HII · Q1 2026 Earnings

Cautious

Huntington Ingalls Industries

Reported May 5, 2026

30-second summary

HII delivered Q1 revenue of $3.10B (+13.4% YoY) with all three segments growing, but consolidated segment operating margin compressed to 5.6% (Q1 2025: 6.3%) and Q1 FCF was a $461M outflow — approximately $100M better than the Q1 guide per CFO commentary. The FY26 guide was reaffirmed in full, but the operational signals underneath are mixed: Newport News revenue +19.3% YoY with margin at just 5.3%, Ingalls margin slipped to 6.8% on an LHA-8 EAC adjustment, and the Virginia Block 6 / Columbia Build 2 awards that the FY26 guide was conditioned on slipped from Q1 into Q2. Management's tone is more contingency-laden than at the Q4 print, with autonomous systems reframed as a pre-award R&D investment cycle and battleship/frigate programs explicitly excluded from guidance.

Headline numbers

EPS

Q1 FY2026

$3.79

Revenue

Q1 FY2026

$3.10B

+13.4% YoY

Free cash flow

Q1 FY2026

$-0.46B

Operating margin

Q1 FY2026

5.0%

Key financials

Q1 FY2026

Metric	Q1 FY2026	YoY	Q4 FY2025	QoQ
Revenue	$3.10B	+13.4%	$3.48B	-10.8%
EPS	$3.79	—	$4.04	-6.2%
Operating margin	5.0%	—	4.9%	+10bps
Free cash flow	$-0.46B	—	$0.52B	-189.3%

Guidance

Guidance is issued for the full year only, refreshed each quarter. Prior and new below are the same FY updated this quarter.

Actuals vs prior guidance

Metric	Period	Prior guide	Actual	Δ	Result
Shipbuilding Revenue	Q1 FY2026	No prior Q1 guidance provided	$2.390B	in-line (no prior Q1 guidance to compare)	Met
Mission Technologies Revenue	Q1 FY2026	No prior Q1 guidance provided	$0.748B	in-line (no prior Q1 guidance to compare)	Met
Shipbuilding Operating Margin	Q1 FY2026	No prior Q1 guidance provided	Ingalls 6.8%, Newport News 5.3%	in-line	Met
Mission Technologies Operating Margin	Q1 FY2026	No prior Q1 guidance provided	4.7%	in-line	Met
Mission Technologies EBITDA Margin	Q1 FY2026	No prior Q1 guidance provided	7.8%	in-line	Met
Free Cash Flow	Q1 FY2026	No prior Q1 guidance provided	-$0.461B	in-line (no Q1 guidance provided)	Met

Reaffirmed unchanged this quarter: Shipbuilding Revenue ($9.7B to $9.9B), Shipbuilding Operating Margin (5.5% to 6.5%), Mission Technologies Revenue ($3.0B to $3.2B), Mission Technologies Segment Operating Margin (approximately 5%), Mission Technologies EBITDA Margin (8.4% to 8.6%), Free Cash Flow ($500M to $600M), Effective Tax Rate (approximately 17%)

Segment KPIs

Q1 FY2026

Segment	Q1 FY2026	YoY
Ingalls Shipbuilding	$0.725B	+13.8%
Newport News Shipbuilding	$1.665B	+19.3%
Mission Technologies	$0.748B	+1.8%

Other KPIs

Q1 FY2026

Segment	Q1 FY2026
Segment Operating Margin (consolidated)	5.6%
Ingalls Shipbuilding Segment Operating Margin	6.8%
Newport News Shipbuilding Segment Operating Margin	5.3%
Mission Technologies Segment Operating Margin	4.7%
Mission Technologies EBITDA Margin	7.8%
Total Backlog	$54.0 billion
New Contract Awards (Q1)	$4.0 billion
Diluted Earnings Per Share	$3.79

Management tone

Q2 FY25 "next 18 months will be challenging" → Q3 FY25 quiet execution beat → Q4 FY25 medium-term targets raised → Q1 FY26 contingency-laden reaffirmation.

The Q4 confidence has been replaced with preconditions. One quarter ago management raised medium-term growth targets and dropped the cautious horizon language. This quarter the same FY26 guide is reaffirmed but explicitly described as "predicated on achieving the shipbuilding throughput improvements that we have outlined, as well as reaching agreement on the next Virginia and Columbia class submarine contracts in the near term." The contracts the Q4 guide assumed would close in H1 have slipped from Q1 into Q2, and management is now writing the contingency into the reaffirmation itself.

