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    ESLT
    Earnings call· Jun 2025(Q2 FY25)

    ELBIT SYSTEMS LTD ESLT

    Aug 13, 2025 Source

    Executive summary

    Elbit Systems Ltd. Q2 FY25 — Strong Double-Digit Growth Across All Segments and Geographies

    Elbit Systems delivered a robust second quarter, marked by strong double-digit growth across all financial parameters and business segments, driven by high demand in Europe and Israel. The company successfully completed a share offering to support future growth and capacity expansion, while also securing significant new contracts globally. Management highlighted continued margin expansion efforts and strategic investments in R&D and production capabilities, despite some geopolitical challenges and one-time expenses.

    Highlights

    5

    • Second quarter revenues increased by 21.3% year-over-year to $1.973 billion.

    • Non-GAAP operating income expanded to 8.9% of revenues, up from 8.0% in Q2 FY24.

    • Non-GAAP diluted EPS grew by 55.3% year-over-year to $3.23.

    • Order backlog reached $23.8 billion as of June 30, 2025, a 12% increase year-over-year.

    • Operating cash flow for the first six months of 2025 was $304 million, significantly up from $26 million in the prior year period.

    Concerns

    2

    • G&A expenses increased to 4.8% of revenues in Q2 FY25, up from 4.2% in Q2 FY24, mainly due to one-time expenses.

    • Financial expenses increased to $31.2 million in Q2 FY25, up from $29.1 million in Q2 FY24, impacted by exchange rate fluctuations.

    Guidance & targets

    5
    CategoryTargetConfidence
    Full-year 2025 Revenue Growth
    mid-teens
    high materiality
    Medium
    Full-year 2026 Revenue Growth
    double-digit growth
    high materiality
    Medium
    ESA Margin Expansion
    continued expansion
    medium materiality
    High
    IRON BEAM System Deployment
    deploy the system by the end of this year
    medium materiality
    High
    Ramat Beka Site Initial Production
    expected towards the end of this year
    medium materiality
    High

    Segment performance

    9
    SegmentRevenueYoYQoQMargin
    Europe
    Contributed 29% of total revenues in Q2 FY25, with robust demand and higher sales.
    		29%———
    North America
    Contributed 21% of total revenues in Q2 FY25, with robust demand and higher sales.
    		21%———
    Asia Pacific
    Contributed 13% of total revenues in Q2 FY25, with robust demand and higher sales.
    		13%———
    Israel
    Contributed 34% of total revenues in Q2 FY25, with robust demand and higher sales.
    		34%———
    Aerospace
    Aerospace revenue increased by 12% year-over-year in Q2 FY25.
    Mainly due to increase in Precision Guided Munition sales in Israel and Asia PacificUAS sales in Europe
    		—12%——
    C4I and Cyber
    C4I and Cyber revenues increased by 21% year-over-year in Q2 FY25.
    Mainly due to radio systems and command and control system sales in Israel and in Europe
    		—21%——
    ISTAR and EW
    ISTAR and EW revenues increased by 15% in Q2 FY25.
    Mainly due to electro-optical system sales in Israel and electronic warfare system sales in Europe
    		—15%——
    Land
    Land revenues increased by 45% in Q2 FY25, becoming the biggest segment for Elbit. Expected to continue growing in revenue and expand margins.
    Due to ammunition and munition sales in Israel and in EuropeLeading products: Ammunition, Iron Fist, SIGMA Howitzer, Rampage missile
    		$550M+45%——
    Elbit Systems of America
    Elbit Systems of America revenues increased by 4% in Q2 FY25. The segment has turned around from a loss in 2023, with continued margin expansion expected after flushing out losing contracts.
    Due to the increase in maritime and warfighters systems salesTurned around from a loss in 2023Q3 FY25 will be the last quarter of Sparton (losing contracts)
    		—4%—expansion in margins

    Operational metrics

    14
    Non-GAAP Gross Margin
    24.4%flat YoY
    Q2 FY25

    Compared to 24.4% in Q2 FY24.

    GAAP Operating Income Margin
    8.0%up 80 bps YoY
    Q2 FY25

    Compared to 7.2% in Q2 FY24.

    Non-GAAP Operating Income
    $175.1Mup 34.2% YoY
    Q2 FY25

    Compared to $130.5 million in Q2 FY24.

    Non-GAAP Operating Income Margin
    8.9%up 90 bps YoY
    Q2 FY25

    Compared to 8.0% in Q2 FY24.

