DOGE Federal IT Vendor Impact Series: Leidos
The Trump administration and its Department of Government Efficiency (DOGE) have generated massive upheaval across the board in federal operations, including in the federal IT segment. As of March 2025, thousands of contracts described by DOGE as “non-mission critical” have been canceled, including some across the federal IT and professional services landscape. TBR’s DOGE Federal IT Vendor Impact Series explores vendor-specific DOGE-related developments and impacts on earnings performance. Click here to receive upcoming series blogs in your inbox as soon as they’ve published.
Leidos suffered no DOGE-related material erosion to its sales, profitability or order book in 1Q25 and is holding to its FY25 outlook
By all accounts, Leidos was virtually unaffected by the Department of Government Efficiency (DOGE) in 1Q25. In its 1Q25 earnings release on May 6, Leidos announced that revenue rose 6.8% year-to-year, from $3.98 billion in 1Q24 to $4.25 billion in 1Q25. Additionally, margin performance remains robust: Gross margin was 17.8%, up from 15.9% in 4Q24; operating margin was 12.5%, up from 9.6% in 4Q24; and adjusted EBITDA margin (non-GAAP margin excluding taxes, interest, depreciation and amortization) was 14.2%, up from 11.6% in 4Q24. Backlog also hit an all-time high, rising 6.3% sequentially to $46.3 billion in 1Q25.
Leidos is standing by the fiscal year 2025 (FY25) outlook it tendered at the end of FY24 and still expects FY25 sales of between $16.9 billion and $17.3 billion, implying growth of between 1.4% and 3.8% over FY24 sales of $16.7 billion. The company is calling for a FY25 non-GAAP EBITDA margin in the mid- to upper-12% range, implying non-GAAP margin will most likely decrease from the FY24 record 12.9%. Leidos reaffirmed all other aspects of its FY25 guidance in 1Q25, underscoring the company’s confidence that it will experience minimal disruption from DOGE to its book of business on profit-and-loss (P&L) statement in FY25.
Leidos is keen to distinguish itself from consulting-focused peers
During Leidos’ 1Q25 earnings discussion, CEO Tom Bell emphasized the company’s chief differentiators while setting itself apart from its advisory-led federal systems integrators (FSIs). Bell opened the call by saying, “This administration’s clear preference [is] to work with firms that solve problems and get things done, not consultants that study problems and publish reports.” He also noted that DOGE’s impact on Leidos’ 1Q25 top line was essentially negligible, at only 1% of 1Q25 revenue, or roughly $40 million — a figure that essentially aligns with what TBR has observed on GX2’s DOGE-Terminated Contracts Tracker, which tracks DOGE-based developments in federal contracting, specifically contract terminations or drawdowns.
According to the GX2 website, Leidos has had a total of $56.5 million in contracts terminated by DOGE as of the publishing of this blog. The General Services Administration (GSA) continues to review the contracts held by Leidos and nine other companies* the Trump administration instructed DOGE to initially target in its effort to cut $65 billion in consulting fees the federal government is set to pay in federal fiscal year 2025 (FFY2025) and future years.
Bell also commented, “One of the things that we’ve taken a little bit of issue with is the fact that while we’ve been lumped into a consulting review, we’ve never used those words back the GSA. Less than 1% of our revenue could generously be considered consulting revenue.” Leidos’ strong 1Q25 results and willingness to reaffirm its full-year guidance after only one quarter — albeit a very turbulent one for many of Leidos’ competitors — support the notion that Leidos’ portfolio and book of business should remain relatively insulated from major DOGE-related disruptions in FY25.
Eleven ongoing contracts in Leidos’ order book were cancelled, the largest being a $25 million program with the Department of Housing and Urban Development for energy and water benchmarking services. Leidos also had five awards worth a total of $31.6 million with the Department of Health and Human Services terminated by DOGE, the largest being a $12 million award to develop models for cancer drug development while the remainder appeared to be mostly research focused. Leidos lost less than $2 million worth of engagements with the Department of Defense for service, mapping, integration and transport services on what appeared to be the $7.7 billion NGEN (Next Generation Enterprise Network) program with the U.S. Navy.
In contrast to Leidos’ award terminations, Accenture Federal Services has had over $193 million in cancellations, Deloitte Federal lost over $473 million worth of contracts and IBM has had over $40 million in awards sacked by DOGE.
Leidos’ go-to-market messaging in FY25 will underscore the tight alignment of its portfolio with DOGE’s agenda and the Trump administration’s IT priorities
In FY25 Leidos will tout its mission-critical solutions to enhance outcomes quickly, cost-effectively and at scale for federal agencies. Leidos will accelerate efforts to draw closer to its federal clients, emphasizing how they can more effectively utilize the company’s delivery scale and depth of mission expertise to comply with DOGE’s mandates, the overarching IT objectives of the Trump administration and the enduring need to modernize federal technology infrastructures.
Leidos is also very well positioned to continue capitalizing on accelerating demand for faster, more efficient IT-enabled healthcare services for veterans. Sales in the company’s Health & Civil unit rose 8% year-to-year and the segment’s non-GAAP operating income margin was 23.6% in 1Q25, owing to strong project volumes on managed health services contracts. Leidos also expects to win two large-scale, multibillion-dollar health IT contracts over the next one to two years: a follow-on award to the MHS Genesis electronic health record engagement on which Leidos recently achieved 100% deployment, and a subsequent five-year, $1 billion award to the Reserve Health Readiness program to provide commercial health services to all U.S. military reserves (set to conclude in 2026).
Finally, Leidos’ executives indicated during the earnings call that the Trump administration and DOGE became much more accessible to the federal IT contracting community during 1Q25 and have indicated a strong willingness to work with the industry in improving operating efficiencies across the federal government. Bell noted, “I’ve sought out and secured more meetings with cabinet members and key administration executives in the last month than I was able to secure during the whole of the last administration. And we’re seeing significant receptivity in those meetings to big ideas we are bringing forward.”
Some of those “big ideas” include the Golden Dome missile defense shield (a program with a potential worth of tens of billions of dollars, and that will draw fierce competition from Booz Allen Hamilton) and an upgrade to domestic air traffic systems. Leidos also believes its suite of defense solutions and R&D capabilities is well aligned to the FFY2026 defense budget, which could top $1 trillion.
TBR’s DOGE Federal IT Impact Series will include analysis of Accenture Federal Services, General Dynamics Technologies, CACI, IBM, CGI, Leidos, IFC International, Maximus, Booz Allen Hamilton and SAIC. Click here to download a preview of our federal IT research and receive upcoming series blogs in your inbox as soon as they’ve published.
