Leonardo DRS, Inc. (DRS): Results of Operations and Financial Condition
Leonardo DRS, Inc. (DRS) filed an SEC Form 8-K — Results of Operations and Financial Condition. Leonardo DRS Announces Financial Results for Second Quarter 2026 • Revenue: $913 million, up 10% year-over-year • Net Earnings: $86 million, up 59% year-over-year • Adjusted EBITDA: $128 million, up 33% year-over-year • Diluted EPS: $0.32, up 60% year-over-year • Adjusted Diluted
How this was made
The 30-second read
Why it matters
The combination of higher revenue, sharply higher net earnings and EPS, record funded backlog, and an explicit increase to full-year Adjusted EBITDA and Adjusted Diluted EPS creates a fresh earnings-and-guidance catalyst. The announced $450M Raft acquisition adds a near-term capital allocation and growth narrative.
Market read
Traders can reprice DRS on the new guidance increase, record backlog, and the acquisition announcement, all disclosed in the same filing.
What to watch
Free cash flow was relatively low ($6M) versus earnings strength, so investors may scrutinize working-capital dynamics and cash conversion going forward.
Leonardo DRS Announces Financial Results for Second Quarter 2026
Second-quarter revenue, profitability, bookings, funded backlog and both segment margins increased year-over-year, while the company increased 2026 Adjusted EBITDA and Adjusted Diluted EPS guidance.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| RevenueGAAP | $913 million | – | 10% |
| Net EarningsGAAP | $86 million | – | 59% |
| Net MarginGAAP | 9.4% | – | 290 bps |
| Diluted weighted average number of shares outstanding (WASO)GAAP | 268.935 | – | – |
| Diluted Earnings Per Share (EPS)GAAP | $0.32 | – | 60% |
| Adjusted EBITDAnon-GAAP | $128 million | – | 33% |
| Adjusted EBITDA Marginnon-GAAP | 14.0% | – | 240 bps |
| Adjusted Net Earningsnon-GAAP | $94 million | – | 52% |
| Adjusted Diluted EPSnon-GAAP | $0.35 | – | 52% |
| Net cash flow provided by operating activitiesGAAP | $35 million | – | – |
| Free Cash Flownon-GAAP | $6 million | – | – |
| Bookingsother | $1,085 million | – | – |
| Book-to-Billother | 1.2x | – | – |
| Funded Backlogother | $5,092 million | – | 17% |
| Six Months RevenueGAAP | $1,759 million | – | 8% |
| Six Months Net EarningsGAAP | $148 million | – | 42% |
| Six Months Net MarginGAAP | 8.4% | – | 200 bps |
| Six Months Diluted weighted average number of shares outstanding (WASO)GAAP | 268.661 | – | – |
| Six Months Diluted Earnings Per Share (EPS)GAAP | $0.55 | – | 41% |
| Six Months Adjusted EBITDAnon-GAAP | $233 million | – | 31% |
| Six Months Adjusted EBITDA Marginnon-GAAP | 13.2% | – | 230 bps |
| Six Months Adjusted Net Earningsnon-GAAP | $163 million | – | 41% |
| Six Months Adjusted Diluted EPSnon-GAAP | $0.61 | – | 42% |
| Six Months Bookingsother | $1,970 million | – | – |
| Six Months Book-to-Billother | 1.1x | – | – |
| ASC Operating EarningsGAAP | $49 million | – | 32% |
| ASC Operating MarginGAAP | 8.3% | – | 150 bps |
| ASC Bookingsother | $691 million | – | – |
| ASC Book-to-Billother | 1.2x | – | – |
| ASC Segment Adjusted EBITDAnon-GAAP | $69 million | – | 19% |
| ASC Segment Adjusted EBITDA Marginnon-GAAP | 11.8% | – | 110 bps |
| IMS Operating EarningsGAAP | $53 million | – | 61% |
| IMS Operating MarginGAAP | 15.9% | – | 450 bps |
| IMS Bookingsother | $394 million | – | – |
| IMS Book-to-Billother | 1.2x | – | – |
| IMS Segment Adjusted EBITDAnon-GAAP | $59 million | – | 55% |
| IMS Segment Adjusted EBITDA Marginnon-GAAP | 17.7% | – | 460 bps |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Advanced Sensing and Computing (ASC)Revenue growth was primarily attributable to programs related to tactical radars and infrared sensing. Quarterly bookings were supported by healthy demand for infrared sensing, tactical radars and naval network computing. | $587 million | – | 8% |
| Integrated Mission Systems (IMS)Electric power and propulsion programs drove quarterly bookings. Broad-based revenue growth reflected momentum across the segment. | $333 million | – | 15% |
2026 outlook
- Revenue$3,900 million - $3,975 million
- Tax rate16.5%
- NoteAdjusted EBITDA: $525 million - $540 million
- NoteDiluted WASO: 269.0 million
- NoteAdjusted Diluted EPS: $1.34 - $1.39
- NoteGuidance excludes the pending acquisition of Raft.
