Elbit Systems 2025-26: Revenue +16%, $28.1B Backlog, Europe Engine
FY25 revenue $7.94B (+16%); GAAP op income $671M (8.5% margin); non-GAAP op income $737M (9.3%); GAAP EPS $11.39 (+59%); non-GAAP EPS $12.75 (+46%). Q4 revenue $2.15B (+11%); GAAP gross margin 24.7%; non-GAAP gross margin 25.0%; non-GAAP op income $210M (9.8%); GAAP diluted EPS $3.52 (vs $2 Q4 FY24, +76%). Segment growth: C4I + cyber +19%; ISTAR + EW +39%; Land +22%; Elbit Systems of America +9%; Aerospace -14%. Geographic mix: Europe 27% (main growth engine); North America 21%; Asia-Pacific 16%; Israel 32%. Backlog of orders $28.1B (3.5x annual revenue). Operating cash flow $778M; FCF $553M. FY26 capex ~$300M (factories in Israel + outside) for high demand. Directed energy weapons + Europe = key FY26 growth drivers.
Key takeaways
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Backlog $28.1B = 3.5x annual revenue — multi-year visibility unprecedented in defense. Year-end FY25 backlog reached $28.1B, equivalent to ~3.5x annual revenue ($7.94B). This is unusually deep visibility for a defense systems integrator and reflects the post-2022 European rearmament surge + Israel security demand + global directed energy + ISR contract pipeline. The backlog quality matters: contracts skew toward multi-year delivery profiles (3-7 years typically), creating revenue tailwinds well into 2028+. Combined with FY25 +16% revenue growth, the trajectory is firmly compounding.
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ISTAR + EW segment +39% — the cleanest beneficiary of modern warfare doctrine. ISTAR (Intelligence, Surveillance, Target Acquisition, and Reconnaissance) + Electronic Warfare (EW) revenue grew +39% in 2025 — by far the fastest-growing segment. ISTAR + EW is the cleanest beneficiary of (a) drone proliferation in Ukraine + Gaza + Middle East theaters, (b) electronic warfare priority in modern multi-domain doctrine, (c) precision-strike + counter-UAS demand. Elbit's portfolio (Skylark UAS, SkyStriker loitering munition, EW jamming systems, MUSIC family of self-protection suites, Hermes UAVs) is well-positioned across these vectors. Multi-year structural growth.
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Europe 27% of revenue — main growth engine post-2022. Europe contributed 27% of FY25 revenue and is explicitly called out by management as the main growth engine for FY26+. Post-Russia/Ukraine 2022 invasion, European defense budgets have stepped up materially: Germany €100B special fund + 2%+ GDP target; France multi-year programmation law; UK £56B+ FY24/25 defense spend; NATO members all at or above 2% of GDP. Elbit's localized European presence (UK, Germany, Netherlands, Italy, Czech Republic, others) + multi-program engagement (PULS rocket launchers, MUSIC EW, Hermes UAVs) creates structural exposure to this multi-decade rearmament cycle.
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Directed energy weapons (IMD contract) — secular new revenue + profit pool. Management explicitly highlighted directed energy weapons as a new revenue + profit driver, with an IMD (Israel Missile Defense) contract being a key milestone. Directed energy (high-power lasers + microwave) is increasingly viewed as the next-generation low-cost-per-shot counter-UAS / counter-rocket / counter-mortar capability. Elbit is one of a small group of integrators globally with active production-grade directed energy programs. This represents new TAM opening over multi-year horizon.
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Non-GAAP EPS $12.75 (+46%) + GAAP EPS $11.39 (+59%) — operating leverage flowing through. FY25 EPS growth materially outpaced revenue growth (+16%) reflecting (a) operating leverage at scale, (b) tax rate reduction (effective tax 9.9% vs 11.4% FY24), (c) gross margin expansion (24.4% FY25 vs 24.0% FY24 GAAP), (d) operational efficiency. Q4 GAAP EPS $3.52 (+76% YoY) shows accelerating EPS growth in back-half. The combination of revenue growth + margin expansion + operating leverage creates a multi-year EPS compounding setup.
Business
Elbit Systems Ltd. is one of the world's leading independent defense electronics + systems integrators, with multi-segment portfolio:
- C4I + Cyber + Communications (~25% of revenue): Battle management systems, secure tactical communications, cyber defense, command + control software. FY25 +19% growth.
- ISTAR + EW (~25% of revenue, fastest growing): UAVs (Hermes 450/900, Skylark), loitering munitions (SkyStriker), reconnaissance, electronic warfare (MUSIC family, jammers), counter-UAS systems. FY25 +39% growth.
- Aerospace (~15% of revenue): Helmet-mounted display systems, mission computers, training systems, aerial platforms. FY25 -14% (one-year decline).
- Land Systems (~20% of revenue): PULS rocket launcher systems, artillery, vehicle-mounted weapon systems, IronFist active protection. FY25 +22% growth.
- Elbit Systems of America (~15% of revenue): US-domiciled subsidiary serving DoD + US allies; helmet-mounted displays + training + ISR + medical. FY25 +9% growth.