    Net R&D Expenses
    $129.7Mup 11.0% YoY
    Q2 FY25

    Compared to $116.8 million or 7.2% of revenues in Q2 FY24.

    Marketing and Selling Expenses
    $91.5Mup 4.3% YoY
    Q2 FY25

    Compared to $87.7 million or 5.4% of revenues in Q2 FY24.

    G&A Expenses
    $93.9Mup 36.7% YoY
    Q2 FY25

    Compared to $68.7 million or 4.2% of revenues in Q2 FY24. Increase mainly due to one-time expenses.

    Financial Expenses
    $31.2Mup 7.2% YoY
    Q2 FY25

    Compared to $29.1 million in Q2 FY24. Impacted by sharp fluctuations of exchange rate, strong free cash flow, and offering proceeds decreasing loan portfolio.

    Tax Expense
    $7.1Mdown 37.1% YoY
    Q2 FY25

    Compared to $11.3 million in Q2 FY24.

    Effective Tax Rate
    5.6%down 760 bps YoY
    Q2 FY25

    Compared to 13.2% in Q2 FY24. Decrease mainly due to increase in deferred tax assets and settlement of tax assessments.

    Non-GAAP Diluted EPS
    $3.23up 55.3% YoY
    Q2 FY25

    Compared to $2.08 in Q2 FY24.

    Dividend Per Share
    $0.75up 50% YoY
    Q2 FY25

    Declared by the Board of Directors, 50% higher than last year and the second dividend raise this year.

    Share Offering Proceeds
    $573M
    Q2 FY25

    Net proceeds from a successful share offering, to support future business growth and capacity expansion.

    Capital Expenditures
    $72Mlower than corresponding quarter last year
    Q2 FY25

    Lower Q2 CapEx due to governmental evacuation funds received in Q1. Running rate is around $250 million, with plans to expand investments based on offering proceeds.

    Industry KPIs

    2
    MetricValueDetails
    Total company backlog$23.8BUSD
    Defense program awards$1.625BUSD

    Orderbook & backlog

    1
    Total Order Backlog$23.8BJune 30, 2025

    up 12% YoY; up $626M QoQ

    68% from orders outside of Israel; 46% scheduled for remainder of 2025 and 2026; rest for 2027 and beyond.

    Product announcements

    2
    ProductTypeDetails
    IRON BEAM high-power laser sourcemilestone
    ReDrone counter-drone systemexpansion

    Deals & partnerships

    7
    European countryDeliver a range of defense solutions, including military digitization, network combat solution, Torch-X C4ISR, advanced working capabilities, Hermes 900, Skylark 3, loitering munitions, luminous soldier level tactical drones, ISTAR capabilities, EW, and SIGINT systems.$1.625B5 years

    Contract awarded to deliver a comprehensive suite of defense solutions, marking a significant milestone in Elbit's European expansion.

    AirbusSupply J-MUSIC Directed Infrared Counter Measures (DIRCM) self-protection system for installation on German A400 transport aircraft.$260M

    Contract awarded for DIRCM systems for the German A400 transport aircraft.

    European countrySupply PULS rocket launcher.$130M

    Another contract win for the PULS rocket launcher in Europe.

    U.S. Marine CorpsDelivery order for SBNVG (Squad Binocular Night Vision Goggle) as part of a multiyear ID/IQ contract.$110Mmultiyear (ID/IQ)

    Delivery order received for SBNVG systems.

    General Dynamics European Land SystemsSupply advanced UT30 unmanned turret system for installation on ASCOD armored fighting vehicles for a NATO European country.$100M

    Contract awarded for UT30 unmanned turret systems.

    International customers (including NATO member countries)Supply a broad range of advanced naval technological solutions, including electrical warfare and anti-submarine warfare systems, modernizing and upgrade programs, combat management systems.$330M

    Several contracts awarded for naval technology solutions.

    Israeli Ministry of DefenseSupply airborne munitions.$250M

    Two contract wins for airborne munitions.

    Capital programs

    1
    Ramat Beka Production Siteunderway

    Benefit: state-of-the-art facility with automated AI and robotic solutions for utmost facility efficiencies

    Construction is continuing, with initial production expected towards the end of this year, despite some delays due to the ongoing conflict in the region.

    Risks & headwinds

    4
    Geopolitical difficulties and conflict in the regionCurrent

    Some delays due to the ongoing conflict

    Mitigation: Leveraging unique integrated solutions, operational experience, and local presence through 40 worldwide subsidiaries and partnerships to navigate challenges and expand market reach. Focus on exportable solutions.

