Teledyne Technologies Incorporated Q1 2026 Earnings Call Transcript

Note: This is a preliminary transcript and may contain inaccuracies. It will be updated with a final, fully-reviewed version soon.

Teledyne Technologies Incorporated (NYSE: TDY) Q1 2026 Earnings Call dated Apr. 22, 2026

Presentation

Operator

Welcome to Teledyne’s first quarter earnings call. I would now like to introduce our first speaker, Mr. Jason Van Wiese. Jason, please go ahead.

Jason VanWees — Vice Chairman

Thank you. Hi, good morning everyone. This is Jason Van Wiese, Vice Chairman. I’d like to welcome everyone to Teledyne’s first quarter 2026 earnings release conference call. We released our earnings earlier this morning before the market opened. Joining me today are Teledyne’s Executive Chairman Robert Moravian, President and CEO George Bobb, EVP and CFO Steve Blackwood and Melanie Sevick, EVP General Counsel, Chief Compliance Officer and Secretary. After remarks by Robert, George and Steve, we’ll ask for your questions, but of course before we get started.

All forward looking statements made this morning are subject to various assumptions, risks and caveats as discussions noted in the earnings release under periodic SEC filings and of course actual results may differ materially in order to avoid potential selective disclosures. This call is simultaneously being webcast and a replay via webcast and dial in will be available for approximately one month. Here is Robert

Robert Mehrabian — Executive Chairman

Thank you Jason and good morning everyone and welcome to our conference call. We started 2026 with record first quarter sales, earnings per share and operating margin. Specifically, sales and non GAAP earnings increased 7.6% and 17.2% respectively. In addition, despite a 30 basis point increase in R and D expense, non GAAP operating margin increased 58 basis points year over year. And while we acquired DD Scientific in January and increased our capital expenditures significantly from last year, our leverage ratio declined to the lowest level in five years since before the acquisition of FLIR in 2001.

Excluding the impact of acquisitions, sales increased 5.3% due in part to the performance of our digital imaging segment, while organic growth was 6.9%. Sales of visible light sensors, infrared detectors and specialty semiconductors for space applications each increased at double digit rates as did FLIR infrared cameras for unmanned air vehicles as well as our own complete unmanned aerial systems. Also within the digital imaging segment, our industrial imaging and X ray businesses each returned to year over year growth which helped contribute to the strong margin performance in the first quarter.

Given stronger sales in the first quarter, but also record orders and backlog with a big book to bill of 1.16, which is our 10th consecutive quarter of book to bill of over 1. We’re comfortable in increasing both our expected sales and earnings for 2026. We believe now sales will be in the range of 6.415 billion or 70 basis points higher than we communicated in January. We’re also raising our earnings outlook at both the bottom and top of our prior range to about $24 at midpoint or 35 cents overall in increase.

George will now briefly comment on the performance of our four business segments. George

George C. Bobb III — President and Chief Executive Officer

Thank you Robert. In the Digital Imaging segment, first quarter sales increased 7.9% due to well balanced growth throughout the segment including Teledyne imaging sensors, Dulce E2V and Teledyne FLIR. As Robert mentioned, sales of visible and infrared detectors for space based imaging increased nicely. Sales of infrared subsystems and cameras for our customers, unmanned air systems and unmanned maritime surface vehicles also increased. In addition, revenue from our own complete unmanned air systems increased due to continued growth of the highly differentiated Blackhorn nanodrone as well as full rate production deliveries of our rogue one loitering munition.

Interest in counter drone activity also remains elevated and in the first quarter and early Q2 we received orders for infrared cameras and subsystems totaling in the tens of millions of dollars. For counter drone applications. There were also bright spots outside of defense. For example, industrial machine vision cameras and sensors for semiconductor inspection and x ray products for healthcare increased year over year and sales of micro electromechanical systems or mems grew over 20% primarily due to demand for micro mirrors used for optical switching in high speed networking applications.

Finally, non GAAP operating margin in the segment increased 107 basis points to 23.2% despite a 59 basis point increase in R and D expense within the segment. In the instrumentation segment which consists of our marine, environmental and test and measurement businesses, first quarter sales increased 5.3% versus last year. Overall sales of marine instruments increased 8.3% primarily due to strong defense related sales including unmanned subsea vehicles which increased more than 20% for applications such as anti submarine warfare and mine countermeasures as well as sales of interconnects for US Virginia and Columbia class submarines.

