ELBIT SYSTEMS LTD

Elbit Systems Ltd. is an international high technology company engaged in a wide range of programs throughout the world, primarily in the defense and homeland security arenas. The company develops and supplies a broad portfolio of airborne, land and naval systems and products for defense, homeland security and commercial applications. The nature of military and homeland security requirements has evolved in recent years following the conflicts in Eastern Europe and the Middle East and the growing geopolitical instability in the Asia Pacific region, with governments around the world announcing plans to increase defense spending and demand for a range of advanced capabilities to better prepare for near peer high intensity conflicts. This global trend has increased demand in the areas of C4ISR systems, cyber-defense systems, network centric information and operational systems, intelligence gathering systems, border and perimeter security systems, unmanned aircraft systems, unmanned surface vessels, autonomous systems, land and aerial precision munitions, tank, artillery and mortar munitions, vehicle survivability and force protection systems, signal intelligence and electronic warfare systems, space and satellite-based defense capabilities and homeland security solutions.

The markets Elbit Systems serves are highly competitive and characterized by rapid changes in technologies and evolving industry standards. Competitors in the sale of some of its products to the government of Israel include, among others, Israel Aerospace Industries and Rafael Advanced Defense Systems. Outside of Israel, the company competes in a number of areas with major international defense and homeland security contractors principally from the United States and Europe, including divisions and subsidiaries of Northrop Grumman, Raytheon, General Dynamics, BAE Systems, L3Harris, Thales, Airbus, Leonardo, Saab, Textron, Teledyne Technologies, Boeing, Lockheed Martin, AeroVironment, Rohde & Schwarz, Rheinmetall, Kongsberg, Safran, Hensoldt, CMC, CAE, Aselsan, Bharat Electronics, Cubic, Cognyte, Baykar, Turkish Aircraft Industries, Hanwha, LIG Next1 and Poongsan. The company also competes with companies active in the deep-tech / defense-tech field, such as Anduril Industries, Palantir Technologies, Shield AI, Helsing, Kela AI Systems and Ondas. Many of these competitors have greater financial, marketing and other resources than Elbit Systems does. The company believes it is able to compete on the basis of its systems development and technological expertise, its systems’ operationally-proven performance and its policy of offering customers overall solutions to technological, operational and financial needs.

Elbit Systems generates revenues primarily from fixed-price long-term contracts involving the design, development, manufacture and integration of defense systems and products, and to a lesser extent from non-defense systems and products as well as support and services for its systems and products. Revenues from its contracts are principally recognized using the percentage-of-completion cost-to-cost measure of progress, with revenue amounts being recognized proportionately as costs are incurred relative to the total expected costs to satisfy the performance obligation. Service revenues, which include contracts for the provision of supplies and services other than those associated with design, development or manufacturing, were less than 10% of total revenues in each of the fiscal years 2025, 2024 and 2023. The company derives most of its revenues directly or indirectly from government agencies, mainly the Israeli Ministry of Defense, the U.S. Department of War and other military or governmental authorities of various countries, pursuant to contracts awarded under defense and homeland security-related programs.

Elbit Systems reports segment information in five segments. The Aerospace segment mainly provides products and systems for airborne platforms, unmanned aerial solutions, precision guided munition sensors, aerostructures, training and simulator systems, flight academy solutions, and commercial aviation systems. The C4I and Cyber segment mainly provides command, control, communications, computer, intelligence, surveillance and reconnaissance systems, data links and radio communication systems and equipment, cyber intelligence solutions, autonomous solutions and homeland security solutions. The ISTAR and EW segment mainly provides a wide range of electro-optic laser solutions and countermeasure systems and products, naval systems and a wide range of EW systems and SIGINT systems. The Land segment mainly provides land-based systems and products for armored and other military vehicles, artillery and mortar systems, munitions for land, air and sea applications including PGM, armored vehicle and other platforms’ survivability and protection systems. The ESA segment mainly provides products and systems solutions to U.S. military, foreign military sales, homeland security, medical instrumentation and commercial aviation customers.

