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    LHX
    Earnings call· Mar 2026(Q1 FY26)

    L3HARRIS TECHNOLOGIES, INC. /DE/ Q1 FY26 earnings call LHX

    Apr 30, 2026 Source

    Executive summary

    L3Harris Technologies Q1 FY26 — Strong Organic Growth and Record Backlog

    L3Harris Technologies delivered a strong first quarter, driven by robust organic revenue growth and expanding margins, reinforcing its "Trusted Disruptor" strategy. The company saw significant demand in Space & Mission Systems and Resilient Communications, leading to a record backlog and strong international book-to-bill. Management reaffirmed full-year guidance, expressing confidence in sustained growth and the 2028 financial framework.

    Highlights

    5

    • Revenue grew 15% organically, up over $600 million to $5.7 billion, driven by strength in Space & Mission Systems and Missile Solutions.

    • Segment operating income increased $125 million to $902 million, with segment operating margin at 15.7%, up 10 basis points year-over-year.

    • GAAP earnings per share (EPS) was $2.72, up 33% year-over-year, and full-year GAAP EPS guidance was raised by $0.10 to $11.40-$11.60.

    • Backlog almost doubled to over $40 billion, providing 2.0x revenue coverage, and does not yet include $25 billion in Munitions Acceleration Council orders.

    • International book-to-bill was 2.2x for the quarter, with international demand accelerating over 20%.

    Concerns

    2

    • Free cash flow was an outflow of $187 million in Q1, driven by working capital timing, though cash generation is expected to be weighted to the back half of the year.

    • Missile Solutions segment experienced net unfavorable EAC adjustments, which were partially offset by a gain on the sale of legacy assets.

    Guidance & targets

    9
    CategoryTargetConfidence
    Full-year revenue
    $23 billion to $23.5 billion
    high materiality
    High
    Full-year organic revenue growth
    7% at the midpoint
    high materiality
    High
    Full-year segment operating margin
    low 16%
    high materiality
    High
    Full-year GAAP EPS
    $11.40 to $11.60
    high materiality
    High
    Full-year free cash flow
    $3 billion
    high materiality
    High
    Full-year non-service pension income
    $290 million
    medium materiality
    High
    Full-year total pension income
    $310 million
    medium materiality
    High
    Radios business acceleration
    accelerate as the year progresses
    low materiality
    Medium
    Impact of Missile Solutions IPO, DoW investment, and space propulsion sale
    not contemplated in current guidance
    high materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Space & Mission Systems
    Revenue growth driven by strength in various sectors, including a milestone on a new classified program. Margin increase partially offset by increased material purchases and R&D investment.
    Revenue benefited from a milestone associated with procurement of material on a new classified program
    		$3 billion24%—increased 60 basis points
    Communication & Spectrum Dominance
    Revenue growth driven by increased volume in Resilient Communications products, night vision devices, and the next-generation jammer program. Margin increase partially offset by higher investments in customer demonstrations, prototypes, and R&D.
    Increased volume of Resilient Communications productsIncreased volume of night vision devicesRamp-up on the next-generation jammer electronic warfare programFavorable legal settlement
    		$1.9 billion3%—increased 60 basis points
    Missile Solutions
    Revenue increased due to higher production volumes. Segment margin increased due to mix, volume, and a gain on asset sale, partially offset by net unfavorable EAC adjustments.
    Segment margin up 110 basis pointsIncreased on higher production volumes across key missile munitions and space propulsion programsGain on the sale of legacy assetsNet unfavorable EAC adjustments
    		$1 billion18%—12.5%

    Operational metrics

    11
    Revenue per employee
    increased by almost 25%
    past couple of years

    Driven by productivity improvements and aided by investments in technology, including AI.

    International demand growth
    accelerating over 20%
    Q1 FY26

    As allies modernize their technology and invest more heavily in national defense.

    Investment in innovation and capacity
    increased 44%
    Q1 FY26

    Hallmark of the Trusted Disruptor strategy.

    R&D spend as percentage of revenue
    2.5% to 3%
    ongoing

    Management's own R&D investment.

    Total innovation, growth and R&D spend as percentage of revenue
    10%
    ongoing

    Includes CRAD contracts and Shield capital investments.

    Army HMS program budget
    $515 million
    FY27

    Similar amounts outlined for the next 5 years, well funded.

    Marines radio budget
    $750 millionup from $200 million in 2026
    FY27

    Marines requested $750 million for 2027, up from $200 million in 2026.

    NGC2 budget
    $2.8 billion
    ongoing

    Large budget for the Next Generation Command and Control initiative.

    Classified sole-source contract award
    $600 million
    Q1 FY26

    Awarded as a result of past performance and innovative solution.

    Estimated revenue contribution from extra productive days
    $200 million
    Q1 FY26

    Estimated impact of fewer working days in the prior-year quarter.

    Installed base of software-defined radios
    1 million
    current

    Worldwide installed base, positioned to increase by 20% over the next couple of years.

    Industry KPIs

    7
    MetricValueDetails
    Book to bill ratio1.4x
    Free cash flow bridge$187 million outflowUSD
    Defense program awards$700 millionUSD
    Program segment backlog$726 millionUSD
    Unit deliveries by program2units
    Program margins eac chargesnet unfavorable
    Total company backlog total estimated contract vover $40 billionUSD

    Orderbook & backlog

    7
    Total company backlogover $40 billionQ1 FY26

    almost doubled

    Does not yet include $25 billion of orders for the Munitions Acceleration Council programs, which are currently in negotiations. Provides 2x revenue coverage.

    Munitions Acceleration Council orders$25 billionQ1 FY26

    Currently in negotiations; expected to be definitized by end of calendar year.