Battleship and frigate programs have been moved from "near-term contributor" to "upside requiring additional details." Q4 prepared remarks flagged HII building the first two frigates with modest 2026 revenue and ramp into 2027, plus modest 2026 battleship revenue. Q1 commentary reframes both: "we continue to see the new battleship and frigate programs as meaningful upside opportunities to our medium-term outlook that we will need additional details before we can include those in our guidance outlook." That is a softer characterization than Q4 — programs that were in the design and acquisition planning conversation are now explicitly outside the guide.

Autonomous systems shifted from emerging growth vector to pre-award R&D commitment. Management disclosed they are "increasing our investments in our autonomous solutions portfolio of products" to support the Navy's hedge strategy, with corporate investment in product development and demonstration ahead of formal contract award. This is a structural change in the Mission Technologies business model — from contract-funded development to speculative pre-award investment — and it lands in a quarter where MT margins are already below the FY26 guide.

Q2 FCF guidance is unusually wide. A range of -$100M to +$100M for a single quarter is a $200M band, which CFO Tom Steele attributed to "the timing of the upcoming submarine contract award, regular working capital movement, and CapEx timing." Q1 FCF came in approximately $100M better than guide on stronger collections and disbursement timing. Setting a $200M band for Q2 signals genuine uncertainty about the submarine contract close.

Newport News confidence is qualified. Kari Wilkinson stated "I am confident we will continue to see improvement in Newport News outcomes" — language that asserts directional improvement rather than attainment of a margin target. With Q1 at 5.3% (vs. Q4 4.4%, FY25 full-year 5.1%), the yard is improving sequentially but still below the band floor.

Recurring themes management leaned on this quarter:

Shipbuilding throughput acceleration and workforce stabilizationDistributed shipbuilding and outsourcing expansion (targeting 30% YoY growth)Autonomous systems portfolio development and IP creation ahead of formal awardsSubmarine contract negotiations and Virginia/Columbia-class pipelineNewport News Charleston facility integration and capacity doublingCapital-intensive manufacturing center investments for long-term capacity

Risks management surfaced:

Margin pressure from contract adjustments and lower performance in aircraft carriers and amphibious shipsDependency on achieving 15% shipbuilding throughput improvement for 2026 guidanceSubmarine contract award timing uncertainty affecting Q2 cash flow and full-year resultsWorkforce proficiency and attrition risk during rapid hiring phase (1,600+ new hires in Q1)Capital expenditure requirements and timing uncertainty in cash flow forecasting

Q&A highlights

Scott Mikus · Melius Research

How does management view the auxiliary and support ships funding opportunity in the 2027 budget request for Ingalls, and could this create upward pressure on medium-term shipbuilding revenue growth?

Management will evaluate auxiliary ships on a case-by-case basis alongside existing battleship and frigate work. They do not anticipate competing for auxiliaries at this point but will assess based on how acquisition strategies unfold. Ingalls has plenty of baseline work without needing to pursue this segment immediately.

Battleship design effort just beginning with NavyNo immediate competition planned for auxiliary shipsEvaluation depends on acquisition strategy development

Scott Doishla · Deutsche Bank

Does Q2 guidance include margin benefit from expected submarine contract awards at Newport News, and what is driving delays for LHA 8, 9, and 10?

Q2 guidance includes a factored-weight estimate for submarine contract modifications with opportunity for margin and cash benefits contingent on timing. For LHA delays, management attributes them to test program issues with new systems on LHA 8, but notes recent improvement in test rates and maintains confidence in margin step-up for post-COVID ships (LHA 9 and 10).

Submarine contract modification factored into Q2 guidance at weighted probabilityTest program challenges on LHA 8 with new systemsRecent ramp in test rate over past couple weeksOperational importance: staying on schedule to continue submarine program progress

David Strauss · Wells Fargo

What drove much lower Ingalls margins and what is the outlook for Ingalls margin going forward?

Q1 was characterized as a 'pacing quarter' for Ingalls. Lower margins resulted from a minor risk adjustment taken on LHA-8 EAC related to delivery progress and risk. DDGs showing improvement with milestones holding, LPD30 progressing well, DDG129 on track for delivery this year. Management expressed confidence in Ingalls team and characterized margins as stable.

Q1 described as 'pacing quarter'Minor adjustment taken on LHA-8 EACDDG129 expected delivery this yearLPD30 making 'really good progress'

Seth Seifman · JP Morgan

What will it take to gain confidence in carrier estimates given performance challenges in the current and prior year quarters?

