L3Harris Technologies Inc. (NYSE: LHX) shares faced downward pressure Thursday after the defense contractor reported fourth-quarter revenue that trailed Wall Street expectations, despite a beat on the bottom line. The company also provided a 2026 financial outlook that largely fell below analyst projections, overshadowing record order intake and a multi-billion-dollar strategic reorganization of its missile business.
In pre-market trading, L3Harris shares declined approximately 1.86% to $353.59 as investors weighed the impacts of a recent U.S. government shutdown on revenue timing against the firm’s operational efficiencies.
Revenue Lag and Strategic Reorganization
The aerospace and defense innovator reported fourth-quarter revenue of $5.65 billion, a 2.3% increase over the previous year but below the $5.79 billion anticipated by analysts. Management attributed the shortfall to delays in contract awards and customer payments resulting from federal budget uncertainties and the government shutdown late in the year.
Beyond the financial metrics, L3Harris announced a significant portfolio shift designed to capitalize on heightening global demand for munitions. The company plans to launch an Initial Public Offering (IPO) for its Missile Solutions business in the second half of 2026. This move follows a strategic partnership with the Department of War, which serves as an anchor investor in a project aimed at expanding production capacity for large solid rocket motors.
Quarterly and Annual Financial Performance
Despite the top-line miss, L3Harris demonstrated disciplined cost management through its “LHX NeXt” transformation initiative. Fourth-quarter adjusted earnings per share (EPS) reached $2.86, surpassing the consensus estimate of $2.76.
| Metric (Q4 2025) | Reported | Analyst Consensus |
| Revenue | $5.65 Billion | $5.79 Billion |
| Adjusted EPS | $2.86 | $2.76 |
| Adjusted Segment Margin | 15.7% | — |
For the full year 2025, the company reported:
- Total Revenue: $21.87 billion, up 3% (5% organically).
- Adjusted EPS: $10.73, an 11% increase year-over-year.
- Adjusted Free Cash Flow: $2.8 billion, a 21% surge compared to 2024.
- Backlog: A record $38 billion, supported by a full-year book-to-bill ratio of 1.3x.
Segment performance was mixed. Communication Systems remained a primary driver of growth with a 24.9% operating margin. Conversely, Aerojet Rocketdyne results were impacted by an $85 million non-cash impairment charge related to its space technology business, while Integrated Mission Systems saw margins contract to 11.1% following the divestiture of its Commercial Aviation Solutions unit.
2026 Outlook and Growth Drivers
L3Harris initiated 2026 guidance that struck a cautious tone. The company expects total revenue between $23.0 billion and $23.5 billion, with adjusted EPS ranging from $11.30 to $11.50. This profit forecast sits significantly below the $12.39 per share analysts had modeled, suggesting that investments in production capacity and supply chain stabilization may weigh on near-term margins.
Management highlighted that “capacity is now the most important capability,” noting that construction has already begun to expand rocket motor production. Key wins during the quarter, including a $2.2 billion award from South Korea and an $850 million satellite contract for the Space Development Agency, are expected to provide long-term revenue tailwinds.
Industry Context and Macro Pressures
The results from L3Harris mirror a broader trend across the defense sector, where robust demand driven by global geopolitical tensions is being met by domestic execution hurdles. While peers like RTX Corporation and Northrop Grumman also reported earnings beats recently, the industry remains sensitive to U.S. defense budget cycles and supply chain bottlenecks.
The planned reorganization of L3Harris into three distinct segments—Space & Mission Systems, Communication & Spectrum Dominance, and Missile Solutions—marks an effort to streamline operations as the firm transitions from a period of rapid acquisitions to one of integration and organic scaling.
