Leidos Holdings, Inc.

RESULTS OF OPERATIONS

The following table summarizes our condensed consolidated results of operations for the periods presented:

SEGMENT AND CORPORATE RESULTS

The increase in revenues for the three months ended October 3, 2025, as compared to the three months ended September 27, 2024, was primarily attributable to program wins, a net increase in volumes and $26 million of revenues recognized from the acquisition of Savanna Industries, Inc. ("Kudu Dynamics"), partially offset by the completion of certain contracts.

The increase in revenues for the nine months ended October 3, 2025, as compared to the nine months ended September 27, 2024, was primarily attributable to program wins, a net increase in volumes on certain programs and $38 million of revenues recognized from the acquisition of Kudu Dynamics, partially offset by the completion of certain contracts.

The increase in operating income for the three months ended October 3, 2025, as compared to the three months ended September 27, 2024, was primarily attributable to program wins.

The increase in operating income for the nine months ended October 3, 2025, as compared to the nine months ended September 27, 2024, was primarily attributable to program wins and a net increase in volumes, partially offset by the completion of certain contracts.

The increase in revenues and operating income for the three and nine months ended October 3, 2025, as compared to the three and nine months ended September 27, 2024, was primarily attributable to increased volumes and net write-ups on certain programs within the managed health services business.

The decrease in revenues for the three months ended October 3, 2025, as compared to the three months ended September 27, 2024, was primarily attributable to the completion of certain contracts, partially offset by program wins.

The increase in revenues for the nine months ended October 3, 2025, as compared to the nine months ended September 27, 2024, was primarily attributable to program wins and prior year write-downs on certain programs within our UK operations, partially offset by completion of certain programs and a net decrease in volumes.

The decrease in operating income for the three months ended October 3, 2025, as compared to the three months ended September 27, 2024, was primarily attributable to an increase in technological investments and operating costs, partially offset by a net increase in volumes, net write-ups on certain programs and product mix.

The increase in operating income for the nine months ended October 3, 2025, as compared to the nine months ended September 27, 2024, was primarily attributable prior year write-downs on certain programs within our UK operations, program wins and product mix, partially offset by completion of certain contracts and an increase in technological investments and operating costs.

The increase in revenues for the three months ended October 3, 2025, as compared to the three months ended September 27, 2024, was primarily attributable to a net increase in volumes and program wins, partially offset by the completion of certain contracts.

The increase in revenues for the nine months ended October 3, 2025, as compared to the nine months ended September 27, 2024, was primarily attributable to program wins and a net increase in volumes, partially offset by the completion of certain contracts.

While revenues increased for the three months ended October 3, 2025, as compared to the three months ended September 27, 2024, operating income remained consistent. This was primarily attributable to higher material costs for production programs in their initial phases.

The increase in operating income for the nine months ended October 3, 2025, as compared to the nine months ended September 27, 2024, was primarily attributable to program wins and a decrease in amortization expense in the current year.

The increase in operating loss for the three months ended October 3, 2025, as compared to the three months ended September 27, 2024, was primarily attributable to a $24 million increase in legal reserves and general and administrative expenses.

The decrease in operating loss for the nine months ended October 3, 2025, as compared to the nine months ended September 27, 2024, was primarily attributable to decreased legal fees, a $25 million insurance reimbursement for legal costs primarily incurred prior to fiscal year 2025 and lower acquisition and integration costs.

NON-OPERATING EXPENSE, NET

Non-operating expense, net for the three months ended October 3, 2025, was $51 million as compared to $46 million for the three months ended September 27, 2024. The increase was primarily driven by increased interest expense as a result of the two $500 million senior notes issued in February 2025.

Non-operating expense, net for the nine months ended October 3, 2025, was $156 million as compared to $142 million for the nine months ended September 27, 2024. The increase was primarily driven by increased interest expense as a result of the two $500 million senior notes issued in February 2025 and unfavorable exchange rate movements.

PROVISION FOR INCOME TAXES

On July 4, 2025, tax legislation was enacted in H.R.1 Reconciliation Act, commonly referred to as the One Big Beautiful Bill Act (the “OBBBA”) implementing several corporate tax law changes, including but not limited to, (1) restoring the immediate expensing of U.S. research and development costs; (2) allowing certain taxpayers an election to deduct the unamortized balance of U.S. research and development costs capitalized in prior years; and (3) reinstating one hundred percent bonus depreciation for eligible property. Based upon our interpretation of the law as currently enacted, we estimate that income taxes payable and net deferred taxes will be $270 million and $235 million, respectively, lower at January 2, 2026, than our estimates prior to the OBBBA enactment.

For the three months ended October 3, 2025, our effective tax rate was 23.8% compared to 23.0% for the three months ended September 27, 2024. The increase to the effective tax rate was primarily due to impacts from the OBBBA, partially offset by a decrease in valuation allowance compared to the prior year quarter.

For the nine months ended October 3, 2025, our effective tax rate was 23.9% compared to 23.3% for the nine months ended September 27, 2024. The increase to the effective tax rate was primarily due to impacts from the OBBBA.