Oct 20, 2026 earnings call — Stronger execution, raised guidance, program ramps
Raised 2026 segment operating income midpoint by $65 million and reported a record backlog of $110 billion.
Revenue $11.1B (est $11.1B) · EPS $7.89 (est $7.18) · Next-quarter revenue outlook $43.8B–$44.3B
Key quotes
"In the quarter, our book to bill was 1.5x, which drove a new record backlog of $110 billion reflecting robust demand and years of durable sales."
"And gained approval from the US Air Force on Sentinel design maturity for first flight to proceed in 2027."
Analyst Q&A 10
Drivers of 2027 outlook and Fortitude
Q (Kristine Liwag · Morgan Stanley): Why is your 2027 outlook a range and what could move 2028 growth into 2027? Also, how differentiated is Fortitude and how big is the commercial opportunity?
A: Management said the low end of the 2027 range reflects internal budgeting work and the high end reflects confidence in strong execution and backlog. They listed marquee programs like B-21 and Sentinel as upside and said they will tighten guidance on the Q4 call. On Fortitude, they said Fortitude is mature, they hold relevant patents, and they are doing a strategic review to bring microelectronics tech into defense and commercial markets.
"So the low end reflects frankly, where we are in the budgeting cycle for ourselves." — John Thomas Greene (CFO)
Which segments will drive 2027 growth
Q (John Godden · Citi): Which segments are leading or lagging for 2027 growth, and will laggards snap back? Also, any margin leader/lagger details?
A: Management said all four segments will show positive year-over-year growth. They named Defense Systems (DS) and Aeronautics & Electronics Solutions (AES) as leading franchises, with DS approaching 10% this year and AES growing on B-21; Mission Systems has averaged 3%–5% growth and space should accelerate from a muted base. On margins, they said AES had strong margins this year, Sentinel and program execution will help DS, space margins are consistent, and MS had a strong execution year but may moderate.
"So all 4 segments, we will see positive year over year growth." — John Thomas Greene (CFO)
B-21 ramp and program risk
Q (Ronald Epstein · BofA): How is the B-21 production ramp going and is there risk of another charge on fixed-price LRIP lines?
A: They said the B-21 ramp will happen over time and they are investing in acceleration capacity over the next couple of years, with facilitation through 2028 before capacity expansion takes full effect. On risk, they said testing is reducing late-discovery risk, they are progressing the production learning curve, but production of remaining LRIP units still has risk even as confidence in execution grows.
"It is not without risk because we still have a ways to go clearly in production of our remaining LRIP units." — Kathy J. Warden (CEO·CHAIR)
Foundry strategic review and B-21 cash timing
Q (Scott Deuschle · Deutsche Bank): Does the foundry review include sale or spin or broader options? And what is the timing/cadence of B-21 cash losses remaining?
A: They said the strategic review is broader than just sell or spin: options include continuing to invest internally, broadening the investor base, or separating the business, with timing and degree under advisement. They said it is premature to quantify solo investment and noted RQL quantum tech as part of the exploration. On the B-21 loss burn down, management said roughly $100 million a quarter is the typical burn down and noted the reported number this period was $70 million.
"This, the number happened to be $70 million." — John Thomas Greene (CFO)
Drivers of 5%–7% growth and rocket motors
Q (Sheila Kahyaoglu · Jefferies): What are the main drivers of the 5%–7% 2027 growth and what is the size/opportunity for the solid rocket motor business?
A: They said key drivers include B-21, Sentinel, shipbuilding support, a growing weapons component portfolio, international contracts, and restricted national security space programs; timing of appropriations and when international contracts start will affect whether growth falls into 2027 or 2028. For solid rocket motors and components, they said about $1 billion of work exists today and they are entering agreements to become a component provider; 2027 will be a ramping year as contracts start small and scale toward guaranteed quantities.
"When you think about what will drive us towards the bottom end versus the top end of our growth range for 2027, it is the rate at which we get these areas on contract and can scale our production." — Kathy J. Warden (CEO·CHAIR)
Talon Blue autonomy and interop
Q (Maggie Scooley · Rothschild and Co. Redburn): After Talon Blue's first fully autonomous flight, how is TalonIQ/Prism performing and how well does it interoperate with third-party autonomy systems?
A: They said TalonIQ has demonstrated the ability to interoperate with other companies' autonomy software and has integrated several partners in their test bed. They are working with about a half-dozen companies on cooperative integration and have also shown the ability to control other platforms; the test bed derisks integration and creates optionality to work with multiple U.S. and international customers.
"We also, through that test bed, have demonstrated the ability to control other platforms." — Kathy J. Warden (CEO·CHAIR)
Cash flow drivers and Sentinel program
Q (Seth Seifman · JPMorgan): What explains cash flow movement from 2026 to 2027 and CapEx plans? Also, what is the activity and growth path for the Sentinel program now?
A: They said cash flow is strong year to date, with the third quarter up about $550 million and year-to-date up $900 million, and they expect a meaningful CapEx step up in Q4 as well as another step to about $2.1 billion in 2027 to support infrastructure. For Sentinel, they said three work streams continue: missile development, launch facility design, and command and control, all progressing toward integrated tests and that production ramping across missile and infrastructure will begin toward the end of the decade; they expect growth modestly above company pace.
"So in the third quarter, we are up about $550 million." — John Thomas Greene (CFO)
Most exciting non-B-21 program
Q (Anthony Valentini · Barclays): Outside of B-21 and Sentinel, what are you most excited about in the portfolio?
A: They said the most exciting change is moving advanced microelectronics from deep R&D into commercialization, naming Fortitude and quantum work. They noted this opens commercial markets while partnering with government and creates new opportunities to sell technology back to the government and to commercial customers.
"To me, that is the biggest change that we are sharing with you today and something that I am quite excited about." — Kathy J. Warden (CEO·CHAIR)
Clarify 2028 growth and margin drivers
Q (Noah Poponak · Goldman Sachs): Does 'acceleration in 2028' imply 8%+ growth and should we expect that pace into 2029/2030? Also, why have margins been choppy and are headwinds behind you?
A: They said 5%–7% in 2027 implies higher growth in 2028, but they would not commit to a specific number like 8% and will not guide 2028 explicitly. They cited strong backlog visibility and detailed backlog burn-down (about 35% over next 12 months and 55% over following 24 months) as support for multi-year visibility. On margins, they said choppiness comes from a higher concentration of development work which carries more discovery risk and EAC adjustments, and as the portfolio shifts toward production and fixed-price work, they expect less variation and derisking of margins.
"We are suggesting that a 5% to 7% growth rate next year would accelerate, meaning be higher in 2028 than we experienced in 2027." — Kathy J. Warden (CEO·CHAIR)
CCA strategy and microelectronics investors
Q (Michael Ciarmoli · Guggenheim): What is your overall CCA (unmanned) strategy and role in the market? Also, could direct investments from government offices be part of microelectronics funding?
A: They said they are actively engaging customers and leveraging the company's 5,000+ unmanned flight hours to architect CCAs, integrate autonomy, and drive toward affordable, scaled manufacturing for mass. On microelectronics funding, they said all options are on the table and they do not want to be overly dependent on any single government; they see strong commercial application and are open to partnerships or other structures.
"We believe there is such a strong commercial application for this that we are not wanting to be overly dependent on any government, particularly the US government in this case, but all options are on the table." — Kathy J. Warden (CEO·CHAIR)