Key Takeaways
- L3Harris Technologies recorded $5.4 billion in revenue for Q2 2025, with a 15.9% adjusted operating margin and $574 million in adjusted free cash flow.
- The company is benefiting from a record backlog of $35.4 billion, driven by increasing global defense budgets and strategic initiatives like the Golden Dome project.
- With a favorable capital allocation strategy and raised full-year guidance, L3Harris is positioned as a strong investment option in the defense sector.
Performance Highlights
L3Harris Technologies (LHX) has excelled in Q2 2025, reporting $5.4 billion in revenue, marking a 2% year-over-year increase and 6% organic growth. The company’s adjusted segment operating margin reached 15.9%, demonstrating sustained operational efficiency with seven consecutive quarters of margin expansion. Furthermore, non-GAAP diluted EPS grew by 16% to $2.78, surpassing GAAP growth rates, alongside an impressive $574 million in adjusted free cash flow.
The company’s book-to-bill ratio stood at 1.5x, the highest since its merger, resulting in a robust backlog of $35.4 billion. This visibility enhances prospects for future revenue, as defense budgets rise globally.
Segment Insights
L3Harris’s Communication Systems segment generated $1.376 billion, while Aerojet Rocketdyne contributed $698 million, reflecting a 12% organic growth. Both areas benefited from double-digit margin expansions. Additionally, the Space & Airborne Systems segment, with revenues of $1.787 billion, showed a resilient 7% organic growth despite a slight margin dip. The Integrated Mission Systems segment recorded $1.622 billion, with a 6% growth showcasing L3Harris’s agility amid market shifts.
Strategic Initiatives and Defense Outlook
L3Harris’s strategic plans, notably the “Trusted Disruptor” and Golden Dome initiatives, form the foundation for future growth. The Golden Dome project targets a $10–$15 billion opportunity by 2026, highlighted by a significant Dutch HBTSS contract. Ongoing automation initiatives under LHX NeXt are expected to enhance margins.
The landscape for defense budgets is shifting, with a forecasted increase to $73 billion in defense-related space spending by 2025, largely driven by U.S. military programs. With increasing threats from global powers, L3Harris is well-placed as a major player in developing critical systems.
Financial Management and Investment Appeal
In the first half of 2025, L3Harris returned $1.275 billion to shareholders through dividends and buybacks, maintaining a 1.83% yield and a 55% payout ratio. The firm’s net debt-to-EBITDA ratio stands at 3.14x, indicating a healthy financial position for continued growth.
Despite recent challenges, including a 20% drop in free cash flow due to legal costs, the company’s performance and management strategies suggest resilience. With full-year guidance raising revenue expectations to $21.75 billion, L3Harris is considered a compelling investment with clear growth potential in the defense sector.
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