Oct 29, 2026 earnings call — Missile backlog and capacity expansion focus
Company increased 2026 revenue guidance to $23.5 billion-$23.7 billion and raised EPS guidance to $12.25-$12.35.
Revenue $6.1B (est $5.9B) · EPS $3.28 (est $2.95) · Next-quarter revenue outlook $23.5B–$23.7B
Key quotes
"We booked $11 billion of contractual backlog, representing years of future deliveries, validating the investments we made, and we continue to make to fuel the growth of this business."
"For instance, we are harnessing the power of automation and artificial intelligence to accelerate delivery of PAC-3 solid rocket motors to customers, in some cases, reducing the amount of traditional manual quality inspections from 21 hours to 6.5 hours per motor."
"We have sufficient cash to fund our $3 billion investment in missile capacity expansion, normal capital expenditures, and dividends."
Analyst Q&A 14
Margins and strategy focus
Q (Kristine Liwag · Morgan Stanley): Analyst asked how much more margin expansion is possible via productivity, automation and AI, and whether the new CEO will mainly accelerate the current strategy or change it.
A: Management said they will relentlessly pursue productivity and efficiency across the whole company, from corporate office to factory floor. They will focus more on driving the existing portfolio, remove moving pieces, and accelerate backlog conversion by improving execution on factory floors.
"That means disciplined performance, disciplined execution, driving costs out of the business." — Sam Mehta (CEO)
Free cash flow timing and guidance
Q (Farrell Granath · BofA): Analyst asked how much of the about $1.3 billion free cash flow in 3Q was timing or a pull-forward and how it bridges to the $3 billion full-year outlook.
A: Management said they remain confident in their $3 billion full-year outlook and aim to keep cash flow to net income over 100%. They emphasized careful negotiating on contracts and said the team has focused on making cash generation more linear, and they expect to deliver on full-year guidance.
"First of all, we do remain confident in our $3 billion full-year outlook." — Sam Mehta (CEO)
2028 targets and capital use
Q (Sheila Kahyaoglu · Jefferies): Analyst asked why the 2028 framework changed, whether margins look conservative, and how management thinks about capital deployment given sum-of-parts valuation comments.
A: Management said the 2028 segment operating margin guidance is about 16% after removing assumed product-line sales and investment income, which better matches underlying execution. They said the move from $3.5 billion to $3 billion free cash flow mainly reflects changing 401(k) stock issuance to cash funding of $250 million, some mix effects, and the option to pull forward capital expenditure into 2028; management expects to drive margin improvement through execution.
"What you will see is a roughly 16% operating margin, which more closely matches the actual underlying execution and operation of the business." — Sam Mehta (CEO)
Missile Solutions IPO timing
Q (Robert Stallard · Vertical): Analyst asked for an update on the potential Missile Solutions IPO and whether views on valuation or timing changed.
A: Management said the IPO status has not materially changed and they have four criteria that must be met to create shareholder value. They noted the government contract environment and contracts have improved, execution is strong, but they need more attractive valuations in capital markets and are targeting continued consideration in the middle of next year.
"We continue to reconsider, we continue to consider the timing of an IPO." — Sam Mehta (CEO)
Organic growth outlook
Q (John Godyn · Citi): Analyst asked about the 8% organic growth target, whether it is conservative given current performance, and the main drivers and risks into next year.
A: Management said they are very confident they can hit or exceed the 8% CAGR and that timing of domestic and international budgets is an external factor. They pointed to a $53+ billion backlog and said they will try to accelerate backlog conversion into the period to meet or exceed the 8% target.
"With the $53+ billion backlog that we currently enjoy, we will do everything we can to accelerate that backlog into this period of the framework to see if we can meet and exceed that 8% CAGR that you referenced." — Sam Mehta (CEO)
Supply chain bottlenecks and fixes
Q (Peter Arment · Baird): Analyst asked which supply-chain constraints are internal versus supplier-controlled and how the company is addressing bottlenecks given new awards and framework agreements.
A: Management said some constraints were in printed circuit board manufacturing and laminates driven by AI/data center demand, but they have worked through these with Department of War help to get supplier priority and do not expect material Q4 impact. They also said about 25% of their $3 billion investment is into supply chain capacity, creating multiple sources, modernizing suppliers, and funding the ecosystem to build resilience.
"About 25% of our $3 billion investment is directly into supply chain and supply chain capacity." — Sam Mehta (CEO)
Radio margins and NGC2 transition
Q (Doug Harned · Bernstein): Analyst asked how far radio margins can improve, and how the business will transition into NGC2 with new competitors and continuous competition.