Strategic moves FY25:
- Backlog grew to $28.1B (multi-year visibility)
- Q4 revenue $2.15B (+11%); FY +16%
- ISTAR + EW +39% growth
- Directed energy weapons IMD contract milestone
- Europe 27% of revenue (main growth engine)
- Israel 32% of revenue (wartime demand)
- Production capacity expansions globally (Israel + Europe)
- Disruptive R&D investment (AI capabilities)
- IDF wartime support
- Effective tax rate 9.9% (down from 11.4%)
- FY26 capex stepped up to ~$300M
FY25 financial performance
| Metric (FY) | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|
| Revenue ($B) | 5.26 | 6.07 | 6.83 | 7.94 |
| Revenue YoY | n/a | +15% | +13% | +16% |
| GAAP op income ($M) | 222 | 375 | 505 | 671 |
| GAAP op margin | 4.2% | 6.2% | 7.4% | 8.5% |
| Non-GAAP op margin | n/a | n/a | 8.7% | 9.3% |
| Net income ($M) | 263 | 219 | 326 | 578 |
| GAAP diluted EPS ($) | 5.90 | 4.82 | 7.18 | 11.39 |
| Non-GAAP EPS ($) | n/a | n/a | 8.76 | 12.75 |
| FCF ($M) | 35 | -73 | 320 | 553 |
| Capex ($M) | -205 | -187 | -215 | -244 |
| Total debt ($B) | 1.29 | 1.47 | 1.37 | 0.97 |
| Dividends ($M) | -87 | -89 | -89 | -121 |
| Backlog ($B) | ~13 | ~17 | ~23 | 28.1 |
The earnings progression: revenue grew steadily from $5.26B (FY22) to $7.94B (FY25, +51% over 3 years), reflecting global defense spending step-up. GAAP op margin expanded from 4.2% (FY22) to 8.5% (FY25) — meaningful operating leverage. Non-GAAP op margin 9.3% (FY25). EPS growth dramatically outpaced revenue growth: FY25 GAAP EPS $11.39 (+93% over 3 years from $5.90 FY22).
FCF $553M FY25 (+73% YoY); operating cash flow $778M. Total debt $-29% YoY to $965M — material deleveraging on strong cash generation. Dividend +36% to $121M FY25.
Capital allocation
- Capex: $-244M FY25 (+14% YoY).
- Dividends: $-121M FY25 (+36% YoY) — progressive dividend.
- Buybacks: $0 (no buyback program).
- Total debt: $965M (-29% YoY) — deleveraging.
- FCF: $553M FY25 (+73% YoY).
- FY26 capex: ~$300M (+23% vs FY25); factories in Israel + outside.
FY26 outlook (per Q4 2025 call, 2026-03-17)
| FY26 framework | Detail |
|---|---|
| Revenue growth | Continued growth (no specific %) |
| Capex | ~$300M (factory expansions Israel + outside) |
| Europe | Main growth engine |
| Directed energy weapons | New revenue + profit driver |
| AI capabilities R&D | Continued investment |
| Backlog | $28.1B starting balance |
| Geographic focus | Europe + Israel + select North America |
Management noted continued growth in revenues, directed energy weapons expected to bring new revenues + profits, and Europe remaining a key growth market with ongoing R&D and investment to support future growth.
Key risks
Geopolitical concentration in Israel. ~32% of FY25 revenue from Israel. While wartime demand has supported revenue, any reduction in Israel defense spending or shift in geopolitical environment creates concentration risk.
ITAR + Export controls. Defense systems are subject to ITAR (US), Israeli export controls, and other multi-jurisdictional export licensing. Any policy change can affect addressable market.
Customer / contract concentration. Defense customers tend to be highly concentrated (governments). Multi-year contract awards create large step-ups but also create lumpiness if a major contract is delayed or cancelled.
Aerospace segment normalization. Aerospace -14% FY25 reflects one-year decline; structural recovery + new contract wins needed for future growth in this segment.
Production capacity expansion execution. $300M FY26 capex for factory expansions Israel + outside requires flawless execution. Any cost overruns or delays affect future capacity + margins.
Defense budget cyclicality. While European + Israel + ISR demand is structural, defense budgets globally are still subject to political cycles + appropriation timing. Any abrupt budget shifts create revenue volatility.
FX (USD/ILS, EUR/USD). Multi-currency operations expose Elbit to translation + transaction FX impact. ILS depreciation can help reported USD revenue.
Competitive landscape. Lockheed Martin, RTX, Northrop Grumman, BAE Systems, Thales, Leonardo, IAI, Rheinmetall, Hanwha, Mitsubishi Heavy all compete in subsets. Some segments (UAVs, EW, training) more contested than others.
Wartime demand sustainability. Israel + Ukraine wartime demand lifted FY25 revenue. Post-conflict normalization may reduce ammunition + EW + UAS demand from peak.
M&A integration. Future acquisitions (e.g., Sparton previously) carry integration + valuation risk.
