L3Harris Technologies, Inc. - Q1 2026 10-Q Summary
Business Context and Reporting Period
This report covers the first quarter of fiscal year 2026, ended April 3, 2026. The quarter included 13 weeks, compared to 12 weeks in the prior year period. L3Harris streamlined its operating segments from four to three effective in fiscal 2026: Space & Mission Systems (SMS), Communication & Spectrum Dominance (CSD), and Missile Solutions (MSL). The company reported 75% of revenue derived from U.S. Government customers.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Revenue | $5,744 million | $5,132 million |
| Operating Income | $652 million | $525 million |
| Net Income | $512 million | $386 million |
| Diluted EPS | $2.72 | $2.04 |
| Operating Margin | 11.4% | 10.2% |
| Effective Tax Rate | 13.1% | 15.9% |
| Cash and Equivalents | $590 million | $517 million |
| Total Debt (Long-term + Current) | $11.0 billion | $11.1 billion |
| Contractual Backlog | $40.7 billion | N/A |
Cash Flow: Net cash used in operating activities was $95 million. Net cash used in investing activities was $97 million. Net cash used in financing activities was $284 million, driven by $296 million in share repurchases and $238 million in dividends.
Material Changes vs. Prior Period
- Revenue Growth: Revenue increased 12% ($612 million) driven by higher volumes across all segments, including new program ramps and increased international deliveries.
- Segment Performance:
- SMS: Revenue up 24% ($2,990M) and operating income up 32% ($313M), driven by ISR milestones and Space Systems volume.
- CSD: Revenue up 3% ($1,855M) and operating income up 5% ($465M), aided by a $20 million legal settlement.
- MSL: Revenue up 18% ($990M) and operating income up 29% ($124M), boosted by a $39 million gain on legacy asset monetization.
- G&A Expenses: Decreased 9% ($75 million) due to the completion of LHX NeXt implementation costs, gains on legacy asset monetization, and the absence of the Commercial Aviation Solutions (CAS) disposal group expenses.
- Tax Rate: Effective tax rate decreased to 13.1% from 15.9%, benefiting from FDII deductions and favorable audit resolutions.
Guidance, Outlook, and Risks
- Outlook: Management expects capital expenditures for fiscal 2026 to be approximately $600 million. The company anticipates recognizing 40% of its $40.7 billion backlog over the next 12 months.
- Dividends: The Board increased the quarterly dividend to $1.25 per share, marking the 25th consecutive annual increase.
- Share Repurchases: $296 million was spent on repurchases in Q1 2026, with $1.9 billion remaining under the current authorization.
- Subsequent Event: On April 17, 2026, the company entered into definitive agreements for a $1.0 billion investment by the U.S. Department of War into its subsidiary, Aerojet Rocketdyne Holdings, Inc. (AJRD). This transaction is expected to close in Q2 2026.
- Risks: Key risks include U.S. Government spending priorities, geopolitical tensions, supply chain disruptions, and the impact of the 15% global minimum tax. The company is monitoring trade policies and tariffs.
Investor Verification Checklist
- Verify the impact of the 13-week quarter in 2026 versus the 12-week quarter in 2025 on year-over-year comparisons.
- Confirm the status and closing timeline of the $1.0 billion Department of War investment in AJRD.
- Review the details of the Space Technology disposal group transaction with AE Industrial Partners, expected to close in H2 2026.
- Assess the sustainability of the 13.1% effective tax rate given the specific one-time benefits (FDII, audit resolutions) cited.
- Monitor the $39 million gain on legacy asset monetization in the MSL segment to ensure it is not a recurring revenue driver.