L3Harris Q2 Earnings Beat, Raises 2026 Guidance
L3Harris Q2 earnings topped estimates as weapons demand lifted orders and a record backlog; company raised FY2026 guidance, prompting allocation debate.
KEY TAKEAWAYS
- Q2 revenue $5.9 billion and GAAP EPS $3.13 beat estimates, driven by broad-based segment growth.
- Orders $7.3 billion and a record $42 billion backlog provide multi-year revenue visibility.
- Raised FY2026 revenue to $23.2-$23.7 billion and EPS to $11.80-$12.00 while reiterating $3.0 billion FCF guidance.
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L3Harris Technologies reported Q2 2026 results on July 29, 2026, with earnings and revenue exceeding estimates as weapons demand boosted orders and a record backlog. The company raised its full-year revenue and EPS guidance while maintaining its free-cash-flow outlook.
Strong Quarter and Raised Outlook
L3Harris reported consolidated revenue of $5.9 billion, up 8.0% year over year, and GAAP diluted earnings per share of $3.13, a 28.0% increase. Operating income reached $654 million with an 11.1% operating margin, up 60 basis points. Segment operating margin was 16.0%, and net income totaled $600 million. Orders hit $7.3 billion, producing a book-to-bill ratio of 1.2 and lifting the backlog to a record $42 billion, up from $40.7 billion at the end of Q1. Operating cash flow was $879 million and free cash flow $771 million, both up 37.0%. Management credited execution and "our Trusted Disruptor culture" for the results.
The company raised its 2026 consolidated revenue guidance to $23.2–$23.7 billion and increased full-year diluted EPS guidance to $11.80–$12.00, while reiterating free-cash-flow guidance of $3.0 billion. Management attributed the upgrade to sustained defense demand—especially for missiles and propulsion—robust order intake, strong international demand, and broad-based strength across Space & Mission Systems, Missile Solutions, and Communications. Despite operational strength and higher guidance, investor focus shifted to capital allocation, IPO timing, and valuation, contributing to share pressure around the release.
Backlog Growth and Pentagon Framework Agreements
The Department of War announced two seven-year framework agreements with L3Harris and Lockheed Martin to expand propulsion production for the Patriot Advanced Capability-3 Missile Segment Enhancement (PAC-3 MSE) interceptor and the Terminal High Altitude Area Defense (THAAD) system. These agreements cover PAC-3 MSE propulsion components—including two-pulse solid rocket motors, attitude-control motors, and lethality enhancers—and THAAD propulsion elements. They aim to nearly triple missile motor production at L3Harris, with task orders and volumes to be awarded over time.
Missile Solutions generated about $1.05 billion in revenue during the quarter, a 14.0% year-over-year increase. Management said it is negotiating more than $20 billion in potential contracts for the unit, which could significantly expand the backlog if secured. The company now expects to revisit the planned Missile Solutions IPO in mid-2027, citing market conditions. The Department of War previously invested $1 billion in the business; that funding closed before the quarter and has supported capacity expansion and contract execution.
By raising revenue and EPS guidance while maintaining its free-cash-flow outlook, management signaled continued reinvestment and capital deployment priorities that clarify the IPO timing and frame investor debate heading into 2027.
Quotes
Management highlighted that “our Trusted Disruptor culture” and focus on execution drove higher revenue, margin expansion, and record backlog in Q2 2026.