    International book-to-bill2.2xQ1 FY26
    Company book-to-bill1.4xQ1 FY26

    Includes awards in missionized aircraft, solid rocket motors, and software-defined communication products.

    ISR international pipelineabout $40 billionQ1 FY26
    Space pipelinetens of billions of dollarsQ1 FY26

    Includes LEO, MEO, and GEO opportunities, primarily with Air Force/Space Force.

    Total backlog (future estimate)$60 billion to $70 billionnext 12 months

    Expected with the inclusion of MAC programs.

    Product announcements

    2
    ProductTypeDetails
    VAMPIRE counter-drone systemsupdate
    Falcon 5 radiolaunch

    Deals & partnerships

    3
    Not nameddivestiture

    Entered into an agreement to sell 60% of the Space Propulsion & Power Systems business.

    Department of Warpartnership$1 billion investment

    Announced and closed a novel partnership, receiving a $1 billion investment from the Department of War to support the Missile Solutions segment.

    Not applicabledivestiture

    Filed a confidential Form S-1 with the SEC to take the Missile Solutions segment public, which will be named Axyv (A-X-Y-V).

    Capital programs

    1
    Solid Rocket Motor Production Capacity Expansionunderway
    Funding: $1 billion investment from the Department of War; additional cash

    Benefit: expanding solid rocket motor production capacity

    L3Harris is moving quickly to accelerate the expansion of solid rocket motor capacity, supported by a $1 billion investment from the Department of War and additional company cash. Progress was highlighted at an event in Camden, Arkansas.

    Risks & headwinds

    3
    Free cash flow outflowQ1 FY26

    $187 million outflow

    Mitigation: Driven by working capital timing; cash generation will be weighted to the back half of the year.

    Net unfavorable EAC adjustmentsQ1 FY26

    Net unfavorable

    Mitigation: Partially offset by a gain on the sale of legacy assets in the Missile Solutions segment.

    Supply chain constraints for production ramp-upOngoing

    Implied

    Mitigation: Working with suppliers to ramp up, DoW helping with equity investments or loans, focused on getting multiple suppliers for components like cases, nozzles, and igniters, investing in additional second or third sources.

    Q&A highlights

    8

    Given the Investor Day chart showing higher multi-year growth for SMS than CSD, how does management see SMS's growth profile over the next few years, and is there upside to consensus estimates?

    Chris Kubasik highlighted SMS's strong pipeline in ISR, citing the South Korea and NATO awards, and the potential for 22+ Compass Call aircraft. He also emphasized the growth in Space, where L3Harris has won every SDA competition and secured a $600 million sole-source classified contract with potential for billions. He affirmed the company's guidance and noted the strong maritime budget.

    “I think the future of ISR is very bright as a result of that, just that one market. Space, we've talked a lot about space, this is another decision strategically we made about 5 years ago to invest in the space to be a prime satellite manufacturer.”

    asked by John Godyn · answered by Christopher Kubasik

    2 min read5 chapters

    Detailed Narrative

    01

    Strategic Positioning and Market Alignment

    L3Harris continues to execute its "Trusted Disruptor" strategy, positioning itself between traditional primes and new defense tech companies. This approach, focusing on agility and rapid missionization, has resulted in consistently strong financial results and alignment with fastest-growing priorities like space sensing, missile defense, ISR, and resilient communications. The company's capacity is highlighted as a key capability in the current demand-driven environment, with a strategy aligned to customer demand and a step-change in the DoD budget request.

    02

    Missile Solutions and Axyv IPO

    The company is strategically evolving its Missile Solutions segment, including a $1 billion investment from the Department of War and a planned IPO under the new name Axyv. This move is designed to accelerate capacity expansion for solid rocket motors, unlock shareholder value, and align with urgent customer priorities. Negotiations for multiyear procurement frameworks are progressing, with definitized contracts expected later in the year. The new company, Axyv, is built for momentum with a portfolio designed to deliver at scale, conveying clarity of strategy and agile execution.

    03

    Space & Mission Systems Growth Drivers

    The Space & Mission Systems segment saw significant growth, driven by strong performance in ISR and space programs. Key wins include a $2.2 billion multi-aircraft missionized business jet award with a NATO ally (initial $726 million booked) and a strategic tanker/transport award in Canada for $700 million. The company also secured a sole-source classified contract for $600 million with potential for billions in follow-on work, reflecting its differentiated capabilities in satellite manufacturing and missile warning/tracking. The HBTSS program was recognized with the 2025 David Packard Excellence in Acquisition award for successfully demonstrating tracking against a hypersonic target.

    04

    Resilient Communications Strength

    International demand for software-defined tactical communication products remains robust, with $460 million in orders from three NATO countries (Czech Republic, Germany, Poland). Domestically, the Army HMS program is well-funded with $515 million in FY27 and similar amounts for the next five years, while the Marines' budget for radios increased from $200 million to $750 million. L3Harris is also participating in the NGC2 initiative, with two initial contracts for the transport layer, and is working to ensure seamless integration of its products into an open systems architecture.

    05

    Investment in Innovation and Capacity

    L3Harris is increasing investments in R&D and capacity expansion, with R&D spending around 2.5% to 3% of revenue, and total innovation-related spending (including CRAD contracts and Shield capital) estimated at 10% of revenue. This includes developing new radio technologies like the Falcon 5 and expanding solid rocket motor production, demonstrating a commitment to meeting rapidly evolving customer needs and sustaining long-term growth. The company also converted an existing factory to integrate VAMPIRE counter-drone systems, which are combat-proven and positioned to capitalize on expanding demand.

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