Leidos CEO lays out the company's core technology priorities

"We're very keen that we don't deploy AI and forget," Leidos CEO Tom Bell said to analysts regarding artificial intelligence.

"We're very keen that we don't deploy AI and forget," Leidos CEO Tom Bell said to analysts regarding artificial intelligence. Courtesy of Leidos.

Tom Bell describes to Wall Street some of the company's "seed corn" investments that will inform how it develops the North Star vision he often speaks of.

Companies that lay out their priority technology areas also tell us where their investment dollars are going and where they perceive the largest returns on those bets.

During Leidos' first quarter earnings call with its investors Tuesday, chief executive Tom Bell described some tech areas the company sees as foundational to its still-TBD North Star.

Bell started his CEO tenure in the spring of 2023 and has since given glimpses of what that North Star will eventually look like.

It sounds like the full unveiling will be more of a next-year event. Bell told analysts that this year will be one of "deep strategic thinking" for Leidos amid its work on "analyzing all the business cases and sub-business cases for where the best use of capital is."

"We're able to put some seed corn in areas that are emerging in this year, even though the strategy process is not done," Bell added.

Even as Leidos thinks things through, Bell called out these three tech areas as priorities ­­­­— trusted mission artificial intelligence, full-spectrum cyber and secure rapid software.

All three of those areas do have commonalities with each other. AI is an enabling function for cyber and software is the type of product being used for both of those.

In the context of federal systems integrators like Leidos, all three have a heavy component of partnering well with the global commercial tech companies that make the software-centric products.

This part of Bell's answer to one analyst's big-picture question on how Reston, Virginia-headquartered Leidos is thinking about AI applies to any technology that federal agencies want to incorporate:

"What we're looking at with AI, is really becoming that conduit from commercial best practices and (generative) AI technologies into the government space. You'll appreciate as well as anybody the fact that the government space and the government systems have a whole bunch of idiosyncrasies and complications that people like Leidos, and Leidos in particular, know very well."

Specific to AI, Bell touted Leidos' partnerships with code intelligence companies Sourcegraph and MoveWorks to incorporate more generative AI functionality into software development practices and IT service desk solutions.

Bell said those collaborations have reduced the amount of work across Leidos' customer ecosystem and allows people to "do more value-added work than just the trite, routine, repetitive or deeply analytical things that then we team with a human."

Leidos has also incorporated AI into its medical exam work for the Veterans Affairs Department, the company's airport security product business, and unmanned systems that support the military's command-and-control mission.

Cyber can be viewed through a similar lens to AI, in that both are linked to the endless problem of how much data the government has to work with.

Bell said that over the last three years, Leidos' cyber team to develop next-generation tools that use AI to automate the work to discover new vulnerabilities and develop novel defensive techniques.

Either way, the choice and adoption of an AI tool or toolset can also be seen as step one in an entire process.

"We're very keen that we don't deploy AI and forget," Bell said. "We are very focused on our AI solutions being in partnership with the human being, never alone and unafraid."

First quarter revenue of $4 billion was up 7% from the prior year period, while profit of $490 million showed a 41% year-over-year increase in adjusted EBITDA (earnings before interest, taxes, depreciation and amortization).

The company lifted its 2024 financial outlook to revenue of $16 billion-to-$16.4 billion on an adjusted EBITDA margin of mid-to-high 11%.