Elbit Systems Reports 16% Revenue Growth and Record $32 Billion Backlog Amid European Defense Surge
The Israeli defense contractor posted double-digit gains across key metrics in Q2 2026, fueled by major contracts in Europe and the U.S. as geopolitical tensions drive demand.
Strong Financial Performance Across All Metrics
Elbit Systems Ltd. delivered robust second-quarter results, with revenues climbing 15.9% to $2.29 billion compared to $1.97 billion in the year-ago period (earnings call, 2026-08-11). The Israeli defense contractor, with a market capitalization of approximately $40 billion, reported non-GAAP diluted earnings per share of $4.14, up 28% from $3.23 in Q2 2025.
Operating margins expanded significantly, with non-GAAP operating income reaching 10.4% of revenues versus 8.9% in the prior-year quarter, surpassing internal targets despite a $70 million increase in R&D spending. CFO Kobi Kagan noted that approximately half of the incremental R&D investment was funded by a new Israeli research and development incentive law enacted in March 2026 (earnings call, 2026-08-11).
Gross margins also improved to 25.6% on a non-GAAP basis, up from 24.4% a year earlier, reflecting better project mix and operational efficiency.
Record Backlog Driven by European Demand
The company's backlog reached a record $32 billion at quarter-end, with approximately 70% generated from customers outside Israel. Europe has emerged as a significant growth driver, contributing 25% of quarterly revenues, while North America accounted for 20% and Israel 37%, the latter boosted by "inventory replenishments on the back of the recent conflict with Iran that ended at the beginning of April" (earnings call, 2026-08-11).
Major contract wins during the quarter included a landmark $1.4 billion award from a European customer for a comprehensive multi-domain military program, a $750 million contract for PULS rocket artillery systems in Greece, and $270 million in orders from U.S. Customs and Border Protection (earnings call, 2026-08-11).
Segment Performance and Strategic Positioning
By business segment, Land revenues surged 32% year-over-year, primarily driven by ammunition and munitions sales in Israel. ISTAR and EW revenues increased 22%, mainly from airborne and land High Power Laser and Electronic Warfare systems in Asia-Pacific. Elbit Systems of America revenues grew 17%, partly due to a $212 million sole-source contract for ENVG-B night-vision systems, marking the first time the U.S. Army awarded the contract to a single supplier (earnings call, 2026-08-11).
Aerospace revenues declined 8% due to unfavorable project mix and lower training and simulation systems sales in Europe, though UAV sales in Israel partially offset the decline.
CEO Butzi Machlis highlighted the company's successful demonstration of digitalized land force networks in Sweden and three bolt-on acquisitions year-to-date, including an Israeli AI-powered autonomous ground solutions developer acquired in May (earnings call, 2026-08-11).
Cash Generation and Outlook
Free cash flow reached $150 million in the quarter, more than double the $71 million generated in Q2 2025, with cash conversion at 86%. Operating cash flow of $237 million reflected strong contract liabilities growth and improved working capital management.
The company noted that approximately 42% of its backlog is scheduled for execution through 2027, providing substantial revenue visibility. MarginX data shows upcoming presentations at the Gabelli Funds' 32nd Aerospace & Defense Symposium in September 2026.
This article was generated by MarginX from the earnings call on 2026-08-11. It is not investment advice.