L3Harris Technologies NYSE: LHX reported strong first-quarter results and reaffirmed its full-year revenue outlook while raising its GAAP earnings guidance, as executives pointed to accelerating demand tied to U.S. and allied defense modernization, a growing backlog, and increased investment in capacity and innovation.
First-quarter performance and backlog growth
Tony Calderon, vice president of investor relations and corporate development, said the company published its first-quarter earnings release and updated 2026 guidance, alongside its Form 10-Q and a supplemental presentation.
Chairman and CEO Chris Kubasik described the quarter as “one of the best we’ve had,” and said demand across the Middle East, Europe, and the Indo-Pacific is driving urgency around “readiness, resilience, and modernization.” He also highlighted a supportive budget backdrop, citing a proposed “$1.1 trillion base budget request and a $350 billion in reconciliation funding,” which he said aligns with L3Harris priorities including “critical missiles and munitions, SDA tracking layer, Compass Call business jets, and tactical communication modernization.”
Kubasik said backlog has “almost doubled to over $40 billion,” adding that it does not include “$25 billion of orders for the Munitions Acceleration Council programs, which are currently in negotiations.” He said the company’s backlog coverage has increased to “2x revenue coverage.”
On operating performance, Kubasik said first-quarter 2026 revenue grew by “over $600 million or 15% organically,” and operating income increased “by $125 million.” CFO Ken Sharp said revenue rose to $5.7 billion, while segment operating income increased to $902 million and segment operating margin was 15.7%, up 10 basis points from the prior year.
Segment results and factors driving margins
Sharp said the year-over-year improvement in segment operating income reflected revenue volume, improved program performance, and “higher monetization of legacy assets,” partially offset by higher growth in lower-margin businesses and increased research and development spending.
By segment, Sharp reported:
- Space & Mission Systems: Revenue of $3.0 billion, up 24% year-over-year, including a benefit from “a milestone associated with procurement of material on a new classified program.” Segment margin increased 60 basis points due to improved program performance, partially offset by increased material purchases and R&D investment.
- Communications & Spectrum Dominance: Revenue of $1.9 billion, up 3%, driven by resilient communications products, night vision devices, and the ramp on the Next Generation Jammer program. Segment operating margin rose 60 basis points, aided by higher sales and “a favorable legal settlement,” partially offset by higher investments in demonstrations, prototypes, and R&D.
- Missile Solutions: Revenue of $1.0 billion, up 18%, with segment margin of 12.5%, up 110 basis points. Sharp attributed the revenue increase to higher production volumes across key missile munitions and space propulsion programs, and said margins benefited from mix, volume, and a gain on the sale of legacy assets, partially offset by “net unfavorable EAC adjustments.”
Sharp also said GAAP EPS was $2.72, up 33% year-over-year, driven by higher operating income, lower interest expense, and a lower effective tax rate, partially offset by lower pension income.
Free cash flow was an outflow of $187 million, which Sharp said was driven by working capital timing and typical for the company’s first-quarter trends. He noted cash generation is expected to be weighted to the back half of the year.
Portfolio moves and Missile Solutions IPO plans
Kubasik said the company has recently taken several strategic actions while continuing to deliver results, including entering an agreement to sell 60% of its space propulsion and power systems business and closing what he called “a novel partnership receiving a $1 billion investment from the Department of War.” He also said the company filed a confidential Form S-1 to take its Missile Solutions segment public.
Kubasik said the planned missile company will be named Axyz, explaining that the name is inspired by missile guidance and trajectory concepts. He added that the company continues to push to expand solid rocket motor capacity and expects definitized contracts tied to multi-year procurement frameworks “later this year.”
In response to analyst questions, Kubasik described the Munitions Acceleration Council process as involving initial “framework agreement” negotiations with primes, followed by the primes converting their frameworks into contracts and then L3Harris doing the same. He said the company is “targeting the end of the calendar year” for that progression and credited the Department of War’s “innovative approach to acquisition.”
Demand signals in space, ISR, and communications
On space, Kubasik told analysts growth is coming from missile warning and missile tracking as well as classified work. He said the company submitted its proposal for the HBTSS follow-on and expects a mid-year award, adding that the customer is expected to launch “the Tranche 1 eight satellites” later in the year. Kubasik also disclosed a “sole source contract for $600 million” in the classified area, with the “potential…for billions of dollars of follow on,” attributing it to past performance and a solution he characterized as a “game changer.”
Kubasik also provided an estimate for the company’s classified exposure, saying classified programs represent about “28%,” up from the prior year.
In airborne ISR, Kubasik said L3Harris has produced “over 100 missionized business jets over the past decade” and delivered the first two Peregrine business jets to the Royal Australian Air Force during the quarter. He described a “complete turnaround” in ISR over the past couple of years and said the company has an international ISR pipeline of about “$40 billion.”
Internationally, Kubasik said book-to-bill was 2.2x for the quarter. He highlighted a NATO ally award valued at “more than $2.2 billion,” with an initial “$726 million” order booked in the quarter, and said the company also secured Canadian strategic tanker and transport capability awards totaling approximately $700 million. He also pointed to $460 million of international resilient communications orders with three NATO member countries for software-defined tactical communications.
On communications, Kubasik cited U.S. budget signals for the Army’s HMS program and Marine Corps demand for software-defined radios, as well as opportunities tied to the Army’s NGC2 initiative. He said the company has already been awarded “two contracts under NGC2 for the transport,” and said international radio modernization programs have long runways, with many countries “about 20% complete.” Sharp added that management expects the communications business “to accelerate as the year progresses.”
Guidance reaffirmed; EPS range lifted
Sharp said the company reaffirmed full-year 2026 revenue guidance of $23.0 billion to $23.5 billion, representing 7% organic growth at the midpoint, and maintained segment operating margin guidance of “low 16%.” The company increased its GAAP EPS range by $0.10 to $11.40 to $11.60 and reaffirmed free cash flow guidance of $3.0 billion.
Sharp said the guidance and 2028 framework continue to include Missile Solutions “as it exists today” and do not contemplate impacts from the planned Missile Solutions IPO, the Department of War investment, or the planned sale of a majority stake in the space propulsion business; the company plans to update guidance when those transactions occur.
Addressing a question about whether first-quarter strength could suggest upside to revenue guidance, Sharp said he was still early in his tenure and that there is “a level of conservatism” in the outlook. He added that extra working days could be “a couple percentage points” and “maybe $200 million-ish in revenue,” but said that was not the primary driver of the quarter’s performance.
About L3Harris Technologies NYSE: LHX
L3Harris Technologies NYSE: LHX is an American aerospace and defense company formed in 2019 through the combination of L3 Technologies and Harris Corporation. Headquartered in Melbourne, Florida, the company designs, manufactures and supports a broad range of technology solutions for government and commercial customers, with a particular emphasis on defense, intelligence and public safety applications.
The company's offerings span communications systems, avionics, electronic warfare, intelligence, surveillance and reconnaissance (ISR) sensors, space systems and mission integration.
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