Teledyne Technologies Q1 2026 Earnings Report

Teledyne Technologies EPS Results

• Actual EPS: $5.80
• Consensus EPS: $5.48
• Beat/Miss: Beat by +$0.32
• One Year Ago EPS: $4.95

Teledyne Technologies Revenue Results

• Actual Revenue: $1.56 billion
• Expected Revenue: $1.52 billion
• Beat/Miss: Beat by +$44.98 million
• YoY Revenue Growth: +7.60%

Teledyne Technologies Announcement Details

• Quarter: Q1 2026
• Date: 4/22/2026
• Time: Before Market Opens
• Conference Call Date: Wednesday, April 22, 2026
• Conference Call Time: 11:00AM ET

Teledyne Technologies (NYSE:TDY) (NYSE: TDY), headquartered in Thousand Oaks, California, is a diversified industrial technology company that designs, manufactures and supports sophisticated electronic systems, instruments and imaging products. Founded in 1960 by Henry Singleton and George Kozmetsky, Teledyne has grown into a multinational provider of high-performance equipment and software for commercial, scientific and government customers. Its offerings are used in markets that include aerospace and defense, marine, industrial manufacturing, environmental monitoring and scientific research.

The company operates through businesses that develop precision instrumentation, digital imaging products, engineered systems and aerospace and defense electronics. Instrumentation products include sensors, analyzers and test-and-measurement equipment for process control, environmental monitoring and laboratory use. Its digital imaging lines provide cameras, detectors and machine-vision systems—expanded notably through strategic acquisitions—to serve automated inspection, scientific imaging and thermal imaging applications. Engineered systems encompass integrated platforms and services for marine and industrial customers, including sonar, submersibles and related underwater technologies, while aerospace and defense offerings cover avionics components, electronic subsystems and specialized sensors.

Teledyne serves customers around the world and maintains a largely decentralized operating model that emphasizes technology development and targeted acquisitions to broaden its product portfolio and geographic reach. The company supplies mission-critical products to commercial industry, research institutions and government agencies globally, and it combines hardware with software and data-analysis capabilities to support complex sensing and imaging applications. Teledyne is publicly traded on the New York Stock Exchange under the symbol TDY.

Teledyne Technologies Q1 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Teledyne reported record Q1 results with sales and non-GAAP EPS up ~7.6% and 17.2% respectively, and raised full-year sales guidance to $6.415 billion and non-GAAP EPS to about $24 midpoint.
• Positive Sentiment: Strong organic demand led by Digital Imaging and Aerospace & Defense — including double‑digit growth in space sensors, infrared detectors, FLIR defense (~9%), and UAV products (Black Hornet, Rogue 1) — drove a company organic growth of ~6.9%.
• Positive Sentiment: Order momentum remains robust with a 10th consecutive quarter of book‑to‑bill >1 (company B/B = 1.16, Digital Imaging ~1.38) and backlog of about $4.6 billion, supporting higher revenue visibility into the year.
• Positive Sentiment: Management is increasing investment while keeping leverage low — higher R&D (Q1 increase, ~$10M) and planned CapEx (~$150M for 2026) to expand capacity for high‑demand products, with leverage at a five‑year low.
• Neutral Sentiment: Cash flow was weaker in Q1 (FCF $204M) due to higher inventory and CapEx, though management still expects >$1B free cash flow for 2026 and projects modest overall margin expansion (~+60 bps y/y) with segment mix headwinds in Instrumentation.

Presentation

[Operator]

Welcome to Teledyne's first quarter earnings call. I'd now like to introduce our first speaker, Mr. Jason VanWees. Jason, please go ahead.

[Jason VanWees, Vice Chairman at Teledyne Technologies]

Thank you. Hi, good morning, everyone. This is Jason VanWees, Vice Chairman. I'd like to welcome everyone to Teledyne's first quarter 2026 earnings release conference call. We released our earnings earlier this morning before the market opened. Joining me today are Teledyne's Executive Chairman, Robert Mehrabian, President and CEO, George Bobb, EVP and CFO, Steve Blackwood, and Melanie S. Cibik, EVP, General Counsel, Chief Compliance Officer, and Secretary. After remarks by Robert, George, and Steve, we'll ask for your questions. Of course, before we get started, all forward-looking statements made this morning are subject to various assumptions, risks, and caveats, as noted in the earnings release and our periodic SEC filings. Of course, actual results may differ materially. In order to avoid potential selective disclosures, this call is simultaneously being webcast, and a replay, via webcast and dial-in, will be available for approximately one month. Here is Robert.

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

Thank you, Jason, and good morning, everyone, and welcome to our conference call. We started 2026 with record first quarter sales, earnings per share, and operating margin. Specifically, sales and non-GAAP earnings increased 7.6% and 17.2% respectively. In addition, despite a 30 basis point increase in R&D expense, non-GAAP operating margin increased 58 basis points year over year. While we acquired DD-Scientific in January and increased our capital expenditures significantly from last year, our leverage ratio declined to the lowest level in five years, since before the acquisition of FLIR in 2001. Excluding the impact of acquisitions, sales increased 5.3%, due in part to the performance of our Digital Imaging segment, while organic growth was 6.9%.