A: Management said they are an integral partner in NGC2 and have won a fair share of awards, do not expect a material reduction in business, and have demonstrated integration with other companies. They said competition is normal, they continually find cost savings (for example using AI on the manufacturing floor), and they expect to maintain and grow radio margins over time as they adopt AI and automation.
"As new technologies like AI and automation take hold and we incorporate them, we do expect to be able to maintain and grow margins in our radio business over time." — Sam Mehta (CEO)
Appendix detail and contract mix
Q (Richard Safran · Seaport): Analyst asked why management provided detailed appendix slides and whether the surge in bookings will shift contract mix toward cost-type work.
A: Management said most of the backlog growth is tied to firm-fixed-price contracts, with Next Gen Jammer in CSD as a cost-type exception. They added the detailed appendices aim to improve investor understanding of the business and make core performance clearer.
"We largely see a lot of the growth in our backlog is really associated with firm-fixed-price contracts." — Sam Mehta (CEO)
Space & Mission Systems growth drivers
Q (Noah Poponak · Goldman Sachs): Analyst asked whether anything is slowing growth in Space & Mission Systems, what the main growth drivers are, and if any big programs will roll off.
A: Management said they do not see anything particularly slowing, but timing matters because ISR and other space programs are big and lumpy and can move by billions. They said the revenue outlook can change significantly based on timing of large international customer decisions, such as missionized business jet purchases.
"Frankly, I expect this number to be able to continue to change significantly based upon those billion-dollar plus movements, as our international customers in particular, consider, reconsider, and move the timing of some of their planned missionized business jet purchases." — Sam Mehta (CEO)
Missile execution risks and protections
Q (Ken Herbert · RBC): Analyst asked about near-term execution risks on Missile Solutions contracts, contract protections, margin expansion, and how programs will progress during heavy investment in SRMs.
A: Management said contracts are structured with advanced and milestone payments aligned to their capital spend and include protective provisions and financial mitigations if volumes do not materialize. They said they are confident in the demand signal, have invested over $3 billion to build supply-chain resilience and capacity, plan to add about 1 million square feet and over 100 buildings, and acknowledged significant execution ahead.
"Those are areas like building a resilient supply chain with multiple suppliers so we can avoid single points of failure, modernizing a lot of our internal equipment." — Sam Mehta (CEO)
Backlog coverage and margins
Q (Michael Ciarmoli · Guggenheim): Analyst asked how much of the 2028 plan is already in backlog (coverage), and whether more firm-fixed contracts should boost margins as production scales.
A: Management said of about $53 billion backlog, Sam estimated $22 billion funded and noted most unfunded backlog is in Missile Solutions, which they expect to materialize. Ken said funded backlog is $31 billion, that much of the new work is fixed-price, and the guide implies about 50 basis points of margin acceleration as they execute.
"I think of the $53 billion or so, I think $22 billion is funded." — Sam Mehta (CEO)
Budget, CRs, and munitions funding
Q (Emily · Wolfe): Analyst asked about the munitions ramp given much funding is in reconciliation and whether the continuing resolution (CR) could impact areas like CSD.
A: Management said they are conscious of the budget environment but believe missiles and munitions are a top Department of War priority and likely to remain funded amid trade-offs. They also said the company will focus on priority areas and strong program execution to avoid leaving programs vulnerable when customers make tough budget choices.
"We feel very confident that as trade-offs happen, should trade-offs happen to the extent they happen, that we continue to operate and focus in areas that will be of the top priority of the Department of War." — Sam Mehta (CEO)
Post-IPO ownership and sale options
Q (Scott Mikus · Melius): Analyst asked whether management would change the ownership percentage they'd keep of Missile Solutions after an IPO, and whether selling all of Missile Solutions or Aerojet is an option if desired valuation is not met.
A: Management said nothing has significantly changed in their posture or in the prospective ownership share and that they remain excited about the business. They added they are not required to do an IPO but are pursuing it and will revisit the decision mid-2027.
"Nothing has changed in our prospective ownership share, our posture, or the criteria against we are measuring the attractiveness of the IPO as we continue to monitor solutions." — Sam Mehta (CEO)
Tactical RF demand and international sales
Q (Gautam Khanna · TD): Analyst asked about tactical RF demand, expected sales this year, and key international and domestic pursuits to watch over the next year.
A: Management said they have a strong tactical radio backlog and that the business is short-cycle and forecast-driven, so backlog can shift quickly. They said this year they will deliver more radios to international customers than domestic, driven by NATO and allied demand to address electronic warfare and maintain interoperability with U.S. forces.
"I can tell you this year, we will actually deliver more radios to international customers than we will domestic." — Sam Mehta (CEO)