LHX · Q2 2026 Earnings

Bullish

L3Harris

Reported July 29, 2026

30-second summary

L3Harris delivered Q2 revenue of $5.88B (+8% YoY, beating consensus by 1.0%), GAAP EPS of $3.13 (+28% YoY), beating consensus of $2.82 by 11%, and $771M of free cash flow that clears the Q1 watch on H1 cash — cumulative H1 FCF now $584M, comfortably above the $400M downside threshold. Management raised FY26 revenue to $23.2–23.7B (+$200M each end) and FY26 GAAP EPS to $11.80–$12.00 (+$0.40 across, a 3.5% midpoint raise), while disclosing segment-level FY guides — a transparency step consistent with the "capacity is capability" positioning. Orders of $7.3B drove book-to-bill to 1.2x and backlog to a record $42B; the Q1 conservative-posture debate has been resolved in favor of the bulls.

Headline numbers

EPS

Q2 FY2026

$3.13

+11.0% vs est.

Revenue

Q2 FY2026

$5.88B

+8.4% YoY

+1.0% vs est.

Gross margin

Q2 FY2026

25.5%

Free cash flow

Q2 FY2026

$0.77B

Operating margin

Q2 FY2026

11.1%

Key financials

Q2 FY2026

Metric	Q2 FY2026	Q2 FY2025	YoY	Q1 FY2026	QoQ
Revenue	$5.88B	$5.43B	+8.4%	$5.74B	+2.4%
EPS	$3.13	$2.78	+12.6%	$2.72	+15.1%
Gross margin	25.5%	24.6%	+90bps	24.4%	+110bps
Operating margin	11.1%	10.5%	+60bps	11.4%	-30bps
Free cash flow	$0.77B	$0.57B	+34.3%	$-0.19B	+512.3%

Guidance

Company raised FY2026 revenue and EPS guidance; revenue now $23.2B-$23.7B (+$0.2B on both ends) and EPS now $11.80-$12.00 (+$0.40 on both ends, driven by strong Q2 execution with 10% YoY organic growth and record $42B backlog.

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

New guidance

Metric	Period	Guide	YoY
Communications & Spectrum Dominance Revenue	FY 2026	~$8,000M	—
Missile Solutions Revenue	FY 2026	~$4,100M	—
Space & Mission Systems Operating Margin	FY 2026	mid 10%	—
Missile Solutions Operating Margin	FY 2026	low 12%	—
Operating Cash Flow	FY 2026	~$3.6B	—
Capital Expenditures	FY 2026	~$600M	—

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Revenue	FY 2026	$23.0B - $23.5B	$23.2B - $23.7B	+$0.2B low end, +$0.2B high end	Raised
Diluted EPS	FY 2026	$11.40 - $11.60	$11.80 - $12.00	+$0.40 low end, +$0.40 high end	Raised
Space & Mission Systems Revenue	FY 2026	~$11,500M	~$11,700M	+$200M	Raised

Reaffirmed unchanged this quarter: Communications & Spectrum Dominance Operating Margin (mid 25%), Free Cash Flow ($3.0B)

Segment KPIs

Q2 FY2026

Segment	Q2 FY2026	Q2 FY2025	YoY
Space & Mission Systems	$2.966B	—	+7.0%
Communications & Spectrum Dominance	$1.943B	—	+4.4%
Missile Solutions	$1.054B	—	+13.9%

Other KPIs

Q2 FY2026

Segment	Q2 FY2026	Q2 FY2025	YoY
Orders	$7.3B	$8.3 billion	—
Book-to-Bill Ratio	1.2x	1.5x	—
Backlog	$42B (record)	—	—
Segment Operating Margin	16.0%	—	—
Operating Cash Flow	$879M	—	—
Space & Mission Systems Operating Margin	9.8%	—	—
Communications & Spectrum Dominance Operating Margin	26.9%	—	—
Missile Solutions Operating Margin	12.3%	—	—

Management tone

No transcript was available for this print; the section below is derived from the press release, prepared statements quoted therein, and comparison to prior-quarter briefs.

Narrative arc: Q3-2025 capacity is the constraint → Q4-2025 capacity is the strategy → Q1-2026 capacity is the moat → Q2-2026 capacity is proven and being monetized via segment-level transparency.

