L3Harris Technologies Inc (LHX) Earnings & Analysis

Latest quarter

L3Harris reported Q2 FY2026 revenue of $5.9 billion, above the $5.8 billion consensus. Adjusted earnings per share of $3.13 also exceeded the consensus estimate of $2.80. Revenue rose from $5.4 billion a year earlier, while diluted earnings per share increased from $2.44.

CFO Ken Sharp said all three segments contributed to revenue growth. Space and Mission Systems grew as activity increased across its portfolio, including missionized aircraft and air traffic control modernization. Communications and Spectrum Dominance benefited from international volume and higher electronic warfare and data links revenue, while Missile Solutions grew despite lower growth in the commercial space propulsion business being divested.

L3Harris reported gross margin of 25.5%, compared with 24.6% a year earlier, and operating margin of 11.1%, compared with 10.5%. Sharp said segment operating margin increased as revenue growth, improved program performance and a net gain on investments offset higher research and development costs. The company reported free cash flow of $771.0 million, up from $561.0 million a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Chris Kubasik said demand for missile and interceptor production was driving investment in facilities, automation and other technology. He said L3Harris was negotiating more than $20 billion in new missile contracts that could potentially triple the business’s backlog. CFO Ken Sharp said the company had committed $2 billion for missile capacity, including facilities, equipment and the supply chain.

Kubasik said a Department of War investment allowed L3Harris to accelerate its missile investment plans by 12 to 18 months. He said the new GMLRS operation would more than double capacity and reduce manufacturing times by 50%. He also said a seven-year THAAD and PAC-3 production framework signed shortly after quarter end represented approximately $12 billion of future production revenue and $2 billion of future profit.

Asked about the missile business’s growth, Sharp said he expected growth in the high teens for at least the next couple of years, with factories coming online in the following years. Kubasik said the production ramp would take a couple of years before a larger increase in revenue and profitability.

On the missile business IPO, Kubasik said market conditions did not reflect the value he believed L3Harris was building. He said the company would stand down and reevaluate while continuing to build facilities and deliver motors.

Elsewhere, Kubasik said L3Harris had secured $2.4 billion in space contracts since the fourth quarter and had been awarded $3 billion in international airborne early warning and control programs over the same period. For the rest of the year, he said the company would ramp operations on satellite awards and pursue international orders. Sharp said second-half Communications and Spectrum Dominance revenue was expected to rise with demand for software-defined radios and counter-drone systems.

Guidance

On the Q2 call, Sharp raised L3Harris’s FY2026 revenue guidance to $23.2 to $23.7 billion, increasing both ends of the range by $200 million. He raised diluted earnings-per-share guidance to $11.80 to $12.

Sharp also raised the Space and Mission Systems full-year revenue outlook by $200 million to $11.7 billion and increased the Communications and Spectrum Dominance segment margin outlook to mid 25% from approximately 25%.