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

Sales of visible light sensors, infrared detectors, and specialty semiconductors for space applications each increased at double-digit rates, as did FLIR infrared cameras for unmanned air vehicles, as well as our own complete unmanned aerial systems. Also, within the digital imaging segment, our industrial imaging and X-ray businesses each returned to year-over-year growth, which helped contribute to the strong margin performance in the first quarter. Given stronger sales in the first quarter, but also record orders and backlog with a big book-to-bill of 1.16, which is our 10th consecutive quarter of book-to-bill of over one, we're comfortable in increasing both our expected sales and earnings for 2026. We believe now sales will be in the range of $6.415 billion or 70 basis points higher than we communicated in January.

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

We're also raising our earnings outlook at both the bottom and top of our prior range to about $24 at midpoint or $0.35 overall an increase. George will now briefly comment on the performance of our four business segments. George?

[George Bobb, President and CEO at Teledyne Technologies]

Thank you, Robert. In the Digital Imaging segment, first quarter sales increased 7.9% due to well-balanced growth throughout the segment, including Teledyne Imaging Sensors, Teledyne e2v, and Teledyne FLIR. As Robert mentioned, sales of visible and infrared detectors for space-based imaging increased nicely. Sales of infrared subsystems and cameras for our customers' unmanned air systems and unmanned maritime surface vehicles also increased. In addition, revenue from our own complete unmanned air systems increased due to continued growth of the highly differentiated Black Hornet Nano, as well as full rate production deliveries of our Rogue 1 loitering munition. Interest in counter-drone activity also remains elevated. In the first quarter and early Q2, we received orders for infrared cameras and subsystems totaling $ tens of millions for counter-drone applications. There were also bright spots outside of defense.

[George Bobb, President and CEO at Teledyne Technologies]

For example, industrial machine vision cameras and sensors for semiconductor inspection and X-ray products for healthcare increased year-over-year. Sales of microelectromechanical systems, or MEMS, grew over 20%, primarily due to demand for micromirrors used for optical switching in high-speed networking applications. Finally, non-GAAP operating margin in the segment increased 107 basis points to 23.2%, despite a 59 basis point increase in R&D expense within the segment. In the Instrumentation segment, which consists of our marine, environmental, and test and measurement businesses, first quarter sales increased 5.3% versus last year. Overall sales of marine instruments increased 8.3%, primarily due to strong defense-related sales, including unmanned subsea vehicles, which increased more than 20%, for applications such as anti-submarine warfare and mine countermeasures, as well as sales of interconnects for U.S. Virginia-class and Columbia-class submarines. Interconnects for offshore energy production also continued to grow.

[George Bobb, President and CEO at Teledyne Technologies]

However, these were partially offset by reduced sales of marine instruments for hydrography and oceanographic research. Sales of environmental instruments increased 6.7%. This primarily resulted from higher sales for gas safety and ambient air monitoring instrumentation, partially offset by lower sales of laboratory and life sciences instruments. Sales of electronic test and measurement systems decreased 3.7% year over year, with greater sales of oscilloscopes offset by lower sales of protocol analyzers. However, we continue to expect full-year sales growth as semiconductor suppliers increase their shipments and data centers increasingly adopt devices utilizing the newest, fastest data transfer protocols. Instrumentation non-GAAP operating margin in the first quarter decreased primarily due to product mix. That is, a decline in higher margin test and measurement versus growth in autonomous underwater vehicles and marine, which generally carry lower margins.

[George Bobb, President and CEO at Teledyne Technologies]

In the Aerospace and Defense Electronics segment, first quarter sales increased 14.4% due to one additional month of results from the Qioptiq acquisition, and with organic growth of 8.4% across defense electronics, partially offset by slightly lower sales from the commercial aerospace market due to a result of a tough comparison. Non-GAAP segment margin increased nearly 200 basis points year-over-year due to higher sales and corresponding operating leverage, improved margins that companies acquired in 2025, and in this case, a relatively easy comparison. For the Engineered Systems segment, first quarter revenue decreased 2.6%. However, segment operating margin increased 113 basis points. I will now pass the call back to Robert.

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

Thank you, George. In conclusion, we're excited to begin 2026 with a strong first quarter, with continued orders and sales momentum in our backlog-driven businesses, specifically defense, where Teledyne has meaningful exposure to low-cost drone, counter-drone technologies, space-based sensing, electronic countermeasures, and maritime surveillance. Furthermore, certain markets, such as industrial inspection and healthcare, which have had headwinds in the past, are now inflecting. Finally, with the leverage at a five-year low, we're actively pursuing a number of acquisitions, but at the same time, we're investing more in R&D and capital expenditures to accelerate our own organic growth. I will now turn the call over to Steve.

