- Revenue: $2.287 billion in Q2 2026, up 15.9% year-over-year from $1.973 billion in Q2 2025.
- GAAP Gross Margin: 25.3% of revenues, compared to 24% in Q2 2025.
- Non-GAAP Gross Margin: 25.6% of revenues, compared to 24.4% in Q2 2025.
- GAAP Operating Income: $218.8 million, or 9.6% of revenues, up from $157.8 million (8% of revenues) in Q2 2025.
- Non-GAAP Operating Income: $237.5 million, or 10.4% of revenues, up from $175.1 million (8.9% of revenues) in Q2 2025.
- GAAP Diluted EPS: $3.61, up 34% from $2.69 in Q2 2025.
- Non-GAAP Diluted EPS: $4.14, up 28% from $3.23 in Q2 2025.
- Backlog: Record $32 billion as of June 30, 2026, with approximately 70% from outside Israel.
- Cash Flow from Operations: $237 million in Q2 2026, compared to $120 million in Q2 2025.
- Free Cash Flow: $150 million in Q2 2026, compared to $71 million in Q2 2025.
- Cash Conversion: 86% for the quarter.
- Segment Revenue Growth (Q2 2026 vs. Q2 2025): C4I and Cyber up 11%; ISTAR and EW up 22%; Land up 32%; Elbit Systems of America up 17%; Aerospace down 8%.
- Net R&D Expenses: $159.1 million, or 7% of revenues, compared to $129.7 million (6.6% of revenues) in Q2 2025.
- Marketing and Selling Expenses: $103.2 million, or 4.5% of revenues, compared to $91.5 million (4.6% of revenues) in Q2 2025.
- G&A Expenses: $97.9 million, or 4.3% of revenues, compared to $93.9 million (4.8% of revenues) in Q2 2025.
- Financial Expenses: $22 million, down from $31.2 million in Q2 2025.
- Taxes on Income: $32.7 million, up from $7.1 million in Q2 2025, with an effective tax rate of 16.4% vs. 5.6%.
Release Date: August 11, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Record backlog of $32 billion, up 34% year-over-year, providing strong revenue visibility.
- Double-digit growth in revenues (15.9%), operating income, and EPS, with margins expanding beyond internal targets.
- Strong cash generation with operating cash flow of $237 million and free cash flow of $150 million in Q2 2026.
- Major contract wins, including $1.4 billion European program, $760 million PULS in Greece, and $370 million US border protection awards.
- Customers increasingly fund capacity expansion, reducing Elbit's capital burden and accelerating growth.
Negative Points
- Aerospace segment revenues declined 8% due to unfavorable project mix and lower training and simulation sales in Europe.
- Effective tax rate jumped to 16.4% from 5.6% due to OECD Pillar II rules, impacting net income.
- Increased R&D spending of $70 million in H1 2026, partially funded by company resources, pressures near-term profitability.
- Revenue growth (16%) lags backlog growth (34%), indicating potential delays in converting orders to sales.
- Dependence on Israel for 37% of revenues exposes the company to regional geopolitical risks.
Q & A Highlights
Q: How do you think about the medium-term growth profile of the company given the record backlog growth and continued demand in Europe and the US?
A: Bezhalel Machlis (President and CEO) stated that the company sees growing demand across Europe, the US, Asia Pacific, and its region, with a very large funnel of opportunities. He highlighted Elbit's unique business model of transferring IP and technology to partners and subsidiaries, which supports local economies and strengthens its market position. The company is investing about $300 million in capital to build new production facilities and improve productivity to convert the record backlog into revenues and profits. Kobi Kagan (CFO) added that the 34% year-over-year growth in backlog versus 16% revenue growth provides extended visibility and confidence in resilient future growth.
Q: Can you discuss the one-time favorable project mix in Elbit Systems of America and the growth outlook for night vision systems and the Howitzer program?
A: Bezhalel Machlis (President and CEO) noted that Elbit Systems of America is expanding its footprint, with growth driven by avionics, night vision capabilities (now sole supplier of ENVG-B), sonobuoys, and active protection systems. He highlighted a prestigious border protection award and continued investment in bringing technologies from Israel to the US. While he couldn't guarantee the same growth pace as this quarter, he expressed confidence that the US market will continue to grow.
Q: Have you seen a change in customers' willingness to fund CapEx directly to add capacity and shorten delivery times, and could this allow Elbit to accelerate capacity expansion while maintaining discipline?
A: Kobi Kagan (CFO) confirmed a significant market shift where customers are now willing to match Elbit's investments or even finance the entire factory for technology transfer to their territory. This is a new trend over the last two to three years, meaning that beyond the company's own $300 million CapEx investment, additional amounts are being funded by customers. This allows for faster capacity expansion and backlog conversion without compromising financial discipline.
Q: As autonomy becomes more important on the battlefield, how do you envision Elbit's role in that ecosystem—as an integrated provider or as a software platform integrator?
A: Bezhalel Machlis (President and CEO) explained that Elbit is unique in being very vertical, owning technology from product level to system solutions. The company is open to offering products, infrastructure, systems, or full solutions based on customer needs. He emphasized Elbit's willingness to share technologies and IP with partners and subsidiaries worldwide, which supports local economies and encourages customers to finance local production and development facilities, ensuring security of supply.
Q: What are you seeing in the maritime domain, and what is driving the high-power laser demand in Asia Pacific?
A: Bezhalel Machlis (President and CEO) described the maritime domain as a growth engine, citing advanced naval EW (including the UK future naval EW program), sonobuoys via Sparton in the US, operational unmanned surface vessels, sonars from GTI in Canada, and ship upgrades. Regarding high-power lasers, Elbit is delivering sources for the Israeli program, developing airborne solutions for helicopters and fighter aircraft, and seeing huge international interest across all continents, as the solution is unique in the market.
Q: Can you quantify how much of the backlog could be converted faster to revenue if customer-funded CapEx materializes?
A: Kobi Kagan (CFO) noted that since 2022, backlog growth has consistently outpaced revenue growth, often by double the cadence. With revenue growth of 14% in 2024, 15% in 2025, and continued growth this year, the company has strong confidence in its ability to convert the backlog into revenue. The improved visibility and accelerated pace of revenue growth demonstrate the effectiveness of the company's capacity expansion strategy.
Q: What drove the strong cash flow performance in the quarter, and how should we view the sustainability of cash conversion?
A: Kobi Kagan (CFO) reported cash provided by operating activities of $237 million in Q2 2026, up from $120 million in Q2 2025, driven by increased net income and a strong increase in contract liabilities. Free cash flow was $150 million, with cash conversion at a strong 86% for the quarter, reflecting the quality of earnings and disciplined working capital management.
Q: Can you elaborate on the impact of the new Israeli R&D law and the increase in R&D spending?
A: Kobi Kagan (CFO) explained that the Knesset enacted a new R&D law effective January 1, 2026, encouraging R&D efforts in Israel. Elbit increased R&D spend in the first half by about $70 million, with roughly half funded by the new incentive law and the other half from company resources. This investment supports future growth and next-generation technologies, including advanced AI capabilities, while maintaining margin expansion.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This stock alert was generated using automated technology and GuruFocus financial data to provide readers with timely and accurate market reporting. This content was reviewed by GuruFocus editorial team prior to publication. Please send any questions or comments about this story to [email protected].
