billion of a $49.6 billion total, up 22% from a year earlier.
By our arithmetic from the release’s backlog table, funded backlog rose by about $2.0 billion, and the Defense segment accounted for $1,556 million of it, or about 78%.
Business Pill · Backlog
An evergreen Business Engineer explainer on backlog: revenue that is signed but not yet earned. It teaches the general idea only and does not discuss Leidos.
The key insight: By our arithmetic, Leidos’s Defense segment supplied $1,556 million, about 78%, of a roughly $2.0 billion rise in funded backlog, and the company returned $556 million to shareholders, about 1.17 times its quarterly free cash flow.
Defense funded backlog rose to $3,812 million from $2,256 million. Homeland’s rose by $716 million, Intelligence & Digital’s by $6 million, and Health’s fell by $280 million, by our arithmetic from the table. In total backlog, Defense rose by $4,162 million while Intelligence & Digital fell by $1,259 million and Health by $1,684 million.
Net bookings were $5.5 billion in the quarter, a book-to-bill ratio of 1.2, Leidos said. The awards the release names, from a $717 million Air Force intelligence, surveillance and reconnaissance contract to a $27 million low-rate production order for the AGM-190A Havoc Spear missile, add up to about $3.1 billion, our count.
Comments: 🔸 “Leidos delivered another quarter of strong financialperformance, allowing us to enhance our 2026 guidance for the third consecutive quarter.”
Wall St Engine posted its summary of Leidos’s third-quarter results at 11:02 UTC on 3 November, including $4.63 billion of revenue, $5.5 billion of net bookings and a $49.6 billion backlog. Figures in this piece are checked against Leidos’s release.
The Agentic Contract
One named award was a $301 million follow-on contract for 24/7 defensive cyber operations for the Department of War Information Network. Leidos said it is deploying its UpHold Effect Agentic SOC Automation platform, which “utilizes autonomous AI agents” and which it said “dramatically compresses threat response windows and eliminates analyst alert fatigue”.
The release does not give a separate revenue or backlog figure for AI work.
Revenue, Margins and Guidance
Revenue was $4.63 billion, up 4%. Leidos said growth came from defense tech products, air traffic management, intelligence mission support and the ENTRUST Solutions acquisition, offsetting declines in some managed health and federal civilian IT programs. Health revenue fell 12% to $1.07 billion; Homeland revenue rose 32% to $1.02 billion, including $142 million from ENTRUST.
Leidos contributed its Security Enterprise Solutions and Industrial Automation businesses to a joint venture with Altaris on 5 October. After adjusting for the joint venture and incorporating year-to-date performance and its current outlook, Leidos said it now expects 2026 revenue of $18.00 billion to $18.20 billion, down from $18.20 billion to $18.40 billion. It raised non-GAAP diluted EPS guidance to $12.50 to $12.70 from $12.20 to $12.50. Chief executive Tom Bell said the results allowed Leidos “to enhance our 2026 guidance for the third consecutive quarter”.
The Wall St Engine post put the consensus estimate cited by Wall St Engine at $4.71 billion for revenue and $3.03 for adjusted EPS, against $4.63 billion and $3.62 reported.
The Structural Read
As we read the backlog table, the funded mix is moving toward Defense while Health and Intelligence & Digital shrink in total backlog: Defense total backlog rose $4,162 million and the other two fell $2,943 million combined, by our arithmetic.
As we read the award list, the AI element is named at the contract level: an agentic security-operations platform on a $301 million cyber operations follow-on.
Leidos Q3 2026 results release
“The platform utilizes autonomous AI agents that dramatically compresses threat response windows and eliminates analyst alert fatigue”
Three Implications
FOR THE BACKLOG Funded backlog rose 22% to $11.1 billion; Defense supplied about 78% of the increase, by our arithmetic.
FOR CASH Leidos returned $556 million against $476 million of free cash flow, about 1.17 times, by our arithmetic.
FOR GUIDANCE Leidos said it expects revenue of $18.00 billion to $18.20 billion, adjusting for the Altaris joint venture, and raised EPS guidance to $12.50 to $12.70.
The framework argues: “As companies move from chatbots to thousands of autonomous agentic workflows running 24/7, the line item that used to be a rounding error becomes the budget.”
As we read it, the Army cyber contract is an early government version of that shift: a 24/7 operation that Leidos now runs with an agentic platform. The framework is the owner’s argument and does not discuss Leidos.
Leidos’s 10-Q for the quarter, filed on 3 November, says: “There were no material changes to the risks described in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended January 2, 2026.”
What Is Not Established
Backlog is management’s estimate and can change; funded backlog depends on appropriations. The release does not say how much of the Defense increase came from the awards it names, and the award values are contract values, not bookings. The release does not split the revenue guidance cut between the joint venture and its year-to-date performance and current outlook.
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Leidos returned $556 million, about 1.17 times its $476 million of free cash flow by our arithmetic, and funded backlog rose 22% to $11.1 billion. Defense supplied about 78% of the roughly $2.0 billion funded increase, by our arithmetic, while Health’s funded backlog fell $280 million.
A note on sourcing. Figures are from Leidos’s third-quarter 2026 release (8-K Exhibit 99.1, 3 November 2026). Segment backlog changes, shares of the increase, the cash return ratio and the award total are our arithmetic. Estimates are as cited by Wall St Engine. We did not contact Leidos.
Gennaro Cuofano is a CRO and tech executive who has worked in AI since late 2015, starting with bringing NLP, natural-language generation, voice and chatbot products to the marketing industry. His background is in law and finance: he holds a Master's degree in Law and an International MBA with an emphasis on corporate finance (LUISS Business School and the University of San Diego, 2012), and worked as a financial analyst at a real-estate investment firm in San Diego and as an assistant controller. His work focuses on business model strategy, business engineering and, more broadly, structural analysis: how companies make money, read from their own filings. He created FourWeekMBA and leads research there and at The Business Engineer, his newsletter on AI and business strategy, with over 95,000 subscribers and more than 1,000 published analyses. His writing has also appeared on Entrepreneur (for example, How to Digitize a Family Business in Europe) and HackerNoon. Find him on LinkedIn and Substack. See how we source.