[Steve Blackwood, EVP and CFO at Teledyne Technologies]

Thank you, Robert, and good morning. I will first discuss some additional financials for the quarter not covered by Robert, and then I will discuss our second quarter and full year 2026 outlook. In the first quarter, cash flow from operating activities was $234 million, compared with $242.6 million in 2025. Free cash flow, that is, cash flow from operating activities less capital expenditures was $204.3 million in the first quarter of 2026, compared with $224.6 million in 2025. Cash flow decreased due to higher inventory purchases, partially offset by greater operating results in the first quarter of 2026 compared with 2025. Capital expenditures were $29.7 million in the first quarter of 2026 compared with $18 million in 2025. Depreciation and amortization expense was $87.2 million in the first quarter of 2026 compared with $80.7 million in 2025. Now turning to our outlook.

[Steve Blackwood, EVP and CFO at Teledyne Technologies]

Management currently believes that GAAP earnings per share in the second quarter of 2026 will be in the range of $4.75-$4.90 per share, with non-GAAP earnings per share in the range of $5.70-$5.80. For the full year 2026, we believe that GAAP earnings per share will be in the range of $20.08-$20.44, and non-GAAP earnings per share in the range of $23.85-$24.15. I'll now pass the call back to Robert.

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

Thank you, Steve. Operator, we would like to start the questions. If you're ready to proceed, please go ahead.

[Operator]

Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from the line of Greg Konrad with Jefferies. Please proceed.

[Greg Konrad, Senior Vice President, Equity Research, Aerospace and Defense at Jefferies]

Good morning.

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

Good morning, Greg.

[Greg Konrad, Senior Vice President, Equity Research, Aerospace and Defense at Jefferies]

Maybe just to start on the revised revenue guidance of $6.415 billion, can you maybe just talk about organic versus inorganic, and then if you think about some of the de-risking or things that have gotten better since the guidance you gave last quarter, where are you seeing the most outperformance, just from a segment basis?

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

Of course, Greg. First, fundamentally, we're seeing about a 4.9% total growth for the year right now, which is about 70 basis points higher than we had in January. About 4% of that solid 4% is organic, and about 0.9% is from acquisitions. One early in 2025, and one small one early this year. From a segment perspective, we think the highest growth will probably be in our Digital Imaging and Aerospace & Defense, with Aerospace & Defense probably over 6%, and Digital Imaging overall about 5%, led by really FLIR, which we expect will grow about 6.5%. I hope that answers your question.

[Greg Konrad, Senior Vice President, Equity Research, Aerospace and Defense at Jefferies]

Yeah, that's perfect. You gave a little bit of color in the opening, but just following up on defense, how much was it up overall in the quarter? Then you mentioned FLIR. Can you just maybe give a little bit more color on FLIR Defense growth and then what's kind of driving the outperformance in A&D Electronics, just given that growth, thinking about that broader portfolio?

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

Okay. Let me start with FLIR Defense. 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, both nano drones and loitering drones, surveillance systems, you name it. And of course, we do supply both cooled, visible, and more importantly, infrared detectors, not only to our own drone manufacturers, but also to everyone else across the world that's making drones. From an A&D perspective, the growth has been, again, in a variety of our components. As you know, we make everything from lasers to detectors, readouts, semiconductors, switches. All of these are seeing various degrees of growth. The business is very healthy, both supplying our own products, but more importantly, supplying products that are required as the various conflicts are increasing, both in Europe and the Middle East.

[Greg Konrad, Senior Vice President, Equity Research, Aerospace and Defense at Jefferies]

Thank you. I'll leave it at two. Thanks.

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

Thanks, Greg.

[Operator]

The next question comes from the line of Amit Malhotra with UBS. Please proceed.

[Zach Waljasser, Equity Research Associate at UBS]

Hi, this is Zach Waljasser around for Amit today. Just two questions from me. Can you just help give some color around the order trends between the segments? Then the second question for me is just around the full year guide. At a high level, first quarter came in a little above, and then we're raising a little above that. There's not too much incremental pickup expected, but if you help flush out the puts and takes for the balance of the year that you guys are seeing, that'll be helpful. Then should the typical earnings seasonality still hold for 2026? Thank you.

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

Sure. Let me start with the overall, which I mentioned. The overall book-to-bill right now is 1.16. It is led by Digital Imaging and specifically both FLIR as well as the DALSA e2v. That's where we have probably the highest book-to-bill, higher than certainly we talked about in January. Digital Imaging right now is looking like about 1.38 in book-to-bill. In Instrumentation, a lot of short cycle stuff, but it's still holding above one, just slightly over one. A&D, which is a little lumpy because both A&D and Engineered Systems are lumpy because then we get big orders, then there's a period of quiescence, and then we pick up more orders. They're just below one right now, certainly A&D is.

