L3HARRIS TECHNOLOGIES, INC. /DE/

L3Harris Technologies, Inc. operates as the Trusted Disruptor in the defense industry, delivering end-to-end technology solutions connecting the space, air, land, sea and cyber domains in the interest of national security. The company supports customers in more than 100 countries, with its largest customers being various departments and agencies of the U.S. Government, their prime contractors and international allies. The capabilities have defense and civil government applications, as well as commercial applications. The company's fiscal year 2025 included 52 weeks, fiscal year 2024 included 53 weeks, and fiscal year 2023 included 52 weeks. The company structures its operations around four operating segments: Communication Systems (CS), Integrated Mission Systems (IMS), Space & Airborne Systems (SAS), and Aerojet Rocketdyne (AR). Beginning fiscal 2026, the company streamlined its business segments from four to three business segments.

The company operates in highly-competitive markets that are sensitive to technological advances. Some competitors in each market are larger and can maintain higher levels of expenditures for research and development. Principal competitive factors are quality and reliability, technological capabilities, service, past performance, ability to develop and implement complex integrated solutions, ability to meet delivery schedules, and cost-effectiveness. The company competes domestically and internationally against large defense companies, principally BAE Systems, Boeing, General Dynamics, Lockheed Martin, Northrop Grumman, RTX, Thales and non-traditional defense contractors such as Anduril, Ursa Major and Silvus Technologies. The company also collaborates with innovative partners, such as strategic partnerships with Palantir Technologies, Shield Capital, Anduril and Amazon Kuiper to develop new capabilities.

The company generates revenue through the design, development, manufacture, integration, production, modernization, and sustainment of advanced defense and technology systems and products. Revenue is derived from contracts with the U.S. Government, their prime contractors, international allies, and commercial customers. In fiscal 2025, 75% of revenue was derived from fixed-price contracts, and 75% of revenue was derived from sales to U.S. Government customers. The company's flexible business model allows it to operate as either a prime, merchant supplier, or subcontractor, offering both commercial pricing and traditional government acquisition approaches. The company's products are used across many customer platforms, and this platform-agnostic approach gives it a unique advantage in rapidly adapting to the changing threat environment.

The Communication Systems (CS) segment enables warfighters with resilient communication solutions for the U.S. Department of War and international, federal, and state agency customers. CS includes Tactical Communications (design, manufacture and sustainment of tactical radios, software, waveforms, satellite terminals and end-to-end battlefield systems), Broadband Communications (ISR and tactical data links, software and integrated broadband networks), Integrated Vision Solutions (helmet-mounted integrated night vision goggles, weapon-mounted sights, aiming lasers, and range finders), and Public Safety and Professional Communications (communication equipment, systems and applications for federal agencies, state and local government first responders, utilities and transit agencies). In fiscal 2025, CS revenue was $5,673 million ¹ and operating income was $1,432 million ² with an operating margin of 25.2% ³. Ending contractual backlog for CS was $6,935 million ⁴.

The Integrated Mission Systems (IMS) segment delivers differentiated mission capabilities and prime systems integration to support multi-mission ISR, passive sensing and targeting, electronic attack, autonomy, power and communications, networks and sensors. IMS includes ISR (airborne passive sensing and targeting, mission systems development, integration and life-cycle management), Maritime (power, electrical, imaging, communication and sensor systems for naval platforms; integrated autonomous vessels), Targeting & Sensor Systems (multi-domain, multi-spectral electro-optical and infrared sensor systems), Defense Electronics (space communications and space flight avionics; 360-degree visible/midwave IR passive surveillance; protected GPS communications), and the CAS disposal group (aviation products and pilot training operations, divested on March 28, 2025). In fiscal 2025, IMS revenue was $6,630 million ⁵ and operating income was $812 million ⁶ with an operating margin of 12.2% ⁷. Ending contractual backlog for IMS was $12,215 million ⁸. The Space & Airborne Systems (SAS) segment supplies full mission solutions as a prime and subsystem integrator in the space, airborne and cyber domains. SAS includes Space Systems (ISR; position, navigation and timing; weather and climate monitoring; missile defense and ground-based space surveillance networks), Intel & Cyber (situational awareness, optical networks and advanced wireless solutions for classified intelligence and defense customers), Mission Networks (communications and networking solutions for air traffic management), and Airborne Combat Systems (sensors, processors, hardened electronics, unmanned aircraft systems, precision weapons, infrared search and tracking, distributed aperture systems and precision pointing, weapons release systems; antennas; threat warning and countermeasures). In fiscal 2025, SAS revenue was $6,946 million ⁹ and operating income was $852 million ¹⁰ with an operating margin of 12.3% ¹¹. Ending contractual backlog for SAS was $11,384 million ¹². The Aerojet Rocketdyne (AR) segment provides propulsion, power and armament products and systems to U.S. Government, including the DoW, NASA and major aerospace and defense prime contractors. AR includes Missile Solutions (propulsion technologies and armament systems for strategic defense, missile defense, hypersonic, tactical and fuzing systems) and Space Propulsion and Power Systems (propulsion and power systems for national security, space and exploration missions). In fiscal 2025, AR revenue was $2,845 million ¹³ and operating income was $270 million ¹⁴ with an operating margin of 9.5% ¹⁵. Ending contractual backlog for AR was $8,171 million ¹⁶.