The Aerospace segment portfolio includes unmanned aircraft systems in various categories, military aircraft and helicopter systems including advanced helmet-mounted systems, training solutions and support including simulators and flight academy solutions, and commercial aviation systems and aerostructures. The C4I and Cyber segment portfolio includes secured and resilient tactical software defined radios, network combat systems for digitization and modernization of defense and HLS capabilities, intelligence and cyber solutions incorporating big data and analysis with secure cloud-based and defense driven generative AI products, and robotics and autonomy systems and sensing. The ISTAR and EW segment portfolio includes optronics and laser systems such as self-protection suites, electronic countermeasure systems, and high-power laser technology for which the company was appointed as developer and provider of military grade HPL by the IMOD, with the first Iron Beam system delivered to the IMOD in 2025; electronic warfare, signal intelligence and radar systems; and naval combat management and sonar systems including unmanned surface vessels. The Land segment portfolio includes indirect fire systems such as self-propelled 155mm howitzers and rocket-launchers, turrets and weapons systems for ground combat vehicles, a comprehensive array of precision munitions and ammunition including small caliber ammunition ranging from 5.56 mm to 0.50 calibers, and active protection systems such as the Iron Fist Active Protection System. The ESA segment portfolio includes airborne holistic situational awareness systems, next-generation warfighter systems through advanced night vision and digital soldier systems, ground combat vehicle systems, counter intrusion and border protection systems, electro-optics and precision targeting solutions, and its subsidiaries Sparton, which provides maritime solutions and undersea warfare systems, and KMC Systems, doing business as HiArc, which is a premier engineering design and manufacturing partner for Life Science and Diagnostic customers.

In 2025, Elbit Systems was awarded a variety of contracts, including an approximately $260 million contract to supply DIRCM self-protection systems for Germany's A400M aircraft fleet, two contracts in an aggregate amount of approximately $260 million for the supply of advanced airborne munitions to the IMOD, an approximately $1.6 billion contract to deliver a range of defense solutions to a European country, an approximately $2.3 billion international contract for a strategic solution, contracts with the IMOD in an aggregate amount of approximately $210 million for tank upgrades, contracts in an aggregate amount of approximately $275 million for the supply of advanced airborne self-protection electronic warfare suite including DIRCM systems to an Asia-Pacific country, and an approximately $228 million follow-on contract to provide Iron Fist Active Protection System for U.S. Army Bradley IFV upgrades. The company continued its strategic CAPEX investments and the process of expanding operations in Europe, initiating the establishment of new facilities in Sweden and Germany, and built a new facility in the U.S. for its composite and metal aircraft structural operations. The new UAV assembly site opened in 2024 in Israel is already operational and the new munitions production site in Ramat Beka in southern Israel is partially operational. In 2025, C4I and Cyber sold its shares in Robo-Team Holdings Ltd. On May 23, 2025, the company closed an offering of 1,570,267 ordinary shares at a price to the public of $375 per ordinary share, for total gross proceeds to the company of approximately $588 million.

Consolidated revenues in 2025 increased by 16.3% to $7,938.6 million from $6,827.9 million in 2024. Gross profit for the year ended December 31, 2025 was $1,935.3 million (24.4% of revenues), compared to $1,641.8 million (24.0% of revenues) in 2024. Operating income in 2025 was $671.4 million (8.5% of revenues), compared to $489.1 million (7.2% of revenues) in 2024. Net income attributable to the company's shareholders in 2025 was $534.3 million (6.7% of revenues), compared to $321.1 million (4.7% of revenues) in 2024. Diluted EPS was $11.39 in 2025, compared to $7.18 in 2024. Net cash provided by operating activities in 2025 was approximately $778 million.

A key growth vector is the continued material increase in demand for Elbit Systems' products and solutions from the IMOD since the commencement of the war in October 2023, which may continue and could generate material additional orders for the company. The global trend of increased defense spending following recent conflicts, with governments around the world announcing plans to increase defense spending and demand for advanced capabilities, presents various opportunities for the company and its U.S. and European subsidiaries. The U.S. government has signaled its intent to materially increase defense spending, with proposed budgets reaching $1.5 trillion in fiscal year 2027. The company believes its core technologies and capabilities position it to benefit from prevailing market trends, particularly in areas such as C4ISR systems, cyber-defense systems, precision munitions, and vehicle survivability systems.

Another growth vector is the company's strategy of expanding its global presence through local subsidiaries and manufacturing facilities. In 2025, Elbit Systems continued its strategic CAPEX investments and the process of expanding its operations in Europe, initiating the establishment of new facilities in Sweden and Germany to enhance local delivery capabilities and customer support. The company also built a new facility in the U.S. for its composite and metal aircraft structural operations. The new munitions production site in Ramat Beka in southern Israel is partially operational, with additional factories expected to join production gradually. The company is increasingly integrating AI, robotics, advanced analytics and advanced production management into its manufacturing facilities and has formed dedicated teams to integrate AI capabilities into its portfolio and technology solutions and to increase productivity across internal enterprise processes.The company is in the process of completing the construction of a new munitions production site in Ramat Beka in southern Israel at a scale of approximately 860,000 square feet, with production having commenced and expected to gradually increase during 2026 and thereafter. Over the last two years the average annual net investment in facilities, including land and buildings, equipment, machinery and vehicles, amounted to approximately $220 million. The company's anticipated capital expenditures as of December 31, 2025 are somewhat higher than those as of December 31, 2024, due to an anticipated increase in expenditures for buildings and certain other expenses, and the company plans to pay for such anticipated capital expenditures using cash from operations.