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

I think what's happened to us is, for whatever products that we're able to put out and increase production, there's very strong demand, and that's why we think across our portfolio, we're going to do very well. We would think that we'll have a little more sales in the second half versus the first half. In January, we were saying the first half would be a little lower than we had. We're kind of guiding our second half maybe at 51% versus first half at 49%. Whereas in January, we were thinking the first half would be more like 48% and the second half, 52%, in terms of our revenue. We remain bullish, but also cautious not to overpromise, promise what we can deliver, and stay within the framework that we've operated for the last 25 years.

[Zach Waljasser, Equity Research Associate at UBS]

Great. It's super helpful. Thank you.

[Operator]

The next question comes from the line of Andrew Buscaglia with BNP Paribas. Please proceed.

[Andrew Buscaglia, Senior Analyst at BNP Paribas Exane]

Hey, good morning, everyone.

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

Hi, Andrew.

[Andrew Buscaglia, Senior Analyst at BNP Paribas Exane]

Just wanted to touch on the Q2 guidance. Just that it reflects at the midpoint EPS declining sequentially, which is atypical historically, like with the seasonality. I'm wondering where is the biggest pain point? I think my guess is Instrumentation, like the test and measurement area being a little weaker than expected in Q1. Wondering, what are the dynamics affecting that Q2 guide?

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

Let me just put it, the big picture is the following. In Q1, we had some good tax benefits year over year. Our tax benefits increased because of stock option exercises about $0.10-$0.11 year over year. In Q2, where we sit right now, we're not projecting similar tax benefits. Now, if our stock were to move up and our people start exercising more options, that would change. Right now, we're not projecting that. We're taking that part out. We're projecting more like $0.03 rather than having the increase that we had. Primarily, that's it. Just to cut through it.

[Andrew Buscaglia, Senior Analyst at BNP Paribas Exane]

Okay.

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

Everything else, I'm comfortable with.

[Andrew Buscaglia, Senior Analyst at BNP Paribas Exane]

Okay. Maybe could you comment further then on that Instrumentation comment I made earlier, just that was a weak start to the year. What do you think drove that, and how do you see the cadence of that niche over the next nine months?

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

I'm going to just make one short comment, and then I'm going to let George answer that. There are different parts to Instrumentation. Strong marine performance for us, especially underwater vehicles. These are vehicles that are used across the world, some of them for mine countermeasures. Very strong performance, but slightly lower margin than some of our high margin like test and measurement. I'll let George kind of expand on that a little bit. George?

[George Bobb, President and CEO at Teledyne Technologies]

Yes. I think I will focus on test and measurement, which is where we had the decline in Q1. There are two parts to that business, really. There's the oscilloscope side of the business, where we saw year-over-year growth and continue to see good demand in high bandwidth applications, power applications, for example, people who are designing power supplies for data centers, and from sales into the in-vehicle networks market. Protocol sales were down year-over-year, and that was really due to the timing of PCI Express Gen 6 CPUs and GPUs. We go through on the protocol side kind of two phases. There's a silicon designer phase, where we sell to silicon designers, and then there's a phase of integration of chips when they come to the market.

[George Bobb, President and CEO at Teledyne Technologies]

What we expect this year is for those chips to come to market in the second half of the year, and we still expect full year growth in the low single digits in test and measurement. Overall, as Robert said, strong performance in marine, strong performance in environmental. Test and measurement a little weaker in Q1, but still expect full year growth in the low single digits.

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

That's great. George mentioned the various aspects. We still expect Instrumentation to grow over 4% for the year.

[Andrew Buscaglia, Senior Analyst at BNP Paribas Exane]

Okay, thank you, guys.

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

Sure.

[Operator]

The next question comes from the line of James Ricchiuti with Needham & Company. Please proceed.

[James Ricchiuti, Senior Analyst at Needham & Company]

Hi. Thank you. Good morning. I know it's probably early yet, but are you seeing signs of potential increases in your defense business just related to the conflict in Iran?

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

Yes. A variety of them. First, we are being approached by the government. Actually, the government is making some investments. We haven't announced it yet, but they're making some investments in getting our capacities increased in specific areas, which I can't go into until the releases are approved. Second, we're seeing, obviously, increased demand for anything that has to do with drones and counter drones. We're also seeing some demand for underwater vehicles. There are a lot of inquiries right now, some orders, but we expect orders to really start picking up in the next six months.

[James Ricchiuti, Senior Analyst at Needham & Company]

Got it. That's helpful, Robert. Thank you. Just on the M&A pipeline, just given valuation levels, are you still thinking the focus this year is going to be mainly tuck-ins, or is there the potential for something larger?

