Leidos Lifts 2026 Outlook as Pentagon Spending Surge Fuels Demand for AI, Intelligence Services
May 5 (Reuters) — Leidos Holdings, one of the largest U.S. defense IT contractors, raised its profit and revenue outlook for 2026 on Tuesday, signaling sustained demand for its military intelligence and digital warfare services as global tensions continue to strain Pentagon stockpiles.
The Reston, Virginia-based company now expects full-year adjusted profit of $12.10 to $12.50 per share, up from its prior forecast of $12.05 to $12.45. Revenue for 2026 is projected between $18 billion and $18.4 billion, compared with an earlier range of $17.5 billion to $17.9 billion.
Leidos' intelligence and digital business — which provides military software, intelligence analysis, and global logistics — posted a 7% revenue increase to $1.51 billion in the first quarter. The company also reported adjusted earnings of $3.13 per share for Q1, up from $2.97 a year earlier.
The upgraded guidance comes as the Pentagon accelerates efforts to replenish weapons and equipment drained by operations linked to Iran and the prolonged Russia-Ukraine conflict. That push has created a sustained tailwind for defense contractors across the board.
Last week, Leidos secured an $869 million U.S. Army contract to build AI-enabled systems designed to convert massive volumes of battlefield data into actionable intelligence, enhancing military decision-making. The deal underscores a broader shift toward artificial intelligence and automation in defense operations.
Fellow defense supplier L3Harris also reported last week that production in its intelligence, surveillance and reconnaissance systems business for classified and international aircraft programs had increased, reflecting a wider industry trend.
Industry analysts say the demand cycle is unlikely to cool soon. “We’re seeing a structural shift, not just a cyclical uptick,” said Michael Torres, a defense sector analyst at D.C.-based StratEdge Research. “Leidos is well-positioned because its core business — IT and intelligence — is exactly where the Pentagon is spending more.”
But not everyone is convinced the boom will last. “This is just another contractor cashing in on war,” said Linda Park, a former Pentagon procurement officer turned defense watchdog. “They’re raising forecasts while the rest of us are paying for it. It’s a morally bankrupt cycle, and no one in Congress wants to talk about it.”
Still, investors appear optimistic. Leidos shares have gained roughly 12% year-to-date, outperforming the broader defense sector.
“The numbers speak for themselves,” said retired U.S. Army Colonel James Whitfield, now a consultant for defense tech startups. “Leidos is delivering real capability — AI-driven logistics, real-time threat analysis. That’s not just good business; it’s what keeps soldiers safe.”
(Reporting by Aishwarya Jain in Bengaluru; Editing by Shilpi Majumdar)