L3Harris 2025-26: $23.5B FY26 Guide, Missile Spin-Off Planned
FY25 (Jan 2026 FYE) revenue $21.87B (+3%); Op income $2.20B (+7%); NI $1.61B (+7%); EPS $8.53 (+8%). Reorganized into 3 segments. Missile Solutions IPO planned for 2026. Record order book exit FY25. FY26 guide: revenue $23-$23.5B (+7% organic at midpoint), GAAP EPS $11.30-$11.50, segment OI margin low 16%, FCF $3B.
Key takeaways
- Major portfolio simplification announced. Reorganized into three segments (CSD, IMS, SAS) with intent to IPO Missile Solutions business in 2026. Strategic refocus on highest-growth defense priorities (cyber, space, intelligence systems).
- Record order book exit FY25. Reflects multi-year defense priorities — space systems + cyber/EW + missile programs all booking at elevated levels. NDAA + classified programs + foreign military sales all contributing.
- FY26 guide: $23-$23.5B revenue (+7% organic at midpoint). Strong forward visibility from backlog; segment OI margin in low 16%s — modest expansion. Diluted EPS $11.30-$11.50.
- FCF $3B FY26 guide. Step up from $2.68B FY25. Reflects working capital optimization + discipline.
- Missile Solutions IPO is the FY26 strategic event. Carve-out of the missile + ordnance business — could unlock value via separate public listing.
Business
L3Harris Technologies is a top-tier US defense + intelligence + space prime contractor. Reorganized into three segments in FY25:
- Communications + Spectrum Dominance (CSD) (~26% of revenue): Tactical radio + satellite communications + electronic warfare + spectrum + integrated communication systems. FY25 revenue $5.7B; margin 25.2%. The high-margin segment.
- Intelligence + Mission Systems (IMS) (~30% of revenue): Surveillance + intelligence + counter-UAS + mission systems integration. FY25 revenue $6.6B with 8% organic growth; margin 12.2%. The growth segment.
- Space + Airborne Systems (SAS) (~31% of revenue): Space exploration + space launch + airborne ISR + classified programs. FY25 revenue $6.9B; margin (lower).
- Missile Solutions (~13% of revenue, planned spin-off 2026): Missile + ordnance.
Strategic position: leading provider of tactical communications + space-based defense + intelligence systems for DoD + IC + foreign military sales. Reorganization aligns segments with how customer demand is evolving (multi-domain warfare + cyber + space).
FY25 financial performance (Jan 2026 FYE)
| Metric (FY) | FY23 | FY24 | FY25 |
|---|---|---|---|
| Revenue ($B) | 19.42 | 21.33 | 21.87 |
| Gross profit ($B) | 4.43 | 4.75 | 5.63 |
| Op income ($B) | 2.03 | 2.06 | 2.20 |
| Op margin | 10.4% | 9.7% | 10.0% |
| EBITDA ($B) | 2.93 | 3.56 | 3.75 |
| Net income ($B) | 1.23 | 1.50 | 1.61 |
| Diluted EPS ($) | 6.44 | 7.87 | 8.53 |
| FCF ($B) | 1.65 | 2.15 | 2.68 |
| Capex ($M) | -449 | -408 | -424 |
| Total debt ($B) | 13.95 | 12.98 | 10.44 |
| Dividends ($M) | -868 | -886 | -903 |
| Buyback ($M) | -518 | -554 | -1,154 |
The earnings print: Revenue +3%, EPS +8% on operating leverage + buyback compounding. FCF +25% to $2.68B — strong cash conversion. Total debt down to $10.44B (-$2.5B YoY) — meaningful paydown.
Capital allocation
- Capex: $-424M FY25 (1.9% of revenue). Light. Capital-efficient defense services + tech.
- Dividends: $-903M FY25 (+2% YoY).
- Buybacks: $-1.15B FY25 (vs $-554M FY24). Material acceleration.
- M&A / Spin: Missile Solutions IPO planned 2026 — major strategic event.
- Debt management: $10.44B (-$2.54B YoY). Significant deleveraging.
FY26 outlook (per Q4 FY25 call, 2026-01-29)
| FY26 guide | Range |
|---|---|
| Revenue | $23.0B-$23.5B (+7% organic midpoint) |
| Segment operating margin | Low 16% range |
| FCF | $3B |
| GAAP diluted EPS | $11.30-$11.50 |
| SMS revenue | $11.5B (post-reorg) |
| CSD revenue | (per detail in call) |
The +7% organic growth reflects backlog conversion + classified programs + foreign military sales + missile production tempo. EPS $11.30-$11.50 implies +33-35% growth — operating leverage + buyback + tax benefit + lower interest.
Key risks
- Defense budget: ~75% of revenue is DoD-funded. Sequester or budget caps would compress.
- Program execution: Multi-year contract execution risk; cost overruns hit margin.
- Missile Solutions IPO: Carve-out timing + valuation uncertainty.
- Concentration in classified programs: Lower visibility for outside observers.
- Tariff regime: Limited but real impact on certain components.
- Foreign military sales: Geopolitical / regulatory frictions affect pace.
Bottom line
LHX FY25 is the reorganization + portfolio simplification year. Revenue +3%, EPS +8%, FCF +25%, debt -$2.5B. Missile Solutions IPO planned 2026 as the strategic catalyst. FY26 guide $23-$23.5B revenue + $11.30-$11.50 EPS + $3B FCF. The thesis is multi-cycle defense priorities + AI-driven mission systems + space + classified programs + buyback compounding. Risks are budget cycle + program execution + spin-off timing.
Citations
- L3Harris Technologies Inc. FY25 Form 10-K (filed January 2026, SEC EDGAR; January 3, 2026 fiscal year end).
- LHX Q4 FY25 earnings call, 2026-01-29 — record order book, FY26 guide ($23-$23.5B revenue, segment OI margin low 16%, FCF $3B, GAAP EPS $11.30-$11.50, SMS $11.5B revenue), Missile Solutions IPO planned 2026.
- Internal financial_statements view (consolidated annual + cash flow + capital structure).