L3Harris Q3 2026 Earnings: Record Backlog Supports Higher Guidance

L3Harris Technologies (NYSE: LHX) reported fiscal Q3 2026 revenue of $6.06 billion, up 7% from $5.66 billion, while GAAP diluted EPS rose 33% to $3.28 from $2.46. GAAP operating margin expanded 200 basis points to 13.0%, and free cash flow increased 195% to $1.26 billion as quarterly orders drove backlog to a record $53.2 billion.

Core Earnings Results

Revenue increased on growth in all three operating segments, with Space & Mission Systems providing the largest reported increase. Organic revenue rose 9%, compared with reported growth of 7%, reflecting adjustments that include the prior-period Space Technology divestiture.

The increase in EPS outpaced revenue growth. In addition to higher volume, L3Harris cited lower corporate expenses, lower interest expense and a lower effective tax rate.

Segment operating margin and free cash flow are non-GAAP measures. L3Harris also changed its free-cash-flow definition to exclude proceeds from property disposals and recast prior periods for comparability.

Business and Segment Performance

Space & Mission Systems remained the largest segment and produced double-digit reported revenue growth. Communications & Spectrum Dominance grew more slowly but retained the highest operating margin, while Missile Solutions’ reported growth understated its organic performance because the prior-year comparison included the divested Space Technology business.

Space & Mission Systems operating income rose to $338 million from $299 million. Communications & Spectrum Dominance operating income increased to $502 million from $477 million, while Missile Solutions operating income edged up to $127 million from $124 million.

Missile Solutions generated approximately 17% organic revenue growth when compared with the adjusted prior-year base of $905 million. Its 11.8x book-to-bill ratio also indicates that major awards were concentrated in this segment, even though reported quarterly revenue growth remained in the mid-single digits.

Record Orders Raise the Importance of Backlog Conversion

L3Harris received $19.3 billion of orders, producing a companywide book-to-bill ratio of 3.2x and record backlog of $53.2 billion. Two seven-year, undefinitized propulsion contracts accounted for $11.0 billion of the awards: $6.3 billion for the THAAD system and $4.7 billion for the PAC-3 Missile Segment Enhancement interceptor, both excluding escalation provisions.

Other awards included a $250 million GMLRS propulsion contract, more than $500 million of VAMPIRE counter-drone orders and an $876 million modification for the U.S. Navy’s Next Generation Jammer Low Band program. Under the company’s definition, orders include funded and unfunded awards but exclude unexercised options and potential orders under ordering-type contracts.

Management said its priority is to convert this demand into financial results while investing in production capacity across missiles, space, resilient communications and multi-domain sensing. That makes production ramp execution and the timing of backlog conversion central to future revenue and cash flow.

Profitability, Cash Flow and the Balance Sheet

The 200-basis-point expansion in GAAP operating margin did not come from a higher segment margin, which remained flat at 15.9%. Instead, unallocated corporate items and other costs declined to $181 million from $279 million, allowing GAAP operating income to grow faster than segment operating income. Acquisition-related intangible amortization fell to $147 million from $192 million, and the prior-year quarter included $25 million of LHX NeXt implementation costs.

Below operating income, net interest expense declined to $116 million from $152 million. The effective tax rate also fell to 14.9% from 18.5%, providing another contribution to the 33% increase in diluted EPS.

Cash generation improved substantially despite capital expenditures rising to $179 million from $119 million. Quarterly operating cash flow benefited from a $369 million reduction in receivables, a $169 million increase in contract liabilities and a $106 million increase in accounts payable. These benefits were partly offset by a $299 million increase in contract assets.

L3Harris ended the quarter with $2.47 billion of cash, $550 million of short-term investments and approximately $11.0 billion of total debt. The current portion of long-term debt rose to $1.82 billion from $673 million at the start of the fiscal year, while long-term debt declined to $9.18 billion from $10.44 billion.

Guidance

Management raised the lower end of its full-year revenue range and increased the entire GAAP EPS range. Free cash flow and operating cash flow guidance were maintained, while segment revenue expectations shifted modestly toward Space & Mission Systems and away from Communications & Spectrum Dominance.

Full-year segment margin expectations were unchanged: mid-10% for Space & Mission Systems, mid-25% for Communications & Spectrum Dominance and low-12% for Missile Solutions. With year-to-date free cash flow of $1.84 billion, the maintained $3.0 billion target requires approximately $1.16 billion in the fourth quarter.

Risks Investors Need to Watch

• Backlog conversion and production capacity: The record backlog creates a substantial revenue opportunity, but the timing depends on execution, facility expansion and the ability to scale missile and propulsion production.
• Large undefinitized awards: The THAAD and PAC-3 contracts represented a substantial share of quarterly orders. Investors should monitor the final contract terms and the pace at which these awards enter production.
• Flat segment margin: Segment operating margin remained at 15.9%, so much of the GAAP margin expansion came from lower corporate items. Lower interest expense and a reduced tax rate also supported EPS growth and may vary between periods.
• Working-capital variability: Receivable collections and higher contract liabilities helped quarterly cash flow, while contract assets were a use of cash. Changes in these balances could cause cash generation to fluctuate.
• Debt obligations: Total debt remained approximately $11.0 billion, including $1.82 billion classified as current, leaving debt repayment and liquidity management relevant alongside capacity investment and shareholder returns.

Summary

L3Harris combined 7% reported revenue growth with faster gains in GAAP operating income, EPS and free cash flow during Q3 2026. Record orders and backlog improved the demand outlook and supported higher full-year revenue and EPS guidance, but segment margin remained flat and the next stage depends on converting major awards into production, revenue and sustained cash flow.