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    HII
    Earnings call· Jun 2026(Q2 FY26)

    HUNTINGTON INGALLS INDUSTRIES Q2 FY26 earnings call HII

    Jul 30, 2026 Source

    Executive summary

    Huntington Ingalls Industries Q2 FY26 — Shipbuilding Revenue and Margin Guidance Raised

    Huntington Ingalls Industries delivered a solid second quarter, driven by strong shipbuilding performance and raised full-year guidance for both revenue and margins in the segment. The company continues to focus on operational initiatives, including throughput improvements and workforce development, while securing significant new contract awards. Despite some headwinds in Mission Technologies and Q2 free cash flow timing, management remains confident in its full-year outlook and the long-term growth trajectory, particularly with recent submarine contract definitization.

    Highlights

    5

    • Q2 sales of $3.4 billion, increased 10.9% compared to the same period last year.

    • Shipbuilding sales of $2.7 billion, up 15.7% year-over-year, marking the fourth consecutive quarter of double-digit growth.

    • Raised 2026 shipbuilding revenue guidance to $10.2 billion - $10.4 billion and margin guidance to 6% - 6.5%.

    • Secured $6.7 billion in new contract awards during the quarter.

    • Mission Technologies delivered $760 million in sales with above 10% EBITDA margin.

    Concerns

    4

    • Mission Technologies revenue decreased 3.9% YoY, primarily due to lower volumes in all domain operations and global security (excluding a nonrecurring contract resolution in Q2 FY25).

    • Ingalls Shipbuilding experienced a 'slow start' to the year regarding labor growth, though retention improved post-CBA.

    • Q2 free cash flow was -$31 million, below forecast, due to timing of receipts and disbursements.

    • Newport News experienced 'lower performance in aircraft carriers' partially offsetting positive contract adjustments.

    Guidance & targets

    21
    CategoryTargetConfidence
    2026 Shipbuilding revenue
    $10.2 billion to $10.4 billion
    high materiality
    High
    2026 Shipbuilding operating margin
    6% to 6.5%
    high materiality
    High
    2026 Mission Technologies revenue
    $3 billion to $3.2 billion
    medium materiality
    High
    2026 Mission Technologies segment operating margin
    approximately 5%
    medium materiality
    High
    Q3 FY26 Shipbuilding revenue
    approximately $2.6 billion
    medium materiality
    High
    Q3 FY26 Shipbuilding operating margin
    similar to the second quarter result of 6.3%
    medium materiality
    High
    Q3 FY26 Mission Technologies revenue
    similar to the second quarter results of $760 million
    medium materiality
    High
    Q3 FY26 Mission Technologies operating margin
    approximately 4%
    medium materiality
    Medium
    Q3 FY26 Free cash flow
    approximately $100 million
    high materiality
    High
    FY26 Free cash flow
    $500 million to $600 million
    high materiality
    High
    Q3 FY26 Effective tax rate
    21%
    low materiality
    High
    FY26 Effective tax rate
    17%
    low materiality
    High
    Ship deliveries
    5 ships
    high materiality
    High
    CVN 79 Kennedy delivery
    final ship delivery in 2027
    medium materiality
    High
    SSN 800 Arkansas delivery
    delivery later this year
    medium materiality
    High
    CVN 81 keel laying
    later this year
    low materiality
    High
    LPD 30 Harrisburg delivery
    delivery this year
    medium materiality
    High
    LHA-8 Buggenville delivery
    planned delivery in 2027
    medium materiality
    High
    DDG 129 Geremia Denton delivery
    planned delivery in 2027
    medium materiality
    High
    Shipbuilding revenue
    $2.5 billion to $2.7 billion
    medium materiality
    Medium
    Shipbuilding margin
    9% to 10%
    high materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Shipbuilding
    Strong performance driven by higher volumes across aircraft carriers, submarines, and amphibious assault ships.
    Fourth consecutive quarter of double-digit growth
    		$2.7 billion15.7%—6.3%
    Ingalls Shipbuilding
    Revenue growth driven by higher volumes in amphibious assault ships. Operating income increased, but margin decreased due to favorable contract adjustments in surface combatants in Q2 FY25. Experienced a slow start to the year in labor growth, but retention is improving post-CBA.
    Segment operating income: $58 million (Q2 FY26)Segment operating income: $54 million (Q2 FY25)Operating margin: 7.5% (Q2 FY25)Net cumulative adjustment: -$2 million (Q2 FY26)
    		$845 million16.7%—6.9%
    Newport News Shipbuilding
    Revenue growth driven by higher volumes across aircraft carriers and submarines. Operating income increased due to contract adjustments and incentives in aircraft carriers, partially offset by lower performance in aircraft carriers. Underlying margin (excluding adjustments) is consistent at 5.5%.
    Segment operating income: $111 million (Q2 FY26)Segment operating income: $82 million (Q2 FY25)Operating margin: 5.1% (Q2 FY25)Net cumulative adjustment: +$8 million (Q2 FY26)
    		$1.8 billion15.3%—6%
    Mission Technologies
    Revenue decrease primarily due to lower volumes in all domain operations and global security, but showed modest organic growth excluding a prior-year non-recurring contract resolution. Operating income increased due to higher equity income from nuclear and environmental joint ventures.
    Segment operating income: $55 million (Q2 FY26)Segment operating income: $36 million (Q2 FY25)Operating margin: 4.6% (Q2 FY25)Net cumulative adjustment: +$4 million (Q2 FY26)
    		$760 million-3.9%—7.2%