The framing shifted from "reaffirming" to "increasing" — a small verbal move that carries weight after two quarters of holding. Q1 reaffirmed the FY revenue line despite strong organic growth; management explicitly cited "appropriate risk posture." This quarter, with H1 reported growth at +10.1% and $771M of Q2 FCF, management raised both revenue and EPS. The tell is EPS: +$0.40 across the range is a 3.5% midpoint raise, larger in percentage terms than the ~0.9% revenue midpoint lift — signaling operating leverage confidence beyond pure top-line strength.

Expanded segment-level FY disclosure is a transparency inflection. This quarter's press release carries explicit FY26 segment lines for SMS, CSD, and MSL revenue, plus SMS and MSL operating margins, alongside the raised CSD margin (mid 25% vs. prior ~25%). This is the standard disclosure regime for defense primes that trade at premium multiples on portfolio predictability. The MSL disclosure specifically prepares the AXIV S-1 audience with a formalized ~$4.1B FY26 revenue anchor.

"Capacity is the new capability" got promoted from Q1 slogan to Q2 operating claim. Q1 anchor: "Capacity is the new capability. And that is what L3Harris has." Q2 anchor (from press release): "Strong orders, record backlog and double-digit first half growth reinforce our multi-year track record of delivering on our financial commitments." The move is from asserting the moat to proving it with the H1 print. Record $42B backlog and $771M Q2 FCF (+37% YoY) are the two data points that make the claim defensible.

Answers to last quarter's watch list

AXIV S-1 going public and disclosing deal terms — no update in the press release; confidential S-1 status remains, and public S-1 has not yet dropped. The formal MSL FY26 revenue guide of ~$4.1B is now the anchor number the S-1 will reconcile against.

Continue monitoring

Whether the FY26 revenue guide gets raised in Q2 — yes, raised by $200M on both ends to $23.2–23.7B. The raise is modest given H1 reported growth of +10.1%, which suggests H2 growth decelerates — either continued conservatism or genuine mix/timing drag. Status: Resolved positively (raise happened, though quantum was measured)

Cumulative H1 FCF tracking to the $3.0B FY — Q2 FCF of $771M brings H1 to $584M, comfortably above the $400M downside threshold. The $3.0B FY guide was reaffirmed. H2 FCF requirement is ~$2.4B, back-end-loaded consistent with prior LHX cadence and the ~$600M capex profile.

Resolved positively

MAC framework-to-contract conversion — no explicit update in the press release. Management targeted end of calendar year for LHX sub-contractor framework finalization; nothing in this quarter contradicts that timeline, but nothing advances it either.

Continue monitoring

HBTSS contract signature — no update in the press release. Silent for four consecutive quarters now.

Continue monitoring

SMS margin trajectory toward the FY guide — H1 SMS margin of 10.1% is tracking to the new "mid 10%" FY guide. Q2 standalone was 9.8%, but the drag was the absence of a $75M prior-year asset-sale gain — an item that flatters the compare rather than a run-rate problem. Status: Tracking

What to watch into next quarter

Whether MSL H2 sustains the ~$1.03B/quarter pace needed to hit ~$4.1B FY — H1 MSL revenue was $2.04B, implying H2 needs ~$2.06B (roughly $1.03B/quarter), essentially flat sequentially from Q2's $1.05B run rate. Achievable, but any Q3 dip signals the ~$4.1B guide is at risk and the AXIV S-1 baseline gets re-priced downward.

SMS H2 margin sustaining around 10%+ — H1 at 10.1% is on the "mid 10%" line; H2 needs to hold or modestly improve. A Q3 SMS margin materially below 10% would put the FY segment guide at risk.

AXIV public S-1 filing — confidential filing was made in Q1; the public S-1 remains the single largest disclosure event pending. The MSL FY26 revenue guide of ~$4.1B is now the anchor number the S-1 will reconcile against.

MAC framework-to-contract conversion by end of calendar year — management's stated target. Any slip into 2027 dents both the backlog-adjacent narrative and the H2 MSL revenue ramp needed to hit the $4.1B FY guide.

HBTSS contract signature — four consecutive quarters silent. Award or loss is the next inflection, and material 2026 Golden Dome revenue depends on it.

Whether Q3 raises the FY26 revenue guide again — with H1 reported growth of +10.1% against a raised FY midpoint that still implies H2 growth below H1 rate, another raise is mechanically available if Q3 organic holds. A Q3 that lands mid-single-digit would suggest H1 was genuinely front-loaded rather than sandbagged.

Sources

L3Harris Q2 CY26 Earnings Press Release — https://www.sec.gov/Archives/edgar/data/202058/000020205826000054/exhibit991q2cy26earnings.htm

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