Regulatory / sanctions. Defense exporters face complex regulatory + sanctions environment. Any sanctions on customer countries or component sources can disrupt deliveries.
Cybersecurity / IP. Defense systems are high-value IP + cybersecurity attack targets. Any breach or IP theft can impair competitive position.
Talent retention. Engineering + cyber + R&D talent competitive globally. Multi-year project cycles need talent stability.
Currency hedging dynamics. Multi-decade contracts often denominated in customer currencies; hedging cost + effectiveness matter.
Bottom line
Elbit Systems FY25 is the multi-segment defense compounding year: revenue $7.94B (+16%); GAAP op income $671M (8.5%) up from 7.4%; non-GAAP op income $737M (9.3%); GAAP EPS $11.39 (+59%); non-GAAP EPS $12.75 (+46%). Q4 revenue $2.15B (+11%); GAAP EPS $3.52 (+76%). Segment growth: ISTAR + EW +39%; Land +22%; C4I + cyber +19%; Elbit Systems of America +9%; Aerospace -14%. Geographic: Europe 27%; NA 21%; APAC 16%; Israel 32%. Backlog $28.1B. Operating cash $778M; FCF $553M (+73%). Total debt $965M (-29% YoY) — deleveraging. Dividend +36% to $121M.
FY26 framework: continued revenue growth; capex ~$300M; Europe main growth engine; directed energy weapons new revenue + profit driver; AI capabilities R&D continued; $28.1B backlog starting balance.
The risks are real — geopolitical concentration in Israel (32% of revenue), ITAR + export controls, customer / contract concentration, Aerospace segment normalization, production capacity expansion execution, defense budget cyclicality, FX (USD/ILS, EUR/USD), competitive landscape (Lockheed, RTX, Northrop, BAE, Thales, Leonardo, Rheinmetall, Hanwha), wartime demand sustainability, M&A integration, regulatory / sanctions, cybersecurity / IP, talent retention, currency hedging dynamics.
But the structural thesis (global independent defense electronics + systems integrator + $7.94B revenue + $28.1B backlog (3.5x annual) + ISTAR + EW segment +39% in modern multi-domain warfare era + European rearmament 27% of revenue + multi-year directed energy contracts + Land Systems +22% (PULS rocket launchers + IronFist) + C4I + Cyber +19% + Israel wartime support + multi-region production capacity + AI capabilities R&D + 8.5% GAAP op margin / 9.3% non-GAAP op margin + dividend +36%) is intact and FY25 confirms.
Quality global independent defense electronics compounder mid-rearmament-cycle, with multi-segment portfolio + multi-year backlog + secular EW + ISR + UAS + directed energy tailwinds + European market access + AI integration + balance sheet deleveraging. The FY25 +16% revenue + +59% GAAP EPS + +46% non-GAAP EPS + ISTAR + EW +39% + Land +22% + Europe 27% main growth engine + $28.1B backlog + directed energy IMD contract + FY26 capex step-up + dividend +36% creates one of the cleaner defense compounding setups for investors seeking exposure to global rearmament + multi-domain warfare modernization + ISTAR / EW / UAS demand + directed energy emergence + European defense industrial base + Israeli technology leadership. The conservative FY26 framework + multi-year backlog + multi-region production + AI capabilities + directed energy optionality + FY25 margin expansion proof point provides multiple paths to outperformance over a multi-year horizon. Geopolitical concentration (Israel 32% of revenue) + budget cyclicality + competitive landscape remain ongoing risks, but the multi-segment diversification + structural rearmament demand + technology leadership + multi-year backlog support continued compounding through cycles.
Citations
- Elbit Systems Ltd. FY25 Form 20-F (filed March 2026, SEC EDGAR + ISA).
- ESLT Q4 2025 earnings call, 2026-03-17 — Q4 revenue $2.15B (+11%); FY revenue $7.94B (+16%); C4I + cyber +19% Q4; ISTAR + EW +39%; Land +22%; Elbit Systems of America +9%; Aerospace -14%; geographic FY: Europe 27%; NA 21%; APAC 16%; Israel 32%; GAAP gross margin Q4 24.7% / FY 24.4%; non-GAAP gross margin Q4 25.0% / FY 24.7%; GAAP op income Q4 $192M (9%) / FY $671M (8.5%); non-GAAP op income Q4 $210M (9.8%) / FY $737M (9.3%); R&D $517M (6.5%); marketing $399M (5%); G&A $347M (4.4%); financial expenses $138M; effective tax rate 9.9% (vs 11.4% FY24); GAAP EPS Q4 $3.52 (vs $2 Q4 FY24); FY GAAP EPS $11.39 (vs $7.18 FY24); FY non-GAAP EPS $12.75 (vs $8.76 FY24); backlog $28.1B; operating cash flow $778M; FCF $553M; FY26 capex ~$300M; directed energy weapons + Europe key growth drivers; AI capabilities R&D investment continued.
- ESLT Q3 / Q2 / Q1 2025 earnings calls — supporting backlog accretion + segment dynamics + European rearmament cadence.
- Internal financial_statements view (consolidated annual + cash flow + capital structure).