Elbit Systems (ESLT) Q2 2026 Earnings Report

The call presents a clearly positive operational and financial picture: double-digit revenue growth, record $32B backlog (driven by international demand), expanding margins, strong EPS growth, robust cash generation and multiple sizable contract awards and strategic M&A. Key negatives are an isolated aerospace revenue decline, a materially higher effective tax rate due to OECD Pillar II, some revenue concentration in Israel from inventory replenishment, and conversion/capacity execution risks tied to turning a large backlog into near-term revenue. Overall, the positives (broad-based growth, margin expansion, cash strength and major contract awards) materially outweigh the lowlights.

Management reiterated guidance for continued mid‑teens revenue growth and strong backlog conversion, pointing to Q2 revenues of $2,287m (+15.9% YoY) and a record backlog of $32.0bn (≈34% YoY increase, ≈6% sequential), ~70% of backlog generated outside Israel and ~42% scheduled to be performed in 2026–27; they said revenue growth has been ~14% in 2024, ~15% in 2025 and expect mid‑teens again in 2026. They raised planned CapEx from $220m to $300m (H1 CapEx > $150m) and increased R&D by about $70m in H1 (≈half funded by Israel’s new R&D law), while maintaining margin expansion (GAAP gross margin 25.3% / non‑GAAP 25.6%; GAAP operating income $218.8m or 9.6% of revenues / non‑GAAP $237.5m or 10.4%) and EPS growth (GAAP diluted EPS $3.61, +34% YoY; non‑GAAP diluted EPS $4.14, +28% YoY). They also highlighted strong cash generation (operating cash flow $237m vs. $120m a year ago; free cash flow $150m vs. $71m; cash conversion 86%), a lower financial expense ($22m vs. $31.2m), and a higher effective tax rate (16.4% in Q2‑2026 vs. 5.6% in Q2‑2025 due to OECD Pillar II), and noted growing customer‑funded CapEx and capacity investments aimed at accelerating backlog conversion.