During fiscal 2025, the company completed the divestiture of its CAS disposal group for net cash proceeds of $820 million ¹⁷. The company also entered into an agreement to sell a controlling interest in its Space Technology disposal group, consisting of its SPPS business and SA&C business, and recorded a non-cash charge for impairment of goodwill of $85 million ¹⁸ in connection with that transaction. The company executed transactions to purchase nonparticipating single premium group annuity contracts and transfer $1.4 billion ¹⁹ of its benefit obligation associated with certain U.S. or Canadian pension plans to insurance providers, funded with $1.4 billion ²⁰ of associated plan assets. During fiscal 2025, the company repurchased 5.1 million ²¹ shares of its common stock under its share repurchase program for $1.2 billion ²². The company repaid the entire outstanding $600 million ²³ aggregate principal amount of its 3.832% notes due April 27, 2025. The company established a new $2.5 billion ²⁴ five-year senior unsecured revolving credit facility and a new $500 million ²⁵ 364-day senior unsecured revolving credit facility. The company invested $536 million ²⁶ (2% of total revenue) in company-funded R&D.

Total revenue for fiscal 2025 was $21,865 million ²⁷, an increase of $540 million ²⁸, or 3% ²⁹, compared to fiscal 2024 revenue of $21,325 million ³⁰. Gross margin for fiscal 2025 was $5,625 million ³¹ compared to $5,524 million ³² in fiscal 2024. Operating income for fiscal 2025 was $2,110 million ³³ compared to $1,918 million ³⁴ in fiscal 2024. Net income attributable to L3Harris for fiscal 2025 was $1,606 million ³⁵ compared to $1,502 million ³⁶ in fiscal 2024. Diluted EPS for fiscal 2025 was $8.53 ³⁷ compared to $7.87 ³⁸ in fiscal 2024. Net cash provided by operating activities for fiscal 2025 was $3,106 million ³⁹ compared to $2,559 million ⁴⁰ in fiscal 2024. Contractual backlog at the end of fiscal 2025 was $38.7 billion ⁴¹, a 13% ⁴² increase over the prior year.

The company's strategic priorities continue to be performance, growth and innovation. The company plans to continue to invest, consistent with profitable growth opportunities, and sustain its culture of innovation, while delivering on its commitments to investors, customers and on every contract it is awarded. The company intends to accomplish this by building upon its solid foundation and operational rigor to execute for its customers, focusing on profitable growth while securing strategic positions as a prime or subcontractor, and leveraging innovation as a competitive advantage to develop rapid solutions. The company ended fiscal 2025 with contractual backlog of $38.7 billion ⁴³, a 13% ⁴⁴ increase over the prior year, indicating robust customer demand for its solutions. The company expects to recognize approximately 45% ⁴⁵ of the revenue associated with such contractual backlog by the end of fiscal 2026 and approximately 70% ⁴⁶ by the end of fiscal 2027, with the remainder to be recognized thereafter.

The company is pursuing its Trusted Disruptor strategy against the backdrop of acquisition reform, prioritizing engaging with its customers and delivering the innovation, agility and affordability its customers demand from the defense industrial base. Recent reforms to the U.S. Government's acquisition strategy, including the transformation of the Defense Acquisition System into the Warfighting Acquisition System, are fundamentally shifting procurement priorities toward speed, flexibility, and mission outcomes. These changes are designed to expand competition, incentivize private investment, and enhance supply chain resilience, which may result in new opportunities and requirements for defense contractors, as well as increased emphasis on rapid innovation and responsiveness in fulfilling government contracts. The company is also focused on its LHX NeXt initiative, a targeted program designed to enhance organizational agility and performance by leveraging its scale and relationships across segments, driving operational efficiency and competitiveness for the enterprise. Beginning fiscal 2026, LHX NeXt will be fully integrated within its operations as standard practice, with ongoing cost savings measured as operational improvement, which the company refers to as e3 (excellence, everywhere, everyday).

The company is investing in enterprise tools and optimized, revamped processes to unlock further opportunities for margin expansion and create additional value for its shareholders. In fiscal 2025, the company continued to make progress with its LHX NeXt initiative. LHX NeXt implementation costs in fiscal 2025 were $167 million ⁴⁷, which included costs associated with transforming multiple functions, systems and processes to increase agility and competitiveness, including third-party consulting, workforce optimization and incremental IT expenses for implementation of new systems. The company's gross margin as a percentage of revenue remained flat compared to fiscal 2024. The company's operating margin for fiscal 2025 was 9.7% ⁴⁸ (operating income of $2,110 million ⁴⁹ divided by revenue of $21,865 million ⁵⁰).