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

I think, tuck-ins first, maybe some mid-size acquisitions like we did early in 2025. The larger ones, they come not that frequently. We're looking at some obviously, but people are willing to pay some outrageous prices to get the revenue, and we'll have to see. I would say the answer to your question specifically, tuck-ins first, mid-size second, larger, we'll have to wait and see what fits our portfolio. We don't want to go outside our portfolio too much, in getting a very large acquisition and then have to do a whole new segment, et cetera. That's not us. There we are.

[James Ricchiuti, Senior Analyst at Needham & Company]

Mainly in the Instrumentation Digital Imaging, or are there still some potential opportunities in A&D?

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

I would say in all of our segments.

[James Ricchiuti, Senior Analyst at Needham & Company]

Okay

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

... probably with the exception of Engineered Systems, where we're not looking at acquisitions. Because it's a business that's growing and the government's investing in that. It'd be in almost all of our segments. Depends on what we get.

[James Ricchiuti, Senior Analyst at Needham & Company]

Okay. Thank you.

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

For sure.

[Operator]

The next question comes from the line of Jordan Lyonnais with Bank of America. Please proceed.

[Jordan Lyonnais, Equity Research Associate at Bank of America]

Hey, good morning. Thanks for taking the question. On the growth that you guys called out for space, can you give us a sense if that is related to Golden Dome? Then two, just for the FY 2027 budget request, the $70 billion that they want for drone funding and the dome program. How are you guys thinking about that if that funding gets approved? For that much funding to come through, can you support those volumes of your own systems and as a supplier to everyone?

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

Yeah, let me start by saying that right now, as Steve mentioned, and so did George, we're investing in our businesses both from a CapEx. We've increased CapEx about 35% over last year in the first quarter, and expect to keep doing that throughout the year. We're investing in capacity because we frankly, our demand is larger than our capacity in certain areas. We're investing in that. Second, we're also increasing some R&D expenditures. We increased R&D by $10 million just in the first quarter. That's, to us, to me, that's about 14 cents a share that we added in our investments because we think those are going to be good investments. There's going to be good demand for them. Now, having said that, I'll let George talk about Golden Dome. Right now, we're pretty well set on Tranche programs, the SDA Tranche programs.

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

We've won just about everything, with minor exceptions here and there. I don't expect to get much more than that. Going to the Golden Dome, I'll have George answer that.

[George Bobb, President and CEO at Teledyne Technologies]

Sure. I'd just as a follow-on to that, what I would say is, certainly on the tranche program, as Robert mentioned, we've done very well there, and that's what's driven a lot of the growth, particularly on the infrared imaging space side of the business. We think we're very well positioned for Golden Dome as it evolves, given the fact that we've been on all of these Space Development Agency tranche programs.

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

We'll see how much budget goes in there in reality, right? Asking for increased budgets is one thing, getting it is another. Eventually, there will obviously be some monies. Either way, we're ready, but right now, with what we have and what we're seeing in terms of the book-to-bill, we feel we should invest in our own businesses, which is very unusual for us at this point in the year.

[Jordan Lyonnais, Equity Research Associate at Bank of America]

Got it. Thank you so much.

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

For sure.

[Operator]

The next question comes from the line of Joseph Giordano with TD Cowen. Please proceed.

[Joseph Giordano, Managing Director at TD Cowen]

Hi, guys.

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

Hi, Joe.

[Joseph Giordano, Managing Director at TD Cowen]

You had previously last quarter talked about your unmanned business, $500 million growing about 10%. I think the general view is that feels pretty conservative given recent events. Just curious for a bit of an update there, and then if you can maybe talk about the subsea stuff specifically, like where are you positioned on potential like Strait of Hormuz minesweeping? What types of products would that be for you? Just any sort of color you can give there on how that might materialize over the next couple quarters here. Thank you.

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

Sure. Okay. Let's start with the unmanned. As you know, we make unmanned systems, air, ground, and subsea. I don't know if there are many companies that are able to do all of that. Our unmanned air systems is growing very fast. Our Black Hornet, which are the nano drones, over the last bunch of years, including this year, just that one drone, Black Hornet 3, now Black Hornet 4, will have revenues of about $500 million over that period. We expect, and we have received already orders for Black Hornet, both in this country and some for Europe. Of course, Middle East, its conflict is demanding more. Second, we've introduced our Rogue 1, which is a armed drone. We have our first contracts. Those would increase substantially with time. We have other systems coming along the way.

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

If we go to subsea, we have different kinds of underwater drones. They're not just any. We have, for example, gliders that can stay down very long periods of time and can go large distances. We also have our Gavia vehicles, various ranges of it that go to different depths. Those are the ones that are used for detecting mines. We have some nice orders for that in Europe. Overall, I'd say I would remain with the $500 million for now. Some of the pockets are growing higher than 10%. Broadly speaking, I think we are approaching almost $2 billion in revenue, between defense, global defense, U.S. defense, drones, EW, missiles, munitions, et cetera. That's a big chunk of our revenue for this year. It's about 30%-35% of the whole company.