    One-time G&A expensesQ2 FY25

    $93.9M G&A (4.8% of revenues) in Q2 FY25, up from $68.7M (4.2%) in Q2 FY24

    Mitigation: Implied to be non-recurring, not a structural issue.

    Losing contracts in Elbit Systems of America (ESA)Historically, with Q3 FY25 being the last quarter for Sparton's losing contracts

    ESA was recording a loss in 2023

    Mitigation: Flushing out losing contracts; Q3 FY25 will be the last quarter for Sparton, which is expected to lead to further margin expansion in ESA.

    Exchange rate fluctuations impacting financial expensesQ2 FY25

    $31.2M financial expenses in Q2 FY25 vs $29.1M in Q2 FY24

    Mitigation: Not explicitly stated, but impact noted as due to 'relatively sharp fluctuations'.

    What to watch in Q3 FY25

    5

    ESA Margin Expansion

    Q3 FY25 and beyond
    Current4% revenue growth in Q2 FY25, turned around from loss in 2023
    TargetContinued expansion, especially after Q3 FY25

    Why it matters

    Indicates successful turnaround and improved profitability for the North American segment.

    This next quarter, Q3 will be the last quarter of Sparton, the maritime company with the last quarter losing contracts. That will allow us to further increase -- to further expand the margins in Elbit Systems America this year and always will secure next year continued expansion in margin.

    Q&A highlights

    8

    What will drive margin expansion in the second half of the year and beyond?

    Management stated a commitment to continue improving margins, citing the new ERP system, operational leverage, and other means, having already achieved approximately 3% margin expansion over the last three years.

    “As we demonstrated in the past, we are committed to continue improving the margin by our new ERP -- one ERP system, for instance, by operational leverage that is playing an important factor in the margin expansion and by other means.”

    asked by Jordan Lyonnais · answered by Yaacov Kagan

    2 min read5 chapters

    Detailed Narrative

    01

    Strong Financial Performance and Margin Expansion

    Elbit Systems reported strong double-digit year-over-year growth across all financial parameters, with revenues reaching $1.973 billion in Q2 FY25, up 21.3% from Q2 FY24. The company achieved non-GAAP operating income of $175.1 million, representing an 8.9% margin, an expansion from 8.0% in the prior year. This margin improvement is attributed to company-wide efforts, including the implementation of a new ERP system and operational leverage, with management committed to further enhancing profitability.

    02

    Robust Backlog and Order Intake

    The company's order backlog grew to $23.8 billion as of June 30, 2025, marking a 12% increase from Q2 FY24 and a sequential increase of $626 million from Q1 FY25. This growth was primarily driven by new international orders, with approximately 68% of the current backlog originating from outside Israel. Management noted that 46% of the backlog is scheduled for performance during the remainder of 2025 and 2026, with the rest extending into 2027 and beyond, providing strong revenue visibility.

    03

    Strategic Investments and Capacity Expansion

    Elbit continues to invest significantly in R&D, with expenses at $129.7 million or 6.6% of revenues in Q2 FY25, to develop cutting-edge technologies. The company also raised $573 million net from a successful share offering, which will be used to increase production capacity, meet growing demand, and potentially fund M&A activities for technology acquisition or global reach expansion. The Ramat Beka production site, featuring automated AI and robotic solutions, is progressing with initial production expected by year-end.

    04

    Key Contract Wins and Product Traction

    During and after the quarter, Elbit secured several significant contracts, including a $1.625 billion deal with a European country for military digitization and C4ISR solutions, a $260 million contract with Airbus for DIRCM systems for German A400 aircraft, and a $130 million order for PULS rocket launchers. Other notable wins include a $110 million order for SBNVG from the U.S. Marine Corps, a $100 million contract for UT30 unmanned turrets for NATO, and $330 million in naval technology contracts. These wins highlight the company's broad portfolio and growing international footprint.

    05

    Geopolitical Context and Operational Experience

    The CEO emphasized Elbit's unique position to offer advanced, integrated defense solutions, leveraging its operational experience, particularly from the recent conflict between Israel and Iran. The company's technologies, such as Hermes 900 drones and ISR systems, played a crucial role in supporting the IDF. Elbit's strategy involves working through its 40 worldwide subsidiaries and partnerships, enabling local development, production, and job creation, which helps mitigate geopolitical sensitivities and expands market reach.

    AI-generated summary of the company’s earnings call. Not investment advice.