Capital returns
- During the second quarter, the company paid dividends to stockholders totaling approximately $24 million or $0.09 per share of common stock.
- The Board of Directors declared a cash dividend of $0.09 per share of common stock payable on August 27, 2026, to stockholders of record on August 13, 2026.
- The company repurchased 261,526 shares of its common stock for approximately $12 million in the second quarter pursuant to a previously announced stock repurchase program.
What drove it
- Second-quarter year-over-year revenue growth was primarily led by programs related to tactical radars, electric power and propulsion, infrared sensing and force protection.
- Disciplined program execution, favorable mix and leverage from increased volume fueled Adjusted EBITDA growth and margin expansion.
- Strong operational performance, lower net interest expense and a lower tax rate supported year-over-year growth in net earnings, Adjusted Net Earnings, diluted EPS and Adjusted Diluted EPS.
- Operating and Free Cash Flow increased year-over-year due to higher profitability and better working capital efficiency.
- Customer demand remained resilient, with the strongest contributions from electric power and propulsion, infrared sensing, tactical radars and naval network computing.
Concerns
- The company increased investment in internal research and development in ASC.
- The pending acquisition of Raft is excluded from 2026 guidance.
- The company does not provide a reconciliation of forward-looking Adjusted EBITDA and Adjusted Diluted EPS because of the inherent difficulty in forecasting and quantifying the necessary adjustments without unreasonable effort.
What to watch
- Conversion of record funded backlog into revenue.
- Sustained demand in electric power and propulsion, infrared sensing, tactical radars and naval network computing.
- ASC profitability while the company increases investment in internal research and development.
- Completion, financing and integration of the pending Raft acquisition.
- Delivery against increased 2026 Adjusted EBITDA and Adjusted Diluted EPS guidance.
Balance sheet and cash flow
- Net cash flow provided by operating activities was $35 million for the second quarter.
- Free Cash Flow was $6 million in the quarter.
- At the end of the second quarter, the company held $270 million of cash.
- The company had no outstanding borrowings under its credit facility.
Analysis
Leonardo DRS reported broad second-quarter growth. Revenue was $913 million, up 10% year-over-year, while net earnings were $86 million, up 59%. The company attributed revenue growth primarily to tactical radars, electric power and propulsion, infrared sensing and force protection. Demand indicators were constructive, with bookings of $1,085 million, book-to-bill of 1.2x and funded backlog of $5,092 million. Funded backlog was described as a record and was up 17% year-over-year.
Profitability improved substantially. Net margin was 9.4%, compared with 6.5%, and Adjusted EBITDA margin was 14.0%, compared with 11.6%. Management cited disciplined program execution, favorable mix and leverage from increased volume. Lower net interest expense and a lower tax rate also supported growth in earnings and EPS. Adjusted EBITDA was $128 million, up 33%, while Adjusted Diluted EPS was $0.35, up 52%.
