On March 27, 2026, ("Acquisition Date"), Leidos, Inc. completed a stock purchase agreement with KENE Holdings, L.P. and KENE Parent Inc. ("Entrust") to acquire all of the shares of Entrust for a purchase price of $2.4 billion in cash, subject to customary adjustments for Entrust’s cash, debt, transaction expenses and net working capital. Entrust is an engineering firm that provides infrastructure design, grid modernization and program management services primarily to electric, gas and pipeline utilities. This acquisition enhances existing energy infrastructure capabilities within our Homeland reportable segment.

The preliminary fair values of the assets acquired and liabilities assumed at the Acquisition Date were as follows (in millions):


Cash and cash equivalents	$	47
Receivables, net	162
Other current assets	19
Property, plant and equipment, net	12
Intangible assets, net	564
Operating lease right-of-use assets, net	23
Other long-term assets	1
Deferred tax liabilities	(75)
Accounts payable and accrued liabilities	(74)
Accrued payroll and employee benefits	(21)
Operating lease liabilities	(21)
Total identifiable net assets acquired	637
Goodwill	1,748
Purchase price	$	2,385

Due to the timing and complexity of the acquisition, the assets acquired and liabilities assumed were recorded at their preliminary estimated fair values. As of April 3, 2026, we had not finalized the determination of fair values for substantially all of the acquired assets and liabilities assumed. The preliminary purchase price allocation is subject to change as we complete our determination of the final working capital and the fair value of the acquired assets and liabilities assumed, the impact of which could be material.

The goodwill represents intellectual capital and the acquired assembled workforce, neither of which qualify for recognition as a separate intangible asset. Of the preliminary goodwill recognized, approximately $119 million is tax deductible.

The following table summarizes the preliminary fair value of intangible assets acquired at the Acquisition Date and the related weighted average amortization period:

The preliminary fair value and related weighted average amortization period of the intangible assets acquired were based on an industry benchmarking analysis surrounding recent and relevant industry transactions. The difference between the benchmark estimate and ultimate fair value of intangible assets identified may be material.

For the three months ended April 3, 2026, $11 million of revenues related to Entrust were recognized within the Homeland reportable segment.

For the three months ended April 3, 2026, $29 million of acquisition and integration costs were recorded related to the acquisition of Entrust. These costs were recorded within the Homeland reportable segment and Corporate, and presented in "Acquisition, integration and restructuring costs" and "Interest expense, net" on the condensed consolidated statements of operations.

The following pro forma financial information presents consolidated results of operations as if the acquisition of Entrust had occurred on January 4, 2025. The pro forma financial information was prepared based on historical financial information and has been adjusted to give effect to the events that are directly attributable to the acquisition of Entrust and factually supportable. These adjustments include amortization and interest expense that are directly attributable to the acquisition.

The pro forma results below do not reflect future events that have occurred or may occur after the acquisition, including anticipated synergies or other expected benefits that may be realized from the acquisition. The pro forma information is not intended to reflect the actual results of operations that would have occurred if the acquisition had been completed on January 4, 2025, nor is it intended to be an indication of future operating results.


	Three Months Ended
(in millions, except per share amounts)	April 3, 2026		April 4, 2025
Revenues	$	4,528	$	4,385
Net income	347		332
Net income attributable to Leidos common stockholders	340		330
Earnings per share:
Basic	$	2.69	$	2.54
Diluted	2.65		2.52

The pro forma financial information above includes the following nonrecurring significant adjustment made to account for certain costs incurred as if the acquisition had been completed on January 4, 2025:

uAcquisition-related costs of $29 million for the three months ended April 3, 2026, were excluded from the pro forma financial information for fiscal 2026 and were included in the pro forma financial information for fiscal 2025.

On May 23, 2025 (the "Purchase Date"), we completed the acquisition of Savanna Industries, Inc. ("Kudu Dynamics") for purchase consideration of $293 million, net of $29 million of cash acquired. The Kudu Dynamics business provides artificial intelligence enabled cyber capabilities for defense, intelligence and homeland security customers.

The final goodwill recognized of $231 million represents intellectual capital and the acquired assembled workforce, neither of which qualify for recognition as a separate intangible asset. All of the goodwill recognized is tax deductible.

The following table summarizes the final fair value of intangible assets acquired at the Purchase Date and the related weighted average amortization period:

For the three months ended April 3, 2026, $22 million of revenues related to Kudu Dynamics were recognized within the Intelligence & Digital reportable segment.

Beginning the first day of fiscal 2026, we completed a business realignment, which resulted in new reportable segments (see "Note 9–Business Segments").

The following table presents changes in the carrying amount of goodwill by reportable segment:


(in millions)	Intelligence & Digital		Health		Homeland		Defense		Total
Goodwill at January 3, 2025(1)	$	2,007	$	1,336	$	950	$	1,791	$	6,084
Acquisition of a business	231		—		—		—		231
Divestiture of a business	—		—		(7)		—		(7)
Foreign currency translation adjustments	—		—		34		—		34
Goodwill at January 2, 2026(1)	2,238		1,336		977		1,791		6,342
Acquisition of a business	—		—		1,748		—		1,748
Foreign currency translation adjustments	—		—		4		—		4
Goodwill at April 3, 2026(1)	$	2,238	$	1,336	$	2,729	$	1,791	$	8,094

We evaluate qualitative factors that could cause us to consider whether the estimated fair value of each of our reporting units may be lower than the carrying value, including, but not limited to (i) macroeconomic conditions, (ii) industry and market considerations, (iii) our overall financial performance, including an analysis of our current and projected cash flows, revenues and earnings, (iv) a sustained decrease in share price and (v) other relevant entity-specific events including changes in management, strategy, partners or litigation.

In conjunction with the change in reportable segments in fiscal 2026, the Company evaluated goodwill for impairment immediately before and after the change and determined that goodwill was not impaired.

Intangible assets, net consisted of the following:


	April 3, 2026						January 2, 2026
(in millions)	Gross carrying value		Accumulated amortization		Net carrying value		Gross carrying value		Accumulated amortization		Net carrying value
Programs	$	2,279	$	(1,413)	$	866	$	1,748	$	(1,391)	$	357
Software and technology	264		(191)		73		264		(187)		77
Backlog	46		(10)		36		12		(7)		5
Customer relationships	53		(35)		18		53		(34)		19
Total intangible assets	$	2,642	$	(1,649)	$	993	$	2,077	$	(1,619)	$	458


Fiscal year ending (in millions)
2026 (remainder of year)	$	166
2027	169
2028	152
2029	139
2030	126
2031 and thereafter	241
	$	993