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

When you get a part of your portfolio growing that fast and you're actually investing dollars the way we are, we've always been kind of very cautious with our money. That ought to tell you that we're kind of bullish about this area.

[Joseph Giordano, Managing Director at TD Cowen]

Thank you.

[Operator]

The next question comes from the line of Guy Hardwick with Barclays. Please proceed.

[Guy Hardwick, Director at Barclays]

Hi, good morning.

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

Good morning, Guy.

[Guy Hardwick, Director at Barclays]

Good morning. This is Robert. I was wondering if you could maybe update us on your margin outlooks, particularly in Digital Imaging, where it seems that you've had a positive mix effect with the industrial and scientific cameras picking up?

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

I think, as George Bobb mentioned, and Jason VanWees mentioned a little bit, for the quarter, our margin went up about 58 basis points. We're projecting that to continue throughout the year. We think we'll end the year, about 60 basis points above last year, and it'll be led by Digital Imaging at over 100 basis points, 105-107 basis points, which is something that we've been striving for ever since the acquisition of FLIR. Now FLIR's doing well, and the legacy Digital Imaging with DALSA e2v is picking up. The margins overall would go about 60 basis points, led by Digital Imaging. Aerospace and Defense is not far behind at about 70 basis points.

[Guy Hardwick, Director at Barclays]

Just generally talking about your, say, long cycle versus short cycle trends, it sounds like you don't think there's a bump to the order book in the defense side yet, but perhaps in the next six months. Does that suggest a pretty good outlook for defense for next year rather than kind of an acceleration this year in terms of revenues?

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

No, I hope I didn't give the impression that we don't expect acceleration this year. We do, because our orders are way up right now in our defense businesses. We expect it to pick up more. Don't mean to be greedy, but we expect it to pick up more in the next six months or so because of the use of munitions, the significant use of munitions in the Middle East. Having said that, we are already experiencing very strong defense orders across all of our portfolio, from components to systems.

[Guy Hardwick, Director at Barclays]

Thank you.

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

For sure.

[Operator]

The next question comes from the line of Jonathan Siegmann with Stifel. Please proceed.

[Jonathan Siegmann, Managing Director at Stifel]

Hey, guys. Thank you for taking my question. I wanted to just ask or kick off with a big picture question about M&A and the strategy. A couple of years ago, we saw new issues, IPOs, businesses being created that really focused on kind of roll-ups and industrial roll-ups with an aerospace and defense focus. More recently, they've been that plus broader industrials as well. When you think about the amount of new kind of industrial compounders, industrial roll-ups, companies focused on finding niche, highly engineered products, et cetera, it definitely feels a little more crowded today than maybe years ago. You guys started this theme, decades ago in the history books, you started it, but even just one decade ago, you were ahead of many of the others. I wanted to just sort of take the temperature on the market at large.

[Jonathan Siegmann, Managing Director at Stifel]

Are you rubbing up against competitors more? Is it harder to get deals done? Are sellers reshaping the processes in the face of different and maybe more buyers seeking the same opportunities? I just feel like with all the IPO activity, it's worth kind of level setting, recalibrating, and taking your temperature.

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

Yeah. I don't know. It's a very kind of difficult question to answer. That we've always had competition. Let me begin somewhere else. In the last 12 months, 13 months, we've already spent $900 million in acquisitions. In the last 25 years, we've spent $12.8 billion in acquisitions, only $4 billion of it with our stock, so $10.8 billion of it with cash, which we generate. In the last 12, 13 months, $900 million. We've made 75 acquisitions in the past 25 years. Yes, it's getting crowded. On the other hand, people that are conglomerates that are putting things together, they also have a tendency to put them together then take them apart. If you look at various conglomerates, we've been the beneficiary of taking them apart.

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

We've gotten a few businesses from conglomerates that suddenly have decided, "Well, this thing doesn't fit," or, "We want to concentrate." We've been getting some really nice carve-outs in the recent past. We've always had competition, we'll always have going forward. That's not what worries me. What worries me is the crazy prices that people have been willing to pay. Fortunately, some of that is switching over to this AI and data center domain, and bless them, let them spend their money in that area, and we will stick to the things we know. I don't really see a lot of competition increases.

[Jonathan Siegmann, Managing Director at Stifel]

Okay. That was great color. If I could just sort of clarify some of the commentary on defense and maybe a little bit on aerospace. It's very loud and clear that defense demand signals are strong, bookings are strong. One of the challenges in the past at different times with Teledyne is that the bookings are strong, but it doesn't necessarily translate into the immediate quarters, and there could be some confusion about kind of short versus long cycle exposure. When we see all these strong demand trends in defense, is that going to translate immediately? Can you maybe just talk about the short cycle elements of your portfolio a little bit more? You mentioned munitions. I just want to make sure that we're all kind of hearing that loud and clear, but also translating into the models the right way.

