L3Harris Technologies, Inc.

What they do

L3Harris designs, develops and sustains mission-critical systems across space, air, land, sea and cyber domains. The company reported four segments in its fiscal 2025 Form 10-K — Communication Systems, Integrated Mission Systems, Defense Electronics and Commercial Aviation — and beginning fiscal 2026 streamlined to three segments: Space Mission Systems, Communications Spectrum Dominance and Missile Solutions. Products include tactical radios and waveforms, night vision goggles, airborne ISR and electronic attack systems, EO/IR targeting sensors, space communications and avionics. U.S. Government customers, including foreign military sales funded through the U.S. Government, accounted for 74% of revenue year to date 2026.

Revenue drivers

• Space Mission Systems — Largest current segment; generated $2,966 million of revenue in Q2 2026 (about half of total) and $5,956 million year to date, with segment operating income of $290 million in the quarter.
• Communications Spectrum Dominance — Second segment; $1,943 million of Q2 2026 revenue and $3,798 million year to date, with the highest segment operating income at $522 million in the quarter.
• Missile Solutions — Smallest of the three segments; $1,054 million of Q2 2026 revenue and $2,044 million year to date, with segment operating income of $130 million in the quarter.
• U.S. Government and international defense budgets — 74% of year-to-date 2026 revenue came from U.S. Government customers directly or through prime contractors, tying results to DoW and allied program funding.

Recent performance

Second quarter 2026 revenue was $5,881 million, up 8% from $5,426 million in Q2 2025, with operating margin of 11.1% (up 60 bps) and segment operating margin of 16.0%. Diluted EPS was $3.13, up 28% from $2.44, and net income was $600 million versus $458 million a year earlier. Orders of $7.3 billion produced a 1.2x book-to-bill and record backlog of $42 billion. Operating cash flow was $879 million and free cash flow was $771 million, both up 37% year over year. Year to date, revenue was $11,625 million versus $10,558 million, and net income was $1,112 million versus $844 million.

Strategy

Management describes L3Harris as a purpose-built portfolio focused on execution, citing record backlog and double-digit first-half growth. The company streamlined from four segments to three beginning fiscal 2026 to align common capabilities and business models. It continues to invest early and strategically, leveraging what it calls a commercial business model. Capital returns remain part of the plan: $470 million of dividends paid and $525 million of share repurchases in the first half of 2026. Guidance for 2026 was raised for both consolidated revenue and EPS.

Risks

• U.S. Government concentration — 74% of year-to-date 2026 revenue came from U.S. Government customers, so changes in DoW programs or budgets directly affect results.
• Competitive bidding and procurement reform — Increased use of multi-award IDIQ contracts and OTA agreements could lower barriers to entry, add pricing pressure and introduce non-traditional competitors.
• Budget and appropriations timing — Management expects the GFY 2027 appropriations cycle to be delayed and the U.S. Government to begin operating on a continuing resolution on October 1, 2026.
• Supply chain and trade policy — The company is seeking tariff exemptions, evaluating alternative materials and suppliers, and considering price adjustments to manage cost impacts.

Outlook

Management raised 2026 guidance to revenue of $23.2 billion to $23.7 billion (from $23.0 billion to $23.5 billion) and diluted EPS of $11.80 to $12.00 (from $11.40 to $11.60), with segment operating margin in the low 16% range. It expects full-year cash from operations of approximately $3.6 billion and free cash flow of $3.0 billion. The outlook reflects the GFY 2027 President's Budget Request of roughly $1.5 trillion for national defense, though the company expects the appropriations cycle to be delayed.