Leidos Holdings, Inc.

U.S. GOVERNMENT MARKETS

During both of the three months ended April 4, 2025, and March 29, 2024, we generated approximately 87% of total revenues from contracts with the U.S. government. Accordingly, our business performance is affected by the overall level of U.S. government spending, especially national security, homeland security and intelligence spending, and the alignment of our service and product offerings and capabilities with current and future budget priorities of the U.S. government.

The federal government is currently operating under a continuing resolution that runs through September 30, 2025. Key congressional and administrative initiatives under consideration include tax reform, energy policy measures and investments in defense and border security.

The Department of Government Efficiency, established under the current administration aims to streamline federal operations and reduce expenditures which have resulted in contract cancellations, modifications and stop work orders. As a company, Leidos remains aligned with the administration's efforts to drive efficiency in government agencies and operations, while increasing the quality of mission outcomes.

INTERNATIONAL MARKETS

Sales to customers in international markets represented approximately 8% of total revenues for both of the three months ended April 4, 2025, and March 29, 2024. Our international customers include foreign governments and their agencies. Our international business increases our exposure to international markets and the associated international regulatory, foreign currency exchange rate and geopolitical risks.

Changes in international trade policies, including higher tariffs on imported goods and materials, may increase the cost of certain goods necessary to fulfill our contractual requirements and for internal purposes. We expect to recover certain portions of the increase to the cost of goods through contractual measures. While we continue to evaluate the impact of the higher tariffs, we currently do not expect them to have a significant effect on our business.