Gross R&D expenses in 2025 totaled $599.6 million (7.5% of revenues), compared to $544.1 million (8.0% of revenues) in 2024. Net R&D expenses (after deduction of third party participation) in 2025 totaled $517.1 million (6.5% of revenues), compared to $466.4 million (6.8% of revenues) in 2024. On May 23, 2025, the company closed an offering of 1,570,267 ordinary shares at a price to the public of $375 per ordinary share, for total gross proceeds to the company of approximately $588 million, intended for general corporate purposes. The company has consistently paid a quarterly dividend to its shareholders, with aggregate quarterly dividend payments of $2.45 per share in 2025, $2.00 per share in 2024, and $2.00 per share in 2023.

The company faces structural headwinds from supply chain disruptions and constraints. The conflicts in the Middle East and the ongoing conflict between Russia and Ukraine have resulted in increased demand for and worldwide shortages in some of the materials and components used, including electronic components and raw materials required to produce explosives, and supply chain disruption due in part to limitations on export to Israel as well as more limited transportation by air and sea to the region, exacerbated by attacks by the Houthi movement in Yemen on shipping in the Red Sea. Such restrictions have caused a material increase in recent years in the company's costs of procurement and shipping, leading in some cases to delays and limitations in production and development. With respect to certain materials, the company's dependency on single sources of supply has increased.

The company faces headwinds from currency exchange risks, as it generates a substantial amount of revenues in currencies other than the U.S. dollar, mainly NIS, the Euro and GBP, and incurs a substantial amount of expenses in currencies other than the U.S. dollar, mainly NIS. During 2025, the NIS appreciated by 12.5% compared to the U.S. dollar, leading to an increase in the portion of labor-related and operating expenses denominated in U.S. dollars. The company also faces the risk of reduced revenues in case of a depreciation of the Euro compared to the U.S. dollar. Additionally, the company faces risks from increased levels of inflation and interest rates, as employee wages and certain CPI-linked expenses, including borrowing costs, as well as costs of supplies, significantly increased over the past few years.

A cyber or security attack resulting in a breach, disruption or failure in the company's or its supply chain's digital environment, or of its products, could adversely affect the company. The company is continuously subjected to attempted cyber-attacks, ranging from standard phishing mails to sophisticated campaigns such as spear phishing, and has experienced an increase in the number of such threats in recent years. In September 2025, one of the company's suppliers experienced a cybersecurity incident that resulted in the disclosure of certain unclassified material related to a company project, though the company's network was not breached and the incident was not believed to have had a material impact. The company faces risks of production delays, discontinuation of supply or liability due to supply chain disruptions and failures of suppliers to comply with requirements or applicable laws. The conflicts in the Middle East and between Russia and Ukraine have resulted in increased demand for and worldwide shortages in some materials and components, including electronic components and raw materials required to produce explosives, and supply chain disruption due in part to limitations on export to Israel and more limited transportation by air and sea to the region, causing a material increase in recent years in the company's costs of procurement and shipping. The company faces currency exchange risks, as during 2025 the NIS appreciated by 12.5% compared to the U.S. dollar, leading to an increase in the portion of labor-related and operating expenses denominated in U.S. dollars. The company also faces risks of cost overruns in fixed-price contracts, as most of its contracts are fixed-price contracts under which it generally assumes the risk that increased or unexpected costs may reduce profits or generate a loss.

Management's message emphasizes the company's strategy based on strong worldwide presence, being a trusted and valued partner, investing in R&D and an innovative portfolio, investing in highly skilled employees, and a growth culture striving for constant value creation. The company has experienced a considerable increase in demand for its products resulting in strong order growth, and to address this demand, Elbit Systems is investing additional resources in its manufacturing facilities, recruiting additional employees and making adjustments such as updating working procedures and processes and information technology systems. Management highlights that in 2025 the company continued to invest in R&D, including in the fields of energy weapons and autonomous systems, and focused on improving operational efficiency by using AI, robotics, advanced analytics and advanced production management to modernize manufacturing capabilities and support growth. The company is also continuing its efforts to reduce supply chain disruptions that have increased in recent years, including by increasing inventories and optimizing inventory planning.