Third Quarter 2026
Filed Oct 29, 2026Leonardo DRS Announces Financial Results for Third Quarter 2026
Third-quarter revenue increased 11%, net earnings increased 60%, Adjusted EBITDA increased 27%, and both operating segments expanded Adjusted EBITDA margins. Bookings were $1,639 million, funded backlog reached $5,640 million, and the company raised 2026 revenue, Adjusted EBITDA and Adjusted Diluted EPS guidance.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Revenue, three months ended September 30, 2026GAAP | $1.07B | – | 11 % |
| Revenue, nine months ended September 30, 2026GAAP | $2.83B | – | 9 % |
| Cost of revenues, three months ended September 30, 2026GAAP | −$803M | – | – |
| Cost of revenues, nine months ended September 30, 2026GAAP | −$2.11B | – | – |
| Gross profit, three months ended September 30, 2026GAAP | $263M | – | – |
| Gross profit, nine months ended September 30, 2026GAAP | $712M | – | – |
| General and administrative expenses, three months ended September 30, 2026GAAP | −$142M | – | – |
| General and administrative expenses, nine months ended September 30, 2026GAAP | −$401M | – | – |
| Operating earnings, three months ended September 30, 2026GAAP | $116M | – | – |
| Operating earnings, nine months ended September 30, 2026GAAP | $295M | – | – |
| Net earnings, three months ended September 30, 2026GAAP | $115M | – | 60 % |
| Net earnings, nine months ended September 30, 2026GAAP | $263M | – | 49 % |
| Net margin, three months ended September 30, 2026GAAP | 10.8 % | – | 330 bps |
| Net margin, nine months ended September 30, 2026GAAP | 9.3 % | – | 250 bps |
| Diluted earnings per share, three months ended September 30, 2026GAAP | $0.43 | – | 65 % |
| Diluted earnings per share, nine months ended September 30, 2026GAAP | $0.98 | – | 51 % |
| Adjusted EBITDA, three months ended September 30, 2026non-GAAP | $149M | – | 27 % |
| Adjusted EBITDA, nine months ended September 30, 2026non-GAAP | $382M | – | 29 % |
| Adjusted EBITDA margin, three months ended September 30, 2026non-GAAP | 14.0 % | – | 180 bps |
| Adjusted EBITDA margin, nine months ended September 30, 2026non-GAAP | 13.5 % | – | 210 bps |
| Adjusted Net Earnings, three months ended September 30, 2026non-GAAP | $124M | – | 59 % |
| Adjusted Net Earnings, nine months ended September 30, 2026non-GAAP | $287M | – | 47 % |
| Adjusted Diluted EPS, three months ended September 30, 2026non-GAAP | $0.46 | – | 59 % |
| Adjusted Diluted EPS, nine months ended September 30, 2026non-GAAP | $1.07 | – | 47 % |
| Bookings, three months ended September 30, 2026other | $1.64B | – | – |
| Book-to-Bill, three months ended September 30, 2026other | 1.5x | – | – |
| Funded Backlog, September 30, 2026other | $5.64B | – | 21% |
| Bookings, nine months ended September 30, 2026other | $3.61B | – | – |
| Book-to-Bill, nine months ended September 30, 2026other | 1.3x | – | – |
| Net cash provided by operating activities, three months ended September 30, 2026GAAP | $96M | – | – |
| Free Cash Flow, three months ended September 30, 2026non-GAAP | $61M | – | – |
| Net cash provided by (used in) operating activities, nine months ended September 30, 2026GAAP | $65M | – | – |
| Free Cash Flow, nine months ended September 30, 2026non-GAAP | −$28M | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Advanced Sensing and Computing (ASC)Revenue growth was driven primarily by programs associated with tactical radars and space sensing programs. Healthy demand for naval network computing and tactical radars supported quarterly bookings. | $659M | – | 14 % |
| Integrated Mission Systems (IMS)Revenue growth reflected strength across naval power and propulsion programs. Quarterly bookings were well balanced across electric power and propulsion and force protection programs. | $428M | – | 12 % |
2026 outlook
- Revenue$3,950 million - $3,985 million
- Tax rate13.0%
- NoteAdjusted EBITDA: $545 million - $555 million
- NoteDiluted WASO: 269.0 million
- NoteAdjusted Diluted EPS: $1.50 - $1.53
- NoteThe guidance excludes the pending acquisition of Raft LLC (“Raft”).
Capital returns
- Dividends paid to stockholders totaled approximately $24 million or $0.09 per share of common stock during the third quarter.
- The Board of Directors declared a cash dividend of $0.09 per share of common stock payable on November 25, 2026, to stockholders of record on November 12, 2026.
- The company repurchased 288,633 shares of its common stock for approximately $12 million in the third quarter.
- Repurchases of common stock were $(28) million for the nine months ended September 30, 2026, compared with $(24) million for the nine months ended September 30, 2025.
- Dividends paid were $(21) million and dividends paid to related party were $(51) million for the nine months ended September 30, 2026.
What drove it
- Third-quarter revenue growth was primarily led by programs related to tactical radars, naval power and propulsion programs and progress on space sensing programs.
- Rigorous program execution, favorable mix and operating leverage from greater volume drove Adjusted EBITDA growth and margin expansion.
