L3Harris Technologies Reports Strong First Quarter 2026 Results

L3Harris Technologies (NYSE: LHX) reports first quarter 2026 results. Highlights Orders of $7.8 billion; book-to-bill of 1.4x increases backlog to new record $40.7 billionRevenue of $5.7 billion, up 12%, and 15% organically*Operating margin of 11.4% up 120 bps; Segment operating margin of 15.7% up 10 bpsGAAP diluted EPS of $2.72, up 33%Updates 2026 EPS guidance “We continue to execute against our Trusted Disruptor strategy with both urgency and discipline, leveraging speed and scale to meet the evolving needs of our customers. Our results reflect the strength of our portfolio and its alignment with the nation’s most critical defense missions. We operate in a dynamic global environment, where demand is accelerating and the future of warfare is driving near-term operational priorities. Across the portfolio, we quickly adapt to mission needs and scale our operations to meet increasing demand, accelerating growth across our enterprise,” said Christopher Kubasik, Chairman and CEO. Kubasik added, “We delivered a strong start to the year with robust orders and revenue growth coupled with progress across our strategic priorities. We are well positioned for the next phase of growth and value creation, remain on track to deliver on our 2026 commitments and continue to advance toward the 2028 Financial Framework we outlined earlier this year.” _ *Organic revenue is a non-GAAP Financial Measure defined and reconciled to GAAP in Table 5. SUMMARY FINANCIAL RESULTS* First Quarter 2026 Guidance ($ millions, except per share data) 2026 2025 Revenue Space & Mission Systems $ 2,990 $ 2,411 Communication & Spectrum Dominance 1,855 1,809 Missile Solutions 990 840 Intersegment (91 ) (74 ) Segment revenue 5,744 4,986 Other1 — 146 Revenue $ 5,744 $ 5,132 $23B - $23.5B Operating income Space & Mission Systems $ 313 $ 238 Communication & Spectrum Dominance 465 443 Missile Solutions 124 96 Segment operating income 902 777 Unallocated corporate items and other, net1 (see Table 4) (250 ) (252 ) Operating income $ 652 $ 525 Operating margin 11.4 % 10.2 % Segment operating margin 15.7 % 15.6 % low 16% Tax rate Effective tax rate 13.1 % 15.9 % GAAP EPS Diluted EPS $ 2.72 $ 2.04 $11.40 - $11.60 (Prior: $11.30 - $11.50) Diluted weighted-average common shares outstanding 188.1 189.1 Cash flow Cash used in operations $ (95 ) $ (42 ) Free cash flow2 $ (187 ) $ (101 ) $3.0B 1 Includes other non-reportable businesses, which is the divested Commercial Aviation Solutions business ("CAS disposal group"). 2 Free cash flow is a non-GAAP Financial Measure defined and reconciled to GAAP in Table 6. Net cash provided by operating activities is anticipated to be approximately $3.6 billion and capital expenditures are anticipated to be approximately $600M. * Organic revenue is a non-GAAP Financial Measure defined and reconciled to GAAP in Table 5. Revenue: Increased $612 million, up 12%, and 15% organically, driven by growth across all segments reflecting new program ramps and increased international volume. Operating Income: Increased $127 million, up 24%. Operating margin was 11.4%, up 120 bps. The improvement in operating income was primarily driven by a $125 million increase in segment operating income due to strong growth in the quarter and a decline in unallocated corporate items and other, net costs. Segment Operating Income: Increased $125 million, up 16%. Segment operating margin was 15.7%, up 10 bps. Segment operating income grew across all segments due to increased volume, improved program performance and higher monetization of legacy assets aligned with our transformation and value creation priorities, partially offset by higher growth in businesses with lower average margin and increased investments in go-to-market activities and research and development. Diluted EPS: Increased 33% to $2.72 driven by higher operating income, lower interest expense due to lower total outstanding debt, including both short-term and long-term debt, and a lower effective tax rate, partially offset by lower FAS pension income. Cash Flow: Cash used in operations was ($95) million, impacted by timing of cash receipts coupled with higher cash disbursements. Capital expenditures were ($99) million, contributing to free cash flow of ($187) million. SEGMENT RESULTS Space & Mission Systems First Quarter ($ millions) 2026 2025 Increase Revenue $ 2,990 $ 2,411 24% Operating margin 10.5 % 9.9 % 60 bps Revenue: Increased 24%, primarily from the ramp in activity in our ISR business on classified and international missionized aircraft programs, including a milestone related to material procurement in support of classified contracts, as well as higher volume in Space, Mission Networks and Maritime programs partially offset by lower classified volume in our intel products and solutions business. Operating Margin: Increased 60 bps to 10.5% driven by improved program performance, partially offset by increased material procurement in programs with lower average margins and increased investments in research and development. Communication & Spectrum