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

That's a good question. That's a very good question. Let me just say it's mixed. Yes, some of our orders that we get are long, two, three, four years in duration. Some of our orders are yet to come because of the conflicts in the Middle East. Of course, there's European growth in defense, where we're getting some healthy orders. By and large, when we think about part of our portfolio growing 9%-10% organically, that's very healthy. We haven't had that for a while. On the other hand, I'm not going to be the one standing here and telling people that we're going to grow 20% a year like I've heard others do. That's not us. It might happen if the munitions that are being used are replaced faster, but the government cycles are tedious, even when there's urgent need.

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

I would balance it to say that we do have a great backlog. We have about $4.6 billion in our backlog right now, and those will translate into revenue. The good thing is that based on what we see, both in the Middle East, but also European defense increases, as well as Ukraine conflict, as well as what's happening in China and Taiwan. All of these directionally, all of these things favor the portfolio that we've developed, both in legacy Teledyne and of course, with FLIR acquisition.

[Jonathan Siegmann, Managing Director at Stifel]

That's great. If I could slip in just one more related question on aerospace. I know your aerospace exposure is very small and your commercial aftermarket exposure is even smaller as a percentage of that, but is there any tea leaf reading there just on the back of what's going on in the Middle East, high oil prices? It's obviously much more topical with the companies that are more kind of aerospace heavier, aerospace pure plays.

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

I'll let George address that one, please.

[George Bobb, President and CEO at Teledyne Technologies]

Yes, you mentioned that it's a relatively smaller part of the business, which it is. It's about 4% of our revenue, give or take. The business actually is split about 1/3 OEM, 2/3 aftermarket. What we've seen in the aftermarket, the aftermarket was healthy in Q1, so not seeing anything in the near term as a result of that conflict.

[Jonathan Siegmann, Managing Director at Stifel]

Thanks, guys. Appreciate it.

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

Good.

[Operator]

The next question comes from the line of Noah Poponak with Goldman Sachs. Please proceed.

[Noah Poponak, Research Analyst at Goldman Sachs]

Hey, good morning, everyone.

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

Morning, Noah.

[Noah Poponak, Research Analyst at Goldman Sachs]

Hey, Robert. Is it possible to state or quantify what short cycle industrial revenue growth was in the quarter, and what defense revenue growth was in the quarter, and then what's in the full year 2026 revenue guidance for each of those?

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

Right. Let me start with the government. We had a 9% growth in U.S. government. We had in non-U.S. government total, we had another 4% growth. This is organic. Where we grew most also was in international domain. We had a little shrinkage in the U.S. commercial, but we grew significantly internationally. What's happened to us now is our international businesses have become 48% of our portfolio now. 20 years ago, that was less than 15%. The growth's been international and U.S. government. U.S. government being at 9% and international about 8.5%. I don't know whether I picked up everything you asked.

[Noah Poponak, Research Analyst at Goldman Sachs]

I guess, are you able to quantify what growth was in short cycle industrial, I guess, as you've defined it, during the downturn you experienced in machine vision, test and measurement, semiconductor? I guess I'm trying to get a sense for how much that recovered in the quarter in the 5% organic total company that you had.

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

Yeah, I think generally the short cycle grew at about lower single digits, 3%-4%. Defense, high single digits.

[Noah Poponak, Research Analyst at Goldman Sachs]

Okay.

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

There's a difference between machine vision and semiconductors. They're very healthy. We have good growth there. On the other hand, we have a little shrinkage in test and measurement.

[Noah Poponak, Research Analyst at Goldman Sachs]

Okay.

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

The first quarter, that's what we saw.

[Noah Poponak, Research Analyst at Goldman Sachs]

That helps. I think you've discussed this a little bit, but just the revenue number you're now providing for the full year, I think would require the organic to slow a bit through the rest of the year. Sounds like defense orders would suggest it can hold or accelerate. Maybe 9's just a tough large number starting point. Then it sounds like short cycle industrial still has room to accelerate. Why would total company organic not accelerate?

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

Well, you got me there. I'm a little conservative, Noah, as you know us to be. We expect revenue to keep growing throughout the year. Year-over-year, we had growth in the first quarter. We expect growth in the second quarter, in the third and the fourth quarter. When I look at the rest of the year, in January, we thought the first half of the year would be 48% of the total, second half, 52% of the total. We switched that now. We think the second half would be a little less. The reason for that is, frankly, it's us, a little conservatism. We think we're going to have less benefit in the second half of the year from foreign exchange. We got some nice benefits in the first half of the year. In Q1, we had about 2%.

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

We think that will drop down to maybe 0.6 in Q2, and then we're projecting 0 in the last two quarters. Now, if that were to flip, when I look at the year, we're thinking now foreign exchange is going to contribute 0.6%, 0.5%. If that shifts, of course, our revenue would increase correspondingly.

[Noah Poponak, Research Analyst at Goldman Sachs]

Okay.