Management took a minor adjustment for scheduled challenges to get the carrier back in sequence. Key improvements include delivery of missing equipment and structural completion, with team executing three super lifts in 10 days and setting another last night. The focus is on working back into a reasonable sequence and completing distributed systems integration.

Minor adjustment taken for scheduled challengesMissing equipment previously down low on ship now deliveredThree super lifts executed over 10 days (high-paced execution)Another super lift completed overnight

Noah Popenac · Goldman Sachs

Given strong shipbuilding growth three quarters running, why maintain conservative full-year guidance that would require year-over-year revenue decline in H2? Is the growth structural or a temporary bump?

Management reaffirmed conservative guidance but emphasized math supports continued growth; no revenue contraction expected in H2. Three consecutive quarters of double-digit growth (2025 vs 2024) driven by insourcing, outsourcing, and material/labor increases. Guidance reflects desire to monetize existing contract backlog and new awards rather than forecasting unsecured future demand.

Three quarters in a row with double-digit shipbuilding returns2025 vs 2024 grew 9.7% in shipbuilding$54 billion backlogGrowth driven by labor, material, insourcing, and outsourcing

Answers to last quarter's watch list

Virginia Block 6 and Columbia Block 2 award timing. Awards did not close in Q1; management said both are "expected in the second quarter," with the Q2 FCF guide built around a weighted-probability outcome. The Q4 framing of H1 closure is technically still intact but the risk has compressed into a single quarter.

Continue monitoring

Working-capital unwind cadence vs. Q1 guide. Q1 FCF use of $461M was approximately $100M better than the Q1 guide per CFO commentary, on stronger collections and disbursement timing. Q2 FCF guide of -$100M to +$100M creates a wide band, but FY26 $500–600M FCF guide was reaffirmed unchanged.

Resolved positively

CapEx execution at 4–5% of sales. Not separately quantified in this print. The FY26 4–5% of sales guide was reaffirmed, and management cited CapEx timing as one of the three sources of Q2 FCF variability.

Continue monitoring

Mission Technologies margin trajectory vs. the FY26 ~5% guide. Q1 op margin printed 4.7%, below the FY26 ~5% guide. Q2 is guided to ~4%, implying H2 needs to step materially higher to land at ~5% full-year. EBITDA margin also printed below band at 7.8% vs. 8.4–8.6% guide. Status: Resolved negatively for Q1

Newport News operating margin direction. Q1 at 5.3% improved sequentially from Q4's 4.4% but remains below the 5.5% Shipbuilding band floor and FY25 full-year of 5.1%. Management deferred the recovery thesis to 2027 portfolio rotation last quarter and offered qualified confidence ("continue to see improvement") this quarter — no commitment to band-floor recovery in 2026.

Continue monitoring

What to watch into next quarter

Virginia Block 6 and Columbia Block 2 close in Q2. Management has built submarine contract modification into the Q2 FCF guide at a weighted probability. A clean close lifts Q2 FCF toward the +$100M top end and reaffirms the FY26 backlog trajectory; a slip into H2 forces a guidance reset that management has flagged but not yet quantified.

Mission Technologies H2 margin step-up. Q1 printed 4.7% and Q2 is guided to ~4%, implying H2 op margin needs to average roughly 5.6% to hit the ~5% full-year guide. Watch Q2 EBITDA margin recovery toward the 8.4–8.6% band as the leading indicator.

Newport News margin stabilization above 5.3%. Sequential improvement off Q4's 4.4% is constructive, but a Q2 print at or below 5.3% with revenue still growing double-digits would confirm the throughput-without-margin pattern is structural through 2026, not transitional.

Autonomous portfolio investment quantification. Management disclosed increased pre-award R&D investment but did not size it. Watch Q2 for an explicit dollar disclosure — material spend without contract visibility is a Mission Technologies margin headwind not currently in the model.

Ingalls margin recovery from 6.8%. Q1's LHA-8 EAC adjustment was framed as a one-quarter pacing issue. A Q2 print below 7.0% would suggest the compression is broader than the EAC explanation supports.

Sources

HII Q1 2026 Earnings Release, filed via SEC: https://www.sec.gov/Archives/edgar/data/1501585/000150158526000027/hii2026q1earningsrelease.htm
HII Q1 2026 Earnings Conference Call prepared remarks and Q&A
HII Q4 2025 and Q3 2025 Earnings Releases (prior-quarter baselines)

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