- The strong operational performance and a lower tax rate supported year-over-year growth in third-quarter net earnings, Adjusted Net Earnings, diluted EPS and Adjusted Diluted EPS.
- Customer demand remained robust, led by naval power and propulsion, tactical radars and force protection programs.
- ASC Segment Adjusted EBITDA was $78 million, versus $64 million, and Segment Adjusted EBITDA Margin was 11.8 %, versus 11.0 %.
- IMS Segment Adjusted EBITDA was $71 million, versus $53 million, and Segment Adjusted EBITDA Margin was 16.6 %, versus 13.8 %.
Concerns
- Third-quarter operating and free cash flow were lower than the third quarter 2025 due to higher cash used to fund working capital, partially offset by increased earnings.
- IMS margin expansion occurred despite increased investment in internal research and development.
- The 2026 guidance excludes the pending acquisition of Raft LLC (“Raft”).
What to watch
- Execution against 2026 revenue guidance of $3,950 million - $3,985 million, Adjusted EBITDA guidance of $545 million - $555 million, and Adjusted Diluted EPS guidance of $1.50 - $1.53.
- Conversion of record funded backlog of $5,640 million and new funded bookings of $1.6 billion into revenue.
- Working-capital demands and operating and free cash flow following third-quarter cash-flow declines versus the prior-year quarter.
- Progress on the pending acquisition of Raft LLC (“Raft”), which is excluded from guidance.
Balance sheet and cash flow
- Cash and cash equivalents were $294 million at September 30, 2026, compared with $647 million at December 31, 2025.
- Short-term borrowings and current portion of long-term debt were $10 million at September 30, 2026, compared with $26 million at December 31, 2025.
- Long-term debt was $165 million at September 30, 2026, compared with $321 million at December 31, 2025.
- The company had no outstanding borrowings under its credit facility at the end of the third quarter.
- Capital expenditures were $(38) million in the third quarter and $(97) million for the nine months ended September 30, 2026.
- Net decrease in cash and cash equivalents was $(353) million for the nine months ended September 30, 2026.
Analysis
Leonardo DRS reported a strong third quarter ended September 30, 2026. Revenue was $1,066 million, up 11 %, while net earnings increased 60 % to $115 million and diluted EPS increased 65 % to $0.43. The company attributed growth to tactical radars, naval power and propulsion programs, and progress on space sensing programs. For the first nine months, revenue was $2,825 million, up 9 %, and net earnings were $263 million, up 49 %.
Profitability expanded faster than revenue. Adjusted EBITDA rose 27 % to $149 million and Adjusted EBITDA Margin increased 180 bps to 14.0 %. Net margin was 10.8 %, up 330 bps. Management cited program execution, favorable mix and operating leverage from higher volume, while also noting that a lower tax rate supported growth in earnings and EPS.
Both operating segments grew and expanded margins. ASC revenue increased 14 % to $659 million, with Segment Adjusted EBITDA Margin increasing 80 bps to 11.8 %. IMS revenue increased 12 % to $428 million, with Segment Adjusted EBITDA Margin increasing 280 bps to 16.6 %. ASC growth was tied to tactical radars and space sensing, while IMS benefited from naval power and propulsion programs. IMS expanded profitability despite increased internal research and development investment.
Demand indicators were notably strong. Third-quarter bookings were $1,639 million, producing a 1.5x book-to-bill ratio, and funded backlog reached a record $5,640 million, up 21%. The company identified naval power and propulsion, tactical radars and force protection as the principal booking contributors. This backlog and improved fourth-quarter visibility supported higher full-year outlooks for revenue, Adjusted EBITDA and Adjusted Diluted EPS.
Cash generation was the principal counterpoint in the quarter. Operating cash flow was $96 million and free cash flow was $61 million, both below the respective prior-year-quarter figures of $107 million and $77 million because of higher working-capital cash use. Year-to-date operating cash flow improved to $65 million from $(59) million and free cash flow improved to $(28) million from $(149) million. The company held $294 million of cash at quarter end, repurchased 288,633 shares for approximately $12 million during the quarter, and declared a $0.09 per-share dividend payable November 25, 2026.
Management, verbatim
Leonardo DRS delivered a strong third quarter, with 11% organic revenue growth and profitability growing even faster. Bookings exceeded $1.6 billion, representing a 1.5x book-to-bill ratio — both our strongest since becoming a public company four years ago.
John Baylouny, President and CEO of Leonardo DRS
Our record funded backlog, together with improved visibility into the fourth quarter, gives us confidence to raise and narrow our full-year revenue and profitability outlook.
John Baylouny, President and CEO of Leonardo DRS
Not in the filing
stated, not guessed- GAAP gross margin was not reported.
- Prior-quarter comparisons were not reported for the reported operating metrics.
- Guidance for gross margin and operating expenses was not reported.
- A separate previous earnings release OUTLOOK section was not provided; therefore, no actual-versus-prior-guidance comparison is presented.
Written by an AI language model 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 checked against the filing text, and a metric whose value, prior period and change do not add up is dropped from the metrics. The model can still misread a table, in the metrics or in the text, so check a number in the filing before you rely on it. Consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.