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

Some of the conservatism has to do with foreign exchange.

[Noah Poponak, Research Analyst at Goldman Sachs]

I understand. Last one for me is just on the Instrumentation margin, maybe just talk about how you see that progressing through the rest of the year. Then I guess, that segment had really nice margin expansion the last three or four years. Now we have this quarter. How should we think about the right kind of medium term, a few years out, Instrumentation margin?

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

Let me start by saying, historically, our Instrumentation margins have been the healthiest in the company. We think with progression through the year, this year, our margins will keep increasing. I think this was our lowest margin quarter and primarily because of test and measurement. We think the margins will go up every quarter, and we should end the year closer to 27.5%. To get there, we're projecting 29% margin in the fourth quarter for that segment. As George said, our underwater vehicles don't have as great a margin as do our test and measurement. We're anticipating a comeback in our protocol analyzers. Our oscilloscopes are already doing well. I think margins will increase as the year goes on.

[Noah Poponak, Research Analyst at Goldman Sachs]

Okay. Always appreciate your time. Thanks so much.

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

Thank you, Noah.

[Operator]

The next question comes from the line of Rob Jamieson with Vertical Research Partners. Please proceed.

[Rob Jamieson, VP of Industrial Technology at Vertical Research Partners]

Hey, good morning, guys. I appreciate the call this morning, and thanks for taking my questions. Just a couple, just on Aerospace and Defense margin. Much better in the quarter than I expected. Was just curious on the better expansion outlook for that quarter or for the segment versus last quarter. Was there anything mix-related that we saw in this quarter or that you're expecting through the rest of the year, or is this more some of the cost efficiencies from the Qioptiq acquisition integration?

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

I think I'll let George answer this, but it has a lot to do with acquisitions.

[George Bobb, President and CEO at Teledyne Technologies]

Yeah, that's right. I'd answer it maybe a couple ways. One, on the acquisition side, our playbook is pretty simple. We acquire companies at reasonable valuations, then we work to improve them. We've really seen over the last year with the Qioptiq acquisition and the Micropac acquisition in the Aerospace and Defense Electronics segment, a lot of good work there on margin improvement. We also did benefit a little bit from mix in Q1. We sell, for example, our avionics spares, some high reliability semiconductors, things like that were somewhat better year-over-year. Fundamentally, I think, cost discipline always, improving the acquisitions, and then yes, a little bit of benefit from mix.

[Rob Jamieson, VP of Industrial Technology at Vertical Research Partners]

Perfect. Thank you. Just quick, can I get an update on just how you're thinking about free cash flow for the full year? Just with the increase in CapEx investment that you called out as well, how should we think about that kind of in like the 2.5% of sales range for the year?

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

Let me start with free cash flow. We've been fortunate in 2024, 2025 to generate over $1 billion in free cash flow. We expect that to happen again this year. First half is a little slower than that, but we'll pick it up the second half of the year because we're spending more on CapEx. CapEx this year, we're projecting at about $150 million, which is an increase versus last year. Of course, we're spending a little more on inventory. We're spending a little more on where we have some cautious approach to some of the product or supply chain that comes out of China with the restrictions. We're investing in some inventory, we're investing in some machining facilities for germanium, et cetera. Having said all of that, $115 CapEx, over $1 billion in free cash flow. I hope we'll get to $1.1 billion.

[Rob Jamieson, VP of Industrial Technology at Vertical Research Partners]

Perfect. Thank you.

[Operator]

Thank you. This concludes the question and answer session. I'd like to

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

Thank you very much.

[Operator]

call upon corporate management for closing remarks.

[Robert Mehrabian, Executive Chairman at Teledyne Technologies]

Thank you very much. I'll ask Jason to conclude the conference call.

[Jason VanWees, Vice Chairman at Teledyne Technologies]

Thanks, Robert. Again, thanks to everyone for joining us today. Of course, if you have follow-up questions, please feel free to call me or send me an email. My number's on the earnings release. Thanks, all. Bye.

[Operator]

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

Participants

Executives

• George Bobb, President and CEO
• Jason VanWees, Vice Chairman
• Robert Mehrabian, Executive Chairman
• Steve Blackwood, EVP and CFO

Analysts

• Andrew Buscaglia, Senior Analyst at BNP Paribas Exane
• Greg Konrad, Senior Vice President, Equity Research, Aerospace and Defense at Jefferies
• Guy Hardwick, Director at Barclays
• James Ricchiuti, Senior Analyst at Needham & Company
• Jonathan Siegmann, Managing Director at Stifel
• Jordan Lyonnais, Equity Research Associate at Bank of America
• Joseph Giordano, Managing Director at TD Cowen
• Noah Poponak, Research Analyst at Goldman Sachs
• Rob Jamieson, VP of Industrial Technology at Vertical Research Partners
• Zach Waljasser, Equity Research Associate at UBS