    Operational metrics

    30
    Consolidated Sales
    $3.4 billionup 10.9% YoY
    Q2 FY26
    Consolidated Diluted EPS
    $5.27up from $3.86 YoY
    Q2 FY26
    Consolidated Segment Operating Income
    $224 millionvs $172 million in Q2 FY25
    Q2 FY26
    Consolidated Segment Operating Margin
    6.6%vs 5.6% in Q2 FY25
    Q2 FY26
    Consolidated Operating Income
    $210 millionvs $163 million in Q2 FY25
    Q2 FY26
    Consolidated Operating Margin
    6.1%vs 5.3% in Q2 FY25
    Q2 FY26
    Net Earnings
    $208 millionup from $152 million in Q2 FY25
    Q2 FY26
    Effective Tax Rate
    18.1%below 21% guidance
    Q2 FY26

    Primarily due to favorable tax impacts related to stock award settlement activity.

    Cash used in operations
    $31 million
    Q2 FY26
    Net Capital Expenditures
    $119 million3.5% of revenues
    Q2 FY26
    Cash balance
    $12 million
    Q2 FY26
    Total liquidity
    $1.7 billion
    Q2 FY26
    Cash dividend per share
    $1.38
    Q2 FY26
    Total cash dividend paid
    $55 million
    Q2 FY26
    Shipbuilding revenue growth
    18%YoY
    Q4 FY25

    Part of a sequence of quarterly YoY growth rates for shipbuilding.

    Shipbuilding revenue growth
    19.6%YoY
    Q1 FY26

    Part of a sequence of quarterly YoY growth rates for shipbuilding.

    Shipbuilding revenue growth
    19.7%YoY
    Q1 FY26

    Part of a sequence of quarterly YoY growth rates for shipbuilding. Stated alongside 19.6% for the same period, indicating potential slight variation or ASR error.

    Shipbuilding revenue growth
    15.8%YoY
    Q2 FY26

    Part of a sequence of quarterly YoY growth rates for shipbuilding.

    Shipbuilding operating margin
    5.2%
    FY24
    Shipbuilding operating margin
    5.9%
    FY25
    Shipbuilding operating margin
    5.5%
    Q4 FY25
    Shipbuilding operating margin
    5.7%
    Q1 FY26
    Shipbuilding throughput improvement
    12%over 2025
    YTD FY26

    Full year goal is 15%.

    Shipbuilders hired
    3,500
    YTD FY26
    Distributed shipbuilding increase
    30%
    FY26
    Working capital
    8%vs 4% at end of FY25
    Q1 FY26

    Increased to just under 11% in Q2 FY26.

    Working capital
    just under 11%vs 8% in Q1 FY26
    Q2 FY26

    Expected to improve in Q3/Q4 FY26.

    Mission Technologies EBITDA margin
    above 10%
    Q2 FY26
    Mission Technologies revenue impact from non-recurring contract resolution
    $45 million
    Q2 FY25

    Excluding this, Mission Technologies revenues grew modestly YoY organically.

    New orders / bookings
    $6.7 billion
    Q2 FY26

    Total contract awards secured in the quarter.

    Industry KPIs

    4
    MetricValueDetails
    Defense program awards$76.6 billionUSD
    Program segment backlog$25 billionUSD
    Unit deliveries by programDDG 128 Ted Stevensship
    Program margins eac charges+$8 millionUSD

    Orderbook & backlog

    2
    Ships currently in construction at Ingalls Shipbuilding13Q2 FY26

    Includes 6 destroyers, 3 LPDs, 2 LHAs, and supporting work on DDG 1000 and DDG 1002.

    Additional ships under contract for preproduction work at Ingallsa dozenQ2 FY26

    Material purchasing and preproduction work underway.

    Product announcements

    8
    ProductTypeDetails
    Romulus unmanned surface vesselmilestone
    DDG-131 George Neilmilestone
    DDG 133 SAM 9milestone
    DDG 135milestone
    DDG 137 John F. Lehmanmilestone
    LPD-31 Pittsburghmilestone
    LPD 32 Philadelphiamilestone
    DDG-1000 USS Zumwaltmilestone

    Deals & partnerships

    7
    U.S. NavyRecompete award for shipboard-based elevators support$418 million

    To continue supporting shipboard-based elevators across U.S. Navy aircraft carriers and amphibious ships.

    Bayou MetalsBroadening REMUS industrial base

    New partnership to broaden REMUS industrial base.

    Halamar ShipbuildingBroadening REMUS industrial base

    New partnership to broaden REMUS industrial base.

    U.S. NavyNext production option for Line Fish Small Unmanned Undersea Vehicle (SUUV) program

    Demonstrates commercial Remus 300's evolution into Navy's preferred next-generation EUV.

