Details on overall defense growth, FLIR defense growth, and drivers for outperformance in A&D electronics.

Robert Mehrabian indicated FLIR defense is growing about 9%, with broad growth across products like drones, nano drones, loitering drones, and surveillance systems. A&D electronics growth is driven by various components (lasers, detectors, semiconductors, switches) due to increasing global conflicts. “I think we're looking at about 9% growth in that area. Pretty much all of our products in the FLIR Defense are growing, specifically drones, nano drones, loitering drones, surveillance systems, you name it.”

Inquiry about the sequential decline in Q2 EPS guidance, which is atypical for seasonality, and the underlying dynamics.

Robert Mehrabian explained that the primary reason for the sequential EPS decline in Q2 guidance is the absence of similar tax benefits experienced in Q1. Q1 had significant tax benefits from stock option exercises, which are not projected for Q2. “In Q1, we had some good tax benefits year-over-year. Our tax benefits increased because of stock option exercises increased about [ $0.10, $0.11 ] year-over-year. In Q2, where we sit right now, we're not projecting similar tax benefits.”

Follow-up on the weak start for the Instrumentation segment in Q1 and its expected cadence for the rest of the year.

George Bobb clarified that while marine and environmental instruments performed strongly, test and measurement was weaker due to the timing of PCI Express Gen 6 CPUs and GPUs impacting protocol analyzer sales. He expects full-year low single-digit growth for test and measurement as chips come to market in H2, with overall Instrumentation growing over 4% for the year. “Protocol sales were down year-over-year, and that was really due to the timing of PCI Express Gen 6 CPUs and GPUs. So we go through on the protocol side, kind of 2 phases.”

TDY

Teledyne (TDY) Q1 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q1 FY26)· Information Technology· Apr 22, 2026

Source: earnings call transcript

Executive summary

Teledyne Q1 FY26 — Record Sales, EPS, and Operating Margin

Teledyne commenced FY26 with robust performance, delivering record first-quarter sales, EPS, and operating margin, driven by strong organic growth and record orders. The company raised its full-year sales and earnings outlook, reflecting confidence in its backlog-driven businesses, particularly defense and digital imaging. Strategic investments in R&D and capacity, coupled with a low leverage ratio, position Teledyne for continued growth and M&A, despite some segment-specific margin pressures and a conservative approach to foreign exchange impacts in its guidance.

Highlights

Achieved record first quarter sales, earnings per share, and operating margin, with sales increasing 7.6% and non-GAAP EPS up 17.2%.
Non-GAAP operating margin expanded by 58 basis points year-over-year, despite a 30 basis point increase in R&D expense.
Reported record orders and backlog, with a book-to-bill ratio of 1.16, marking the tenth consecutive quarter above 1.
Digital Imaging segment non-GAAP operating margin increased 107 basis points to 23.2%, driven by balanced growth.
Leverage ratio declined to its lowest level in 5 years, enabling active pursuit of acquisitions.

Concerns

Instrumentation segment non-GAAP operating margin decreased due to product mix, with lower-margin autonomous underwater vehicles growing faster than higher-margin test and measurement products.
Sales of electronic test and measurement systems decreased 3.7% year-over-year, primarily due to a decline in protocol analyzers.
Second quarter EPS guidance reflects lower projected tax benefits compared to Q1, impacting sequential earnings.

Guidance & targets

Category	Target	Timeline	Confidence
Full-year 2026 Sales	$6.415 billion high materiality	FY26 · 2026	High
Full-year 2026 Non-GAAP EPS	$23.85 to $24.15 high materiality	FY26 · 2026	High
Q2 2026 GAAP EPS	$4.75 to $4.90 medium materiality	Q2 · 2026	High
Q2 2026 Non-GAAP EPS	$5.70 to $5.80 medium materiality	Q2 · 2026	High
Full-year 2026 Organic Sales Growth	about 4% high materiality	FY26 · 2026	High
Full-year 2026 Sales Growth from Acquisitions	about 0.9% medium materiality	FY26 · 2026	High
Full-year 2026 Digital Imaging Sales Growth	about 5% medium materiality	FY26 · 2026	High
Full-year 2026 Aerospace and Defense Sales Growth	probably over 6% medium materiality	FY26 · 2026	High
Full-year 2026 Instrumentation Sales Growth	over 4% medium materiality	FY26 · 2026	High
Full-year 2026 Non-GAAP Operating Margin Increase	about 60 basis points above last year high materiality	FY26 · 2026	High
Full-year 2026 Digital Imaging Operating Margin Increase	over 100 basis points, 105, 107 basis points medium materiality	FY26 · 2026	High
Full-year 2026 Aerospace & Defense Operating Margin Increase	about 70 basis points medium materiality	FY26 · 2026	High
Full-year 2026 Instrumentation Operating Margin	closer to 27.5% medium materiality	FY26 · 2026	High
Full-year 2026 Capital Expenditures	about $150 million medium materiality	FY26 · 2026	High
Full-year 2026 Free Cash Flow	over $1 billion high materiality	FY26 · 2026	High
H2 2026 Revenue as % of Total	51% low materiality	H2 FY26 · 2026	Medium