Both operating segments contributed. ASC revenue was $587 million, up 8%, and its Segment Adjusted EBITDA margin increased to 11.8% from 10.7%, despite increased investment in internal research and development. IMS revenue was $333 million, up 15%, and its Segment Adjusted EBITDA margin expanded to 17.7% from 13.1%. IMS operating earnings increased 61% to $53 million, while ASC operating earnings increased 32% to $49 million.
Cash generation improved during the quarter, with net cash flow provided by operating activities of $35 million and Free Cash Flow of $6 million. The company held $270 million of cash and had no outstanding borrowings under its credit facility. Capital deployment included approximately $24 million of dividends and approximately $12 million of share repurchases, alongside the announced $450 million acquisition of Raft.
The company maintained its 2026 revenue outlook of $3,900 million to $3,975 million and increased Adjusted EBITDA guidance to $525 million to $540 million from $515 million to $530 million. It also increased Adjusted Diluted EPS guidance to $1.34 to $1.39 from $1.26 to $1.30, while reducing its tax-rate assumption to 16.5% from 18.5%. Guidance excludes the pending Raft acquisition, making execution against the standalone outlook and progress toward closing and integrating Raft central items to monitor.
Management, verbatim
Leonardo DRS delivered an exceptional second quarter. Our results reflect disciplined execution and sustained demand for DRS’s differentiated technologies. We captured over $1 billion in bookings, which increased funded backlog to record levels, drove double-digit organic revenue growth and meaningfully expanded margins and profitability. We are encouraged by our first half performance, which gives us the conviction to support increasing our full year guidance for Adjusted EBITDA and Adjusted Diluted EPS. Building on this momentum, the announced acquisition of Raft accelerates our multi-domain AI, data fusion and mission software position and reflects the disciplined capital deployment that underpins our long-term strategy. We are confident that our continued dedication to solving our customers’ toughest challenges will drive consistent, profitable growth and create meaningful long-term value for our stockholders.
John Baylouny, President and CEO of Leonardo DRS
Not in the filing
stated, not guessed- Total gross profit and gross margin.
- Total operating income and operating margin.
- Quarterly prior-quarter comparisons for company-level and segment metrics.
- Prior-year amounts and percentage changes for quarterly operating cash flow and Free Cash Flow.
- Actual tax rate for the second quarter.
- Cash balance comparison with the prior year or prior quarter.
- Total debt outstanding outside the statement that there were no outstanding borrowings under the credit facility.
- Six-month operating cash flow, Free Cash Flow, capital-return and balance-sheet figures.
- Six-month ASC and IMS operating earnings, operating margin, bookings, book-to-bill, Segment Adjusted EBITDA and Segment Adjusted EBITDA margin are reported in the filing but are not separately presented in the key_metrics list.
- Forward guidance for gross margin and operating expenses.
AlphAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.
Background
This is an SEC Form 8-K (Item 2.02) reporting Leonardo DRS second-quarter 2026 financial results and related corporate updates.
Ticker impact
Leonardo DRS reported Q2 2026 results with revenue up 10% YoY, record funded backlog of $5.1B, and increased full-year guidance.
Likely positive bias for shares, with upside sensitivity to how the guidance increase and Raft deal are received.
The filing discloses multiple decision-relevant datapoints: earnings and EPS growth, bookings/book-to-bill, record funded backlog, explicit guidance increase, and a named acquisition with stated strategic rationale.
Market effects
Defense electronics and mission software demand signals improve via record funded backlog and resilient bookings.
Limited direct regional read-through; primarily US defense contractor sentiment.
Modest global relevance, driven by defense spending and AI/data-fusion capability positioning.
Counterpoint
Strong backlog and guidance increases may already be partially anticipated; investors may focus on execution risk and integration costs from the Raft acquisition.
Key entities
- issuerLeonardo DRS, Inc.
Nasdaq-listed defense technology company reporting Q2 2026 results, record funded backlog, guidance increases, and a $450M acquisition of Raft.
- acquired_companyRaft
Target in the announced $450M acquisition to expand multi-domain AI, data fusion, and mission software capabilities.