    Applied and IntuitionDevelopment and integration of AI-defined capabilities

    To develop and integrate AI-defined capabilities for next-generation naval platforms in maritime manned, unmanned teaming.

    U.S. NavyFrigate lead yard support contract

    To procure long lead time material, execute design work, and begin preconstruction activities for the first ship.

    U.S. Navy and Electric BoatVCS Block VI and next Columbia submarine contracts definitization$76.6 billion

    Represents critical demand signals and stability for workforce and supply chain. Includes material for 10 Virginia-class ships and 9 cost-wise shipsets for integration/testing/delivery.

    Capital programs

    1
    Submarine industrial base investmentunder consideration
    Funding: House appropriations bill

    Benefit: Invest in critical areas, including supplier capacity and capability, strategic outsourcing, workforce training, technology and infrastructure.

    Funding added by the House appropriations bill, awaiting Senate position and final outcomes.

    Risks & headwinds

    4
    Mission Technologies revenue declineQ2 FY26

    Decreased by 3.9% compared to Q2 FY25

    Mitigation: Modest organic growth excluding prior-year non-recurring contract resolution; strategic investments in unmanned capability and production capacity planned for Q3.

    Ingalls Shipbuilding labor growthH1 FY26

    Slow start to the year

    Mitigation: Updated collective bargaining agreement in March led to immediate retention benefits and early positive indicators for hiring; focus on workforce development, advanced training, and pipeline programs.

    Free cash flow below forecastQ2 FY26

    Cash used in operations was $31 million in Q2 FY26

    Mitigation: Attributed to timing of receipts and disbursements between quarters; no change to full-year FCF expectation of $500M-$600M, with significant generation expected in Q4.

    Lower performance in aircraft carriers at Newport NewsQ2 FY26

    Partially offset positive contract adjustments and incentives

    Mitigation: Continually evaluating performance and revised plans for CVN 80 to get it back into the build cycle rhythm; management expects natural margin improvement as ships are delivered and new contracts are transitioned to.

    What to watch in Q3 FY26

    5

    Shipbuilding throughput improvement

    H2 FY26
    Current12% YTD FY26
    Target15% for full year

    Why it matters

    Throughput is a key driver for operational efficiency, meeting delivery schedules, and ultimately margin expansion in shipbuilding.

    Year-to-date, we've achieved a 12% improvement over 2025 and with plans in place to meet our full year goal of 15%. Throughput improvements are expected to accelerate in the second half of the year as we hit more milestones and deliveries.

    Q&A highlights

    6

    Asked for quarterly outlook on shipbuilding margins and key milestones.

    Management reiterated Q3 margin guidance and outlined key ship delivery and keel-laying milestones for CVN 79, SSN 800, CVN 81, and LPD 30, emphasizing that these are on schedule.

    “delivery of 30 will be towards the end of the year. It will go to trials here in Q3. 79 is actually going to go to trials here in a couple of weeks or a week or 2. We expect that to proceed and that's on schedule. 800 towards the end of the year, some real critical milestones coming up in the summer here or the later part of the summer related to 800.”

    asked by John Godyn · answered by Christopher Kastner

    2 min read5 chapters

    Detailed Narrative

    01

    Operational Momentum and Throughput

    HII continues to demonstrate strong operational momentum, achieving a 12% throughput improvement year-to-date, with a full-year target of 15%. This progress is expected to accelerate in the second half of the year as key milestones and deliveries are met. The company is actively addressing workforce readiness, having hired over 3,500 shipbuilders year-to-date and seeing positive retention trends following recent collective bargaining agreements.

    02

    Distributed Shipbuilding Expansion

    The company is on track to increase distributed shipbuilding by 30% this year, leveraging new partnerships and additional shipyard facilities along the Gulf Coast. This strategy involves building selected units off-site and integrating them in Pascagoula, creating a dual production path to support greater throughput and production capability. Management noted that while issues can arise, the process has been largely successful due to strong oversight and in-process inspections.

    03

    Submarine Contract Definitization

    HII reached an agreement on the VCS Block VI and next Columbia submarine contracts, representing a significant demand signal and stability for the workforce and supply chain. The $76.6 billion contract modification includes approximately $25 billion for Newport News for the Virginia-class submarines and about $5.5 billion for the Columbia program, with the remainder for capital incentives spread across various contracts.

    04

    Unmanned Systems Growth

    Mission Technologies is capitalizing on the growing market for autonomous products, with the Romulus unmanned surface vessel advancing to U.S. Navy testing and securing the next production option for the Line Fish small unmanned undersea vehicle program. The company is broadening its REMUS industrial base through new partnerships and developing AI-defined capabilities for next-generation naval platforms, positioning for significant growth in this market space.

    05

    Washington Activities and Bipartisan Support

    The President's FY27 budget request is under congressional consideration, with bipartisan support for HII's programs evident in defense authorization and appropriation bills. The House appropriations bill specifically adds funding for the submarine industrial base, targeting supplier capacity, workforce training, technology, and infrastructure investments. The company awaits the Senate's position and final outcomes from conference committee negotiations.

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