HII Q3 2026 Revenue Rises 11% on Shipbuilding Growth

HII reported a 10.8% increase in third-quarter 2026 revenue and said it was increasing its full-year revenue guidance, as higher submarine and aircraft carrier activity drove strong growth at Newport News Shipbuilding. Non-GAAP segment operating income rose 46.4%, while quarterly free cash flow reached $429 million.

Revenue for the three months ended September 30 increased to $3.54 billion from $3.19 billion a year earlier. The company attributed the gain primarily to higher submarine and aircraft carrier volumes at Newport News, along with increased amphibious assault ship activity at Ingalls Shipbuilding.

GAAP operating income rose to $246 million from $161 million. Non-GAAP segment operating income increased to $262 million from $179 million, lifting the corresponding margin to 7.4% from 5.6%. HII said the improvement reflected submarine contract adjustments and incentives, higher volume at Newport News, a milestone achievement in Unmanned Systems, and increased equity income from nuclear and environmental joint ventures.

Shipbuilding Leads Revenue Growth

Newport News revenue climbed 18.1% to $1.91 billion, the strongest growth among HII’s operating segments. Segment operating income rose 65% to $132 million, and the margin expanded to 6.9% from 4.9%.

Ingalls revenue increased 5.8% to $876 million as amphibious assault ship volume grew. Its segment operating income declined 9.2% to $59 million, reducing the margin to 6.7% from 7.9%.

Combined shipbuilding revenue totaled $2.79 billion, up from $2.45 billion in the prior-year quarter. Non-GAAP shipbuilding operating income increased to $191 million from $145 million, with the margin rising to 6.9% from 5.9%.

HII also reported progress on major programs. The company achieved preliminary acceptance of the aircraft carrier John F. Kennedy, or CVN 79, and said hiring and retention continued to improve. Its distributed shipbuilding network was performing well and expanding, according to the presentation.

Mission Technologies Profit More Than Doubles

Mission Technologies revenue was nearly unchanged at $792 million, compared with $787 million a year earlier. Despite the limited sales growth, segment operating income more than doubled to $71 million from $34 million, raising the segment operating margin to 9% from 4.3%.

The company linked the increase to an Unmanned Systems milestone and higher equity income from nuclear and environmental joint ventures. Mission Technologies EBITDA, a non-GAAP measure, rose to $94 million from $61 million, with the EBITDA margin increasing to 11.9% from 7.8%. The segment posted a quarterly book-to-bill ratio of 2.4.

HII recorded $32.4 billion of contract awards during the quarter. Key awards covered Virginia-class Block VI and Columbia-class Build II submarines, CVN 82 long-lead-time material, and unmanned and intelligence programs including ROMULUS, Lionfish and STINGRAI SOUTHCOM ISR. An award for the refueling and complex overhaul of USS Harry S. Truman, or CVN 75, will be reflected in fourth-quarter awards and backlog rather than the third-quarter figures.

Cash Generation Strengthens in the Quarter

Net cash provided by operating activities increased to $520 million from $118 million. After net capital expenditures, non-GAAP free cash flow was $429 million, compared with $16 million in the prior-year period.

The quarterly improvement did not eliminate the year-to-date cash deficit. Free cash flow for the first nine months of 2026 was negative $182 million, versus positive $284 million in the corresponding 2025 period.

HII ended the quarter with $2.1 billion of liquidity, including $387 million in cash. Net capital expenditures were $91 million, equivalent to 2.6% of quarterly revenue. The company paid $54 million in dividends and did not repurchase shares during the quarter.

2026 Outlook

HII’s full-year outlook calls for shipbuilding revenue of $10.5 billion to $10.7 billion and a non-GAAP shipbuilding operating margin of 6% to 6.5%. Mission Technologies revenue is expected to be between $3 billion and $3.2 billion, with a segment operating margin of about 6% and a non-GAAP EBITDA margin of approximately 9%.

The company expects 2026 free cash flow of $500 million to $600 million and capital expenditures of about $500 million. Its cumulative free cash flow target for 2026 and 2027 remains $1.2 billion to $1.3 billion.

Over the medium term, defined as the next three to five years, HII expects companywide revenue to grow at a compound annual rate of about 6%. The outlook includes roughly 6% growth for shipbuilding and about 5% for Mission Technologies. The company also identified potential additional shipbuilding upside from recently announced frigate and battleship work.

HII projected a 2026 non-operating retirement benefit of $213 million. For 2027, it expects lower FAS pension income than previously projected because of recent asset performance and a revised pension asset allocation, while CAS expense is expected to remain relatively stable.

The outlook remains subject to HII’s reliance on the U.S. government for substantially all of its business, as well as appropriations delays, government shutdowns, changing defense priorities, inflation and labor-related contract costs. Other identified uncertainties include supplier performance, material availability and pricing, workforce recruitment and retention, cybersecurity threats, regulatory changes and the company’s ability to execute its contracts effectively.