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Digital Imaging Well-balanced growth throughout the segment, including Teledyne imaging sensors, Delta e2v, and Teledyne FLIR. Non-GAAP operating margin increased 107 basis points despite a 59 basis point increase in R&D expense. Visible light sensors sales: double-digit increaseInfrared detectors sales: double-digit increaseSpecialty semiconductors for space applications sales: double-digit increaseFLIR infrared cameras for unmanned air vehicles sales: double-digit increaseOwn complete unmanned aerial systems revenue: increasedIndustrial imaging: returned to year-over-year growthX-ray businesses: returned to year-over-year growthMEMS growth: >20%	—	7.9%	—	23.2%
Instrumentation Overall sales increased, but non-GAAP operating margin decreased primarily due to product mix, with a decline in higher-margin test and measurement and growth in lower-margin autonomous underwater vehicles in marine. Marine instruments sales: +8.3%Unmanned subsea vehicles sales: >20%Interconnects for U.S. Virginia and Columbia class submarines: increasedInterconnects for offshore energy production: continued to growEnvironmental instruments sales: +6.7%Electronic test and measurement systems sales: -3.7%Oscilloscopes sales: greaterProtocol analyzers sales: lower	—	5.3%	—	decreased
Aerospace and Defense Electronics Growth due to 1 additional month of results from the Qioptiq acquisition and strong organic growth across defense electronics, partially offset by slightly lower sales from commercial aerospace. Margin improvement due to higher sales, operating leverage, and improved margins at acquired companies. Organic growth: 8.4%	—	14.4%	—	increased nearly 200 bps
Engineered Systems Revenue decreased, but segment operating margin increased.	—	-2.6%	—	increased 113 bps

TDY operating KPIs by quarter

TDY operating KPIs stated on its earnings calls, by fiscal quarter
KPI	Mar 2025 Q1 FY25	Sep 2025 Q3 FY25	Dec 2025 Q4 FY25	This call Mar 2026 Q1 FY26	Jun 2026 Q2 FY26	Change vs prior quarter
Book-to-bill	1.05 ratio But if you come back and look at it as a whole, big picture, our book-to-bill across the company is 1.05x. Source: earnings call transcript	1.09 ratio And the overall book-to-bill ratio of 1.09. Source: earnings call transcript	1.07 ratio So total for Q4 is 1.07. Source: earnings call transcript	1.16 ratio Given stronger sales in the first quarter, but also record orders and backlog with a book-to-bill of 1.16, which is our tenth consecutive quarter of book-to-bill of over 1, we're comfortable in increasing both our expected sales and earnings for 2026. Source: earnings call transcript	1.23 ratio Overall, our book-to-bill was 1.23, led by digital hedging, which was higher than 1.4% -- 1.4x. Source: earnings call transcript	+6%
Book-to-bill Instrumentation	1.04 ratio Our instruments book-to-bill is 1.04x. Source: earnings call transcript	0.9 ratio In the Instrumentation segment, we had a book-to-bill overall of 0.9, a little higher in T&M, for example, 0.98; Environmental closer to 0.95; marine closer to 0.8, about 0.8. Source: earnings call transcript	—	—	—	-13.5%
Book-to-bill Digital Imaging	1.11 ratio Overall, Digital Imaging book-to-bill is 1.11x. Source: earnings call transcript	1.12 ratio Third quarter Digital Imaging book-to-bill was 1.12x. Source: earnings call transcript	1.06 ratio Digital imaging is above 1 or 1.06. Source: earnings call transcript	~1.38 ratio Digital Imaging right now is looking like about 1.38 in book-to-bill in instruments, a lot of short-cycle stuff, but it's still holding above 1, just slightly over 1. Source: earnings call transcript	—	—
Backlog	~$4B Well, the Qioptiq backlog that we acquired increased about $60 million because of the 2 new programs overall backlog, I think year-over-year is at the highest we've had, including Qioptiq, it's about I'm going to say about $4 billion, which for us is pretty healthy. Source: earnings call transcript	—	—	~$4.6B We have about $4.6 billion in our backlog right now, and those will translate into revenue. Source: earnings call transcript	~$5B Orders have now exceeded sales for the 11th consecutive quarter, and we ended June with approximately $5 billion of funded backlog. Source: earnings call transcript	—
Book-to-bill Aerospace and Defense Electronics	—	0.84 ratio And then in Aerospace and Defense Electronics, again, longer cycle business, lumpiness in some larger orders, book-to-bill ratio was 0.84, and Engineered Systems was over 2x in the quarter. Source: earnings call transcript	1.25 ratio Aerospace and defense is higher at 1.25. Source: earnings call transcript	—	—	+48.8%

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Orderbook & backlog

Book-to-bill 1.16 Q1 FY26

10th consecutive quarter of book-to-bill of over 1

Led by Digital Imaging at about 1.38; Instruments slightly over 1; A&D and Engineered Systems just below 1.

Total Backlog $4.6 billion Q1 FY26

Backlog includes orders with durations of 2, 3, 4 years, and some immediate. Expected to translate into revenue.

