Leidos Holdings, Inc.LDOS
Leidos Holdings, Inc. Goodwill & Intangibles Disclosure
Note 8—Goodwill and Intangible Assets
GOODWILL
The following table presents changes in the carrying amount of goodwill by reportable segment:
(in millions) | National Security & Digital | Health & Civil | Commercial & International | Defense Systems | Total | ||||||||||||||||||||||||
Goodwill at December 29, 2023(1) | $ | 2,758 | $ | 1,366 | $ | 800 | $ | 1,188 | $ | 6,112 | |||||||||||||||||||
| Foreign currency translation adjustments | — | — | (28) | — | (28) | ||||||||||||||||||||||||
Goodwill at January 3, 2025(1) | 2,758 | 1,366 | 772 | 1,188 | 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) | $ | 2,989 | $ | 1,366 | $ | 799 | $ | 1,188 | $ | 6,342 | |||||||||||||||||||
(1)Carrying amount includes accumulated impairment loss of $596 million within the Commercial & International segment.
Operations of the Security Enterprise Solutions (“SES”) reporting unit rely heavily on the sales and servicing of security and detection products. In fiscal 2023, SES restructured its portfolio by discontinuing select product offerings and ceasing operations in certain countries to better align with its strategic plan. These changes, along with delays in airline travel infrastructure projects and higher than anticipated servicing costs, contributed to a significant reduction in the reporting unit’s forecasted revenue and cash flows. As a result, in fiscal 2023, we conducted a quantitative goodwill impairment analysis and our estimates led us to determine that the carrying value of the SES reporting unit exceeded its estimated fair value (see “Note 11—Fair Value Measurements”). We recorded a non-cash goodwill impairment charge of $596 million for the SES reporting unit as of fiscal 2023, within the Commercial & International reportable segment.
In the fourth quarter of fiscal 2025 and 2024, we performed a quantitative analysis for the SES reporting unit and concluded that no further impairment was necessary as the fair value of the reporting unit exceeded the carrying value.
In the fourth quarter of fiscal 2025, 2024 and 2023, we performed a qualitative analysis for certain reporting units which determined that it was more likely than not that the fair values of these reporting units were in excess of the individual reporting units’ carrying values. In the event that there are significant unfavorable changes to the forecasted cash flows, forecasted revenue, terminal growth rates or the cost of capital used in the fair value estimates, we may be required to record an additional impairment of goodwill at a future date.
INTANGIBLE ASSETS
Intangible assets, net consisted of the following:
| January 2, 2026 | January 3, 2025 | |||||||||||||||||||||||||||||||||||||
(in millions) | Gross carrying value | Accumulated amortization | Net carrying value | Gross carrying value | Accumulated amortization | Net carrying value | ||||||||||||||||||||||||||||||||
| Finite-lived intangible assets: | ||||||||||||||||||||||||||||||||||||||
| Programs | $ | 1,748 | $ | (1,391) | $ | 357 | $ | 1,686 | $ | (1,293) | $ | 393 | ||||||||||||||||||||||||||
| Software and technology | 264 | (187) | 77 | 261 | (165) | 96 | ||||||||||||||||||||||||||||||||
| Customer relationships | 53 | (34) | 19 | 52 | (28) | 24 | ||||||||||||||||||||||||||||||||
Backlog | 12 | (7) | 5 | — | — | — | ||||||||||||||||||||||||||||||||
| Total finite-lived intangible assets | 2,077 | (1,619) | 458 | 1,999 | (1,486) | 513 | ||||||||||||||||||||||||||||||||
| Indefinite-lived intangible assets: | ||||||||||||||||||||||||||||||||||||||
| Trade names | — | — | — | 4 | — | 4 | ||||||||||||||||||||||||||||||||
| Total intangible assets | $ | 2,077 | $ | (1,619) | $ | 458 | $ | 2,003 | $ | (1,486) | $ | 517 | ||||||||||||||||||||||||||
Our strategic decisions regarding SES’ product offerings and operating regions (see the goodwill discussion above) caused certain technology, customer relationships and in-process research and development ("IPR&D") intangible assets to be abandoned and the carrying values of certain program intangible assets to become unrecoverable. As a result, we recognized intangible asset impairment charges of $79 million for fiscal 2023, which included $33 million for IPR&D intangible assets. The impairment was recorded to “Asset impairment charges” in the consolidated statements of operations within the Commercial & International reportable segment. In the event that we are required to make an additional impairment of goodwill at a future date or if other events occur that negatively impact these intangible assets, we may also be required to record an additional impairment of intangible assets at that time.
Amortization expense related to intangible assets was $130 million, $147 million and $202 million for fiscal 2025, 2024 and 2023, respectively.
The estimated annual amortization expense related to finite-lived intangible assets as of January 2, 2026, is as follows:
Fiscal year ending (in millions) | ||||||||
| 2026 | $ | 111 | ||||||
| 2027 | 85 | |||||||
| 2028 | 76 | |||||||
| 2029 | 63 | |||||||
| 2030 | 50 | |||||||
2031 and thereafter | 73 | |||||||
| $ | 458 | |||||||
Actual amortization expense in future periods could differ from these estimates as a result of future acquisitions, divestitures, impairments and other factors.
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About Goodwill & Intangibles Disclosures
Goodwill and intangible asset disclosures reveal the premium paid in acquisitions and how management assesses whether that premium retains its value. Since goodwill is no longer amortized under US GAAP, the annual impairment test is the only mechanism that adjusts carrying values downward — making the assumptions behind that test critically important for investors.
Key signals: a history of goodwill impairments suggests management consistently overpays for acquisitions. Watch the gap between reporting unit fair value and carrying amount — when fair value exceeds carrying amount by less than 10-20%, a small decline in business performance could trigger a write-down. For finite-lived intangibles, examine useful life assumptions across customer relationships, technology, and trade names; aggressive estimates inflate near-term earnings. Compare total intangibles-to-total-assets ratios against peers to assess acquisition dependency. Rising goodwill as a percentage of equity can signal balance sheet fragility.