LHX · Q3 2025 Earnings

Bullish

L3Harris

Reported October 30, 2025

30-second summary

L3Harris posted 10% organic revenue growth, a 1.2x book-to-bill on $6.7B of orders, and raised FY25 revenue (~$22B), EPS ($10.50–$10.70), and organic growth (6%) guides for the second straight quarter. Aerojet Rocketdyne grew 13% with management explicitly committing to "double-digit growth for the foreseeable future," and CEO commentary shifted from "tracking to framework" to "trajectory that extends well past our 2026 financial framework." The print is clean; the new narrative is that capacity, not demand, is now the binding constraint.

Headline numbers

EPS

Q3 FY2025

$2.70

Revenue

Q3 FY2025

$5.66B

+7.0% YoY

Gross margin

Q3 FY2025

26.4%

Free cash flow

Q3 FY2025

$0.43B

Operating margin

Q3 FY2025

11.0%

Key financials

Q3 FY2025

Metric	Q3 FY2025	YoY	Q2 FY2025	QoQ
Revenue	$5.66B	+7.0%	$5.43B	+4.3%
EPS	$2.70	—	$2.78	-2.9%
Gross margin	26.4%	—	24.6%	+180bps
Operating margin	11.0%	—	10.5%	+50bps
Free cash flow	$0.43B	—	$0.57B	-25.6%

Guidance

Northrop Grumman raised FY2025 guidance across revenue, EPS, and organic growth; maintained cash flow and margin guidance reflects strong Q3 execution and elevated operational confidence.

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

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Revenue	FY2025	~$21.75B	~$22B	+$0.25B	Raised
Non-GAAP Diluted EPS	FY2025	$10.40 - $10.60	$10.50 - $10.70	+$0.10 (midpoint)	Raised
Adjusted Segment Operating Margin	FY2025	mid-high 15%	high 15%	moved from range to high end	Raised
Communication Systems Revenue	FY2025	$5,600 - $5,700M	~$5,700M	narrowed to high end	Raised
Integrated Mission Systems Revenue	FY2025	~$6,400M	~$6,500M	+$100M	Raised
Integrated Mission Systems Operating Margin	FY2025	~12%	low-mid 12%	widened to range	Raised
Aerojet Rocketdyne Revenue	FY2025	~$2,800M	$2,800M - $2,900M	+$100M (top end)	Raised
Organic Revenue Growth	FY2025	5%	6%	+1 percentage point	Raised

Reaffirmed unchanged this quarter: Free Cash Flow (~$2.65B), Communication Systems Operating Margin (~25%), Space & Airborne Systems Revenue (~$7,100M), Space & Airborne Systems Operating Margin (low 12%), Aerojet Rocketdyne Operating Margin (mid 12%)

Segment KPIs

Q3 FY2025

Segment	Q3 FY2025	YoY
Communication Systems	$1.462B	+6.0%
Integrated Mission Systems	$1.7B	+6.0%
Space & Airborne Systems	$1.809B	+7.0%
Aerojet Rocketdyne	$0.755B	+13.0%

Other KPIs

Q3 FY2025

Segment	Q3 FY2025
Orders	$6.7 billion
Book-to-Bill Ratio	1.2x
Organic Revenue Growth	10%
Adjusted Segment Operating Margin	15.9%
Communication Systems Operating Margin	26.1%
Integrated Mission Systems Operating Margin	12.0%
Space & Airborne Systems Operating Margin	12.1%
Aerojet Rocketdyne Operating Margin	12.7%

Management tone

Narrative arc: Q2 framework proof points → Q3 capacity is the constraint.

The framework horizon was extended. Last quarter management defended the $23B 2026 framework as resilient to losing T3; this quarter the CEO opened with "the focus is now on potential upside and a trajectory that extends well past our 2026 financial framework," and management said outright "we expect sales for '26 to exceed our current financial framework." The hedging on whether 2026 was reachable is gone; the question being answered is now how much past it the company can go.

Aerojet Rocketdyne's growth language hardened from aspirational to structural. In Q2 the "$5B by end-of-decade" was explicitly called "aspirational." This quarter management said it is "confident that we can grow Aerojet Rocketdyne for the foreseeable future at double digits" and cited that ARD is "ahead of contractual commitments." Anchor quote: "It's all about capacity. That's always been the challenge…if we're going to double, triple or quadruple production on certain programs, let's sign up to a five year, seven year multi-year contract." The constraint has been re-classified from demand visibility to customer commitment to underwrite capex.

ISR was elevated from problem child to growth pillar. Last quarter ISR was the "Canadian maritime helicopter EAC" drag inside a -3% IMS print. This quarter management said "the backlog is doubled in 12 months and the outlook is very positive…we made significant changes at the leadership level." The IMS segment swung +900bps YoY in revenue growth and the margin guide widened upward — the turnaround is real, not narrative.