Product announcements

Product	Type	Timeline	Details
Black Hornet 4	launch	—
Rogue 1	milestone	—

Deals & partnerships

DD-Scientific acquisition

Acquired in January 2026.

Qioptiq acquisition

Acquired in 2025.

MicroPact acquisition

Acquired in 2025.

Capital programs

Capacity Increase Investments underway

Period spend: $29.7 million

Benefit:Increased production capacity in certain specific areas where demand exceeds capacity.

Increased capital expenditures by 35% over last year in Q1. Includes investments in inventory and machining facilities for germanium, driven by strong demand and supply chain considerations.

Risks & headwinds

Lower projected tax benefits Q2 FY26

Q2 EPS guidance reflects lower tax benefits compared to Q1

Mitigation:Not explicitly stated, but management acknowledges it impacts sequential EPS.

Product mix impacting Instrumentation segment margin Q1 FY26

Non-GAAP operating margin decreased

Mitigation:Anticipates margin improvement throughout the year as test and measurement sales recover.

Timing of PCI Express Gen 6 CPUs and GPUs Q1 FY26

Protocol analyzer sales were down year-over-year

Mitigation:Expects chips to come to market in H2, leading to full-year low single-digit growth in test and measurement.

Tedious government cycles Ongoing

Even when there's urgent need

Mitigation:Company has a large backlog ($4.6 billion) and is investing in capacity to meet demand, but acknowledges potential delays in revenue translation.

Decreasing foreign exchange benefit FY26

Q1 benefit ~2%, Q2 projected ~0.6%, H2 projected 0%

Mitigation:Management applies conservatism to full-year revenue outlook due to this trend.

Q&A highlights

Clarification on the organic and inorganic components of the revised revenue guidance and which segments are driving outperformance.

Robert Mehrabian stated that the 4.9% total growth for the year includes about 4% organic growth and 0.9% from acquisitions. He identified Digital Imaging (5% growth, FLIR at 6.5%) and Aerospace and Defense (over 6% growth) as the segments with the highest expected growth.

“About 4% of [ that solid 4% ] is organic and about 0.9% is from acquisitions, 1 early in 2025 and 1 small one early this year.”

asked by Greg Konrad · answered by Robert Mehrabian

2 min read 6 chapters

Detailed narrative

Strong Q1 Performance and Raised Outlook

Teledyne reported a strong start to 2026 with record first-quarter sales, non-GAAP earnings per share, and operating margin. Sales increased 7.6% year-over-year, while non-GAAP EPS grew 17.2%. The company's non-GAAP operating margin expanded by 58 basis points, even with a 30 basis point increase in R&D expense.

This robust performance, combined with record orders and a book-to-bill ratio of 1.16, led management to increase its full-year 2026 sales guidance to $6.415 billion and non-GAAP EPS guidance to a range of $23.85 to $24.15.

Defense and AI-Related Growth Drivers

Defense-related businesses were a significant growth engine, with FLIR infrared cameras for unmanned air vehicles and Teledyne's own unmanned aerial systems, including the Black Hornet nano drone and Rogue 1 loitering munition, showing strong demand. Sales of visible light sensors, infrared detectors, and specialty semiconductors for space applications also saw double-digit increases.

The company is actively investing in capacity and R&D to meet the growing demand for these technologies, particularly in counter-drone applications and space-based sensing, with U.S. government organic growth at 9%.

Digital Imaging Segment Outperformance

The Digital Imaging segment demonstrated well-balanced growth, with sales increasing 7.9% and non-GAAP operating margin expanding by 107 basis points to 23.2%. This was driven by strong performance across Teledyne imaging sensors, Delta e2v, and Teledyne FLIR. Industrial imaging and X-ray businesses returned to year-over-year growth, and micro-electromechanical systems (MEMS) grew over 20%, primarily due to demand for micromirrors in optical switching and high-speed networking applications.

Mixed Performance in Instrumentation

The Instrumentation segment experienced mixed results, with overall sales increasing 5.3%. Marine instruments saw an 8.3% increase, led by strong defense-related sales of unmanned subsea vehicles (up over 20%) and interconnects for submarines. Environmental instruments also grew 6.7%. However, sales of electronic test and measurement systems decreased 3.7% due to lower protocol analyzer sales, which impacted the segment's non-GAAP operating margin due to an unfavorable product mix.

Strategic Investments and M&A Outlook

Teledyne is increasing its investments in R&D and capital expenditures to accelerate organic growth, with Q1 CapEx up 35% year-over-year. The company's leverage ratio is at a 5-year low, positioning it to actively pursue acquisitions. Management indicated a focus on tuck-in acquisitions first, followed by mid-sized opportunities, while remaining cautious about larger deals due to high valuations.

Acquisitions are being considered across all segments except Engineered Systems.

International Expansion and Backlog Strength

The company's international businesses now constitute 48% of its portfolio, reflecting significant international growth of 8.5% organically. Teledyne's total backlog stands at $4.6 billion, providing strong revenue visibility. While some defense orders have long durations, the company expects an acceleration in defense revenues this year, driven by current global conflicts and increased demand for its components and systems.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.