Jim Cramer tells viewers Leidos stock is in “freefall,” even as the contractor raises guidance

Leidos Holdings, Inc., a major U.S. defense and technology contractor, drew an unusual spotlight on CNBC’s “Mad Money” when host Jim Cramer told a viewer during the show’s lightning round that the stock appeared to be falling faster than he expected. “This stock is in freefall,” Cramer said, adding that the movement “makes no sense to me,” while also describing Leidos as a provider of “security stuff.”

Cramer’s comments framed the drop as potentially disconnected from the company’s underlying role in homeland security and national security programs. He suggested he was less concerned about Leidos’s prospects on account of its security focus, even while voicing worry that defense budgets could face cuts. According to a later recap of the exchange, Cramer also told viewers “I say buy.”

Leidos, for its part, has recently tried to reinforce the view that its outlook is improving. In a May 5, 2026 earnings update, the company reported first-quarter fiscal 2026 results including revenues of $4.4 billion, up 4% year over year, and net income of $335 million, or $2.56 per diluted share. On a non-GAAP basis, Leidos reported diluted earnings per share of $3.13, up 5% year over year, and adjusted EBITDA of $614 million with an adjusted EBITDA margin of 14.0%.

In the same update, Leidos raised its full-year fiscal 2026 guidance. The company increased its revenue range to $18.00 billion to $18.40 billion, from $17.50 billion to $17.90 billion previously. It also boosted its non-GAAP diluted EPS range to $12.10 to $12.50 and its operating cash flow target to approximately $1.80 billion, while maintaining a “mid 13%” adjusted EBITDA margin outlook.

That guidance came alongside active corporate and program developments. Leidos said its first-quarter results reflected the costs of the Entrust Solutions Group acquisition and a pending joint venture that would combine parts of Leidos’s Security Enterprise Solutions and Industrial Automation businesses with Analogic. The company also reported net bookings of $3.3 billion during the quarter, with backlog of $48.4 billion at quarter-end, including $9.6 billion that was funded.

Leidos’ dependence on government spending is a central reason its stock can be volatile even when individual quarters look solid. In its most recent annual filing, the company said it generated 87% of revenue from U.S. government contracts in fiscal 2024, either as a prime contractor or subcontractor. It also said that the majority of those government revenues were tied to defense and intelligence customers, putting performance and sentiment closely in line with federal budget trends and procurement timing.

What remains unclear from the lightning-round recap is what specific factor, catalyst, or analyst view market participants were reacting to when Cramer described a “freefall.” The recap did not attribute the decline to any newly disclosed Leidos event, and Leidos did not publicly connect its guidance or contract performance to the televised remarks in the materials reviewed here. Investors will therefore likely look for the usual next checkpoints: the company’s next earnings report, updates on integration and strategy execution, and any changes in federal acquisition momentum that could affect backlog conversion and margin expectations.

For now, the tension is straightforward, shares were publicly described as falling sharply despite a recent quarter in which Leidos raised guidance. The next question for the market is whether that mismatch between price action and company fundamentals narrows as Leidos delivers on the higher revenue and cash flow targets it put forward in May, and whether defense and homeland security budgets remain steady enough for expectations to hold.