Margin expansion is now framed as systemic, not incremental. Q2 noted "eighth consecutive quarter" of sequential margin expansion as a counting milestone; this quarter management used the same fact as evidence "proof that our strategy is working" — accompanied by tightening the FY segment margin guide from "mid-high 15%" to "high 15%."

Capacity is now the named binding constraint. Across every segment discussion management returned to multi-year contracts as the prerequisite for capex — solid rocket motor lines that can't be re-purposed, missile production schedules that need 5–7-year commitment to justify investment. This is a different posture from a defense prime; it signals pricing leverage and a customer that needs LHX more than LHX needs marginal orders.

Recurring themes management leaned on this quarter:

Capacity expansion as primary bottleneck and investment priority across defense industrial baseGovernment shutdown and contracting delays as near-term headwind vs. strong underlying demand signalsInternational demand acceleration, particularly NATO modernization and ally partnershipsMulti-year contracts needed to justify capital investments and formalize demand signalsTransformation to agile, software-defined, AI-enabled mission systems with Silicon Valley partnershipsStrong backlog conversion and execution excellence driving profitable growth trajectory beyond 2026

Risks management surfaced:

Government shutdown and continuing resolution impacts on award timing and cash collectionsCongress funding limitations conflicting with DOD push for speedExport license delays for international businessLegacy contract margin drag at Aerojet Rocketdyne limiting near-term margin expansionSupply chain and manufacturing capacity constraints requiring multi-year commitments to justify capex

Q&A highlights

Ron Epstein · Bank of America

What opportunities does NASA civil work restructuring present for L3Harris, particularly regarding SLS and space exploration?

NASA is an important customer, especially for Aerojet Rocketdyne's RS-25 engines for SLS. Government provided additional funding for SLS through Flight 5, with production capability through Flight 9. Multiple years of backlog exist for RS-25 engines and other SLS program components. Space exploration has both exploration and strategic value.

RS-25 engines are the biggest component of space propulsion businessGovernment funded SLS through Flight 5Production capability exists through Flight 9Multiple years of backlog for RS-25 engines and SLS portfolio

Answers to last quarter's watch list

HBTSS contract signature by year-end — not addressed in available material; management's "trajectory beyond 2026" framing implies the underlying Golden Dome thesis is intact, but no contract signature was announced.

Continue monitoring

T3 award decision — not called out on the print. With the FY25 guide raised independent of T3 and 2026 now expected to "exceed framework," the watch question loses urgency regardless of award timing.

Continue monitoring

Aerojet missile solutions growth rate — ARD segment +13% YoY this quarter (vs. +10.3% in Q2) and management committed to "double-digit growth for the foreseeable future." The growth rate is holding above the 10% warning threshold and the $5B-decade-end aspiration remains credible.

Resolved positively

Integrated Mission Systems return to growth — IMS swung from -3% YoY in Q2 to +6% YoY in Q3, and the FY revenue guide was raised another $100M to ~$6.5B with margin guide widened upward. Canadian maritime helicopter drag is contained.

Resolved positively

Book-to-bill in H2 — Q3 at 1.2x on $6.7B orders, comfortably above the 1.1x warning threshold and consistent with management's "solid" H2 framing.

Resolved positively

FY26 FCF bridge from $2.65B to $3.0B — not specifically refreshed this quarter; FY25 FCF guide of ~$2.65B was reaffirmed with management citing strongest Q4 cash generation expected, but flagged government shutdown resolution as an assumption.

Continue monitoring

What to watch into next quarter

Q4 free cash flow conversion — management said the strongest cash quarter of the year is Q4 and that hitting ~$2.65B FY FCF assumes government shutdown resolution. Anything below $1.2B in Q4 cash would force a downward FY revision and put the 2026 $3B FCF bridge in question.

Whether 2026 revenue framework is formally raised next quarter — management said "we expect sales for '26 to exceed our current financial framework." The Q4 print is the natural venue to quantify it; failing to raise it from $23B would walk back the offensive tone.

Communication Systems margin trajectory into Q4 — 26.1% Q3 margin vs. ~25% FY guide implies Q4 deceleration; watch whether the FY guide gets tightened upward or whether mix/timing genuinely compresses Q4.

Multi-year contract signings on solid rocket motors and missile production — management explicitly conditioned capacity expansion on 5–7-year customer commitments. The signing of one or more named multi-year deals would convert the "capacity is the constraint" narrative into an executable capex plan.

HBTSS contract signature — still the gating event for material 2026 Golden Dome revenue per Q2 commentary; silence in Q3 raises the stakes for Q4 disclosure.

Sources

L3Harris Q3 CY25 Earnings Press Release — https://www.sec.gov/Archives/edgar/data/202058/000020205825000169/exhibit991q3cy25earnings.htm

Get the next brief, free.

We publish analyst-grade earnings briefs the same day or morning after every call — headline numbers, segment KPIs, Q&A highlights, and tone analysis. Free during beta.

This is not investment advice.