The company had approximately 45,000 employees ⁵¹ as of January 2, 2026, including approximately 18,000 engineers and scientists ⁵². Of its total employees, 90% ⁵³ were located in the U.S. The company hired approximately 6,000 new employees ⁵⁴ in fiscal 2025. The company's capital expenditures for fiscal 2026 are expected to be approximately $600 million ⁵⁵. The company is modernizing its infrastructure, applications, and information ecosystem as part of its digital transformation, inclusive of cloud migrations, increasing automation and expanding the use of AI. The company's ability to modernize its technology systems and infrastructure requires it to execute large-scale, complex programs and projects, which rely on the commitment of significant financial and managerial resources and effective planning and management processes.

In fiscal 2025, the company invested $536 million ⁵⁶ (2% of total revenue) in company-funded R&D focused on technologies that expand its capabilities across its domains. The company's capital expenditures in fiscal 2025 were $424 million ⁵⁷. During fiscal 2025, the company repurchased 5.1 million ⁵⁸ shares of its common stock under its share repurchase program for $1.2 billion ⁵⁹. As of January 2, 2026, the company had $2,227 million ⁶⁰ remaining under its share repurchase program authorization. During fiscal 2025, the company paid quarterly per share cash dividends on its common stock of $1.20 ⁶¹, totaling $903 million ⁶² in dividends paid. The company currently expects to continue paying cash dividends in the near future, but can give no assurances concerning payment of future dividends or future dividend increases.

The company is highly dependent on revenue from U.S. Government customers, primarily defense-related programs with the DoW and other government agencies. A reduction in U.S. Government funding or a change in U.S. Government spending priorities could have an adverse impact on the company's business. The U.S. Government spending priorities and levels remain uncertain and difficult to predict. The company's results of operations and cash flows are substantially affected by its contract mix, with 75% of its revenue in fiscal 2025 derived from fixed-price contracts that subject it to the risk of potential cost overruns, including due to greater than anticipated or a sustained period of increased inflation. The company faces the risk of a security breach, whether through cyber-attack on its IT infrastructure, insider threat, or threats to the physical security of its facilities and employees. The volume, intensity and sophistication of threats from around the world remains elevated, and these risks may increase as AI capabilities improve. The company also faces risks related to changes in trade policies, including tariffs, which could cause adverse impacts to its business. Beginning in first quarter 2025, the company observed a significant shift in U.S. trade policy, with increased tariffs and the imposition of new tariffs that could impact its supply chain and its business.

The company's ability to make payments on and to refinance its current or future indebtedness will depend on its ability to generate cash from operations, financings and investments, which may be subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond its control. As of January 2, 2026, the company had $10.9 billion ⁶³ in aggregate principal amount of outstanding fixed-rate debt. The company's ability to withstand competitive pressures and to react to changes in the defense technology industry could be impaired. The company also faces risks related to the outcome of litigation or arbitration in which it is involved from time to time, which is unpredictable, and an adverse decision in any such matter could have a material adverse effect on its financial condition, results of operations, cash flows and equity.

The company is highly dependent on revenue from U.S. Government customers, which accounted for 75% ⁶⁴ of revenue in fiscal 2025, and a reduction in U.S. Government funding or a change in spending priorities could have an adverse impact. The company's results are substantially affected by its contract mix, with 75% ⁶⁵ of revenue derived from fixed-price contracts that subject it to the risk of cost overruns from inflation or other factors. The company faces significant risk from a security breach of its IT networks, given its access to national security information, and the volume and intensity of cyber threats remain elevated. As of January 2, 2026, the company had $10.9 billion ⁶⁶ in aggregate principal amount of outstanding fixed-rate debt, and its ability to service this debt depends on its cash generation, which may be affected by factors beyond its control. The company also faces risks related to changes in trade policies, including tariffs, which could impact its supply chain and business, and the outcome of litigation or arbitration, which is unpredictable and could have a material adverse effect.

Management's message emphasizes the company's role as the Trusted Disruptor in the defense industry, delivering end-to-end technology solutions connecting the space, air, land, sea and cyber domains in the interest of national security. The company's strategic priorities continue to be performance, growth and innovation. Management intends to accomplish these priorities by building upon its solid foundation and operational rigor to execute for its customers, focusing on profitable growth while securing strategic positions as a prime or subcontractor, and leveraging innovation as a competitive advantage to develop rapid solutions. The company ended fiscal 2025 with contractual backlog of $38.7 billion ⁶⁷, a 13% ⁶⁸ increase over the prior year, which management cites as evidence of robust customer demand. The company is pursuing its Trusted Disruptor strategy against the backdrop of acquisition reform, prioritizing engaging with its customers and delivering the innovation, agility and affordability its customers demand. Management also highlights the LHX NeXt initiative, a targeted program designed to enhance organizational agility and performance, which will be fully integrated within its operations as standard practice beginning fiscal 2026, with ongoing cost savings measured as operational improvement referred to as e3 (excellence, everywhere, everyday).