Dominance First Quarter ($ millions) 2026 2025 Increase Revenue $ 1,855 $ 1,809 3% Operating margin 25.1 % 24.5 % 60 bps Revenue: Increased 3%, primarily driven by increased volume for night vision devices, international software-defined resilient communications and the ramp in activity on the Next Generation Jammer Electronic Warfare program. Operating Margin: Increased 60 bps to 25.1% primarily driven by increased sales associated with higher margin products in night vision devices and software-defined resilient communications as well as the favorable settlement of a legal matter, partially offset by increased investments in customer demonstrations, prototypes, and research and development. Missile Solutions First Quarter ($ millions) 2026 2025 Increase Revenue $ 990 $ 840 18% Operating margin 12.5 % 11.4 % 110 bps Revenue: Increased 18% from higher production volumes across key missile and munition programs, including those prioritized by the Department of War's ("DoW") Munitions Acceleration Council, and space propulsion programs as well as new program ramps. Operating Margin: Increased 110 bps to 12.5%, primarily due to the monetization of legacy assets aligned with our transformation and value creation priorities, partially offset by net unfavorable EAC adjustments. Forward-Looking Statements This earnings release contains forward-looking statements within the meaning of federal securities laws made in reliance on the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Examples include, but are not limited to: planned investments; 2026 guidance; the impact of recent and expected contract awards; the 2028 financial framework; divestiture timing; planned public offering by Missile Solutions; the impact of the global security environment; projections of other financial items; and assumptions underlying any of the foregoing. Investors should not place undue reliance on forward-looking statements, which reflect management’s current expectations, estimates, projections, assumptions and information currently available to management, and are not guarantees of future performance or actual results. Important risks that could cause our results to differ materially from those expressed in or implied by these forward-looking statements or from our historical results include, but are not limited to, risks arising from: competitive markets; U.S. Government spending priorities; changes in contract mix; unilateral contract action by the U.S. Government or unexpected issues related to the DoW's investment in our subsidiary; uncertain economic conditions; future geo-political events; supply chain disruptions; indebtedness; interest rates and other market factors; and changes in effective tax rate or additional tax exposures. These and other important risks that could impact forward-looking statements are described more fully in the "Risk Factors" in our Form 10-K for fiscal 2025. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are qualified by the cautionary statements in this section, and we have no duty to and disclaim any intention or obligation, other than imposed by law, to update or revise any forward-looking statements, whether as a result of new information, future events or developments or otherwise. Table 1 - Condensed Consolidated Statement of Operations (Unaudited) First Quarter ($ millions, except per share amounts) 2026 2025 Revenue $ 5,744 $ 5,132 Cost of revenue (4,342 ) (3,782 ) General and administrative expenses (750 ) (825 ) Operating income 652 525 Non-service FAS pension income and other, net1 73 84 Interest expense, net (136 ) (150 ) Income before income taxes 589 459 Income taxes (77 ) (73 ) Net income $ 512 $ 386 Earnings per share attributable to common shareholders Basic $ 2.74 $ 2.05 Diluted $ 2.72 $ 2.04 Weighted-average common shares outstanding Basic 186.8 188.5 Diluted 188.1 189.1 1“FAS” is defined as Financial Accounting Standards. Table 2 - Condensed Consolidated Balance Sheet (Unaudited) ($ millions) April 3, 2026 January 2, 2026 Assets Current assets Cash and cash equivalents $ 590 $ 1,069 Receivables, net 1,912 1,371 Contract assets 3,530 3,566 Inventories, net 1,234 1,219 Other current assets 702 484 Assets of business held for sale 926 884 Total current assets 8,894 8,593 Non-current assets Property, plant and equipment, net 2,658 2,665 Goodwill 19,999 20,010 Intangible assets, net 6,331 6,509 Deferred income taxes 71 76 Other non-current assets 3,427 3,342 Total assets $ 41,380 $ 41,195 Liabilities and equity Current liabilities Short-term debt $ 350 $ — Current portion of long-term debt 1,816 673 Accounts payable 1,930 2,461 Contract liabilities 2,736 2,262 Compensation and benefits 391 482 Other current liabilities 1,267 1,235 Liabilities of business held for sale 111 113 Total current liabilities 8,601 7,226 Non-current liabilities Long-term debt, net 9,191 10,443 Deferred income taxes 1,225 1,114 Other non-current liabilities 2,683 2,777 Total liabilities 21,700 21,560 Total equity 19,680 19,635 Total liabilities and equity $ 41,380 $ 41,195 Table 3 - Condensed Consolidated Statement of Cash Flows (Unaudited) First Quarter ($ millions) 2026 2025 Operating Activities Net income $ 512 $ 386 Adjustments to reconcile to net cash used in operating activities: Depreciation and amortization 282 301 Share-based compensation 21 19 Net periodic benefit income (70 ) (84 ) Share-based matching contributions under defined contribution plans 62 68 Deferred income taxes 119 (89 ) (Increase) decrease in: Receivables, net (623 ) (447 ) Contract assets 72 (420 ) Inventories, net (17 ) 92 Other current assets (218 ) (19 ) Increase (decrease) in: Accounts payable (527 ) 52 Contract liabilities 461 (16 ) Compensation and benefits (87 ) (105 ) Other current liabilities (15 ) 11 Income taxes (7 ) 273 Other operating activities (60 ) (64 ) Net cash used in operating activities (95 ) (42 ) Investing Activities Capital expenditures (99 ) (59 ) Proceeds from disposal of property, plant and equipment, net 7 — Proceeds from sales of businesses, net of cash divested — 831 Other investing activities (5 ) (28 ) Net cash (used in) provided by investing activities (97 ) 744 Financing Activities Repayments of long-term debt (106 ) (5 ) Change in commercial paper, net 350 20 Repurchases of common stock (296 ) (569 ) Dividends paid (238 ) (228 ) Other financing activities 6 (23 ) Net cash used in financing activities (284 ) (805 ) Effect of exchange rate changes on cash and cash equivalents (3 ) 5 Net decrease in cash and cash equivalents (479 ) (98 ) Cash and cash equivalents, beginning of period 1,069 615 Cash and cash equivalents, end of period $ 590 $ 517 Table 4 - Unallocated Corporate Items (Unaudited) First Quarter ($ millions) 2026 2025 Unallocated corporate items: Amortization of acquisition-related intangibles $ 173 $ 194 LHX NeXt implementation costs1 — 35 Business divestiture-related losses1 10 17 Acquisition, divestiture and transaction-related expenses1 30 17 Other unallocated corporate items 37 12 Unallocated corporate items 250 275 Other non-reportable businesses2 — (23 ) Unallocated corporate items and other, net $ 250 $ 252 1 Refer to Key Terms on page 10. 2 Includes the divested CAS disposal group. Table 5 - Organic Revenue Non-GAAP Financial Measure Reconciliation (Unaudited) First Quarter 2025 ($ millions) GAAP Adjustments Organic1 Revenue $ 5,132 $ (146 ) $ 4,986 1 Organic revenue is a non-GAAP Financial Measure as defined by Regulation G. We use organic revenue to exclude revenue attributable to our divested CAS disposal group in prior periods. Table 6 - Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow - Non-GAAP Financial Measures Reconciliation (Unaudited) First Quarter ($ millions) 2026 2025 Net cash used in operating activities $ (95 ) $ (42 ) Capital expenditures (99 ) (59 ) Proceeds from disposal of property, plant and equipment, net 7 — Free cash flow1 $ (187 ) $ (101 ) 1 Free cash flow is a non-GAAP Financial Measure as defined by Regulation G. We use free cash flow to evaluate business performance and overall liquidity, and it is a performance metric in our annual incentive plan. We believe free cash flow is useful because it represents the cash generated from operations after reinvesting in our business that may be available to return to stockholders and creditors (through dividends, stock repurchases and debt repayments) or available to fund acquisitions or other investments. The entirety of free cash flow amount is not available for discretionary expenditures, however, because of certain mandatory expenditures, such repayment of debt. Key Terms Description Definition Business divestiture-related losses In 2026, includes a loss recognized in connection with the Space Technology disposal group, which consists of certain product lines of our Space Propulsion and Power Systems sector and the space portion of our Space & Sensors division reported in our Mission Solutions segment. In 2025, includes a loss recognized in connection with the CAS disposal group divestiture. Acquisition, divestiture and transaction-related expenses Transaction and integration expenses associated with the Aerojet Rocketdyne acquisition in 2025; external costs related to pursuing acquisition and divestiture portfolio optimization; non-transaction costs related to divestitures; costs related to the carve-out and planned MSL public offering; salaries of employees in roles dedicated to planned strategic transaction activity; and resolution of a procurement contract matter. LHX NeXt implementation costs Includes costs related to workforce optimization costs, incremental IT expenses for implementation of new systems, third-party consulting expenses and other related costs, including costs related to personnel dedicated to this project. The implementation phase of LHX NeXt was completed in fiscal 2025. Orders Total value of funded and unfunded contract awards received from the U.S. Government and other customers, including incremental funding and adjustments to previous awards, excluding unexercised contract options and potential orders under ordering-type contracts, such as indefinite delivery, indefinite quantity (IDIQ) contracts. Source: L3Harris Technologies