Interconnects for offshore energy production also continued to grow, however these were partially offset by reduced sales of marine instruments for hydrography and oceanographic research. Sales of Environmental instruments increased 6.7%. This primarily resulted from higher sales for gas safety and and ambient air monitoring instrumentation partially offset by lower sales of laboratory and life sciences instruments. Sales of electronic test and measurement systems decreased 3.7% year over year with greater sales of oscilloscopes offset by lower sales of protocol analyzers.

However, we continue to expect full year sales growth as semiconductor suppliers increase their shipments and data centers increasingly adopt devices utilizing the newest fastest data transfer protocols instrumentation Non GAAP operating margin in the first quarter decreased primarily due to product mix, that is A decline in higher margin test and measurement. First growth in autonomous underwater vehicles and marine which generally carry lower margins. In the aerospace and defense electronics segment, first quarter sales increased 14.4% due to one additional month of results from the keyoptic acquisition and with organic growth of 8.4% across defense electronics, partially offset by slightly lower sales from the commercial aerospace market due to a result of a tough comparison.

Non GAAP segment margin increased nearly 200 basis points year over year due to higher sales and corresponding operating leverage. Improved margins that companies acquired in 2025 and in this case a relatively easy comparison. For the Engineered Systems segment, first quarter revenue decreased 2.6% however segment operating margin increased 113 basis points. I will now pass the call back to Robert.

Robert Mehrabian — Executive Chairman

Thank you George. In conclusion, we’re excited to begin 2026 with a strong first quarter with continued orders and sales momentum in our backlog driven businesses, specifically Defense, where Teledyne has meaningful exposure to low cost drone counter drone technologies, space based sensing, electronic countermeasures and maritime surveillance. Furthermore, certain markets such as industrial inspection and health care which have had headwinds in the past are now inflecting. Finally, with a leverage at a five year low, we’re actively pursuing a number of acquisitions, but at the same time we’re investing more in RD and capital expenditures to accelerate our own organic growth.

I will now turn the call over to Steve.

Stephen F. Blackwood — Executive Vice President and Chief Financial Officer

Thank you Robert and good morning. I will first discuss some additional financials for the quarter not covered by Robert and then I will discuss our second quarter and full year 2026 outlook. In the first quarter, cash flow from operating activities was $234 million compared with $242.6 million in 2025. Free cash flow, that is cash flow from operating activities. Less capital expenditures was $204.3 million in the first quarter of 2026 compared with $224.6 million in 2025. Cash flow decreased due to higher inventory purchases, partially offset by greater operating results in the first quarter of 2026 compared with 2025.

Capital expenditures were $29.7 million in the first quarter of 2026 Compared with $18 million in 2025. Depreciation and amortization expense was $87.2 million in the first quarter of 2026 compared with $80.7 million in 2025. Now turning to our outlook, Management currently believes that GAAP earnings per share in the second quarter of 2026 will be in the range of $4.75 to $4.90 per share, with non GAAP earnings per share in the range of $5.70 to $5.80. And for the full year 2026, we believe that GAAP earnings per share will be in the range of $20.08 to $20.44 and non GAAP earnings per share in the range of $23.85 to $24.15.

I’ll now pass the call back to Robert.

Robert Mehrabian — Executive Chairman

Thank you, Steve. Operator, we would like to start the questions. If you’re ready to proceed, please go ahead.

Question & Answers

Operator

Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please press Star one on your telephone keypad and a confirmation tone will indicate your line is in the question queue. You may press Star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. And our first question comes from the line of Greg Conrad with Jefferies. Please proceed.

Greg Konrad — Analyst, Jefferies

Good morning.

Robert Mehrabian — Executive Chairman

Good morning, Greg.

Greg Konrad — Analyst, Jefferies

Maybe just to start on the revised revenue guidance of 6.0, can you maybe just talk about organic versus inorganic? And then if you think about some of the de risking or things that have gotten better since the guidance you gave last quarter, where are you seeing the most outperformance? Just from a segment basis,

Robert Mehrabian — Executive Chairman

Of course, Greg. First, fundamentally, we’re seeing about a 4.9% total growth for the year right now, which is about 70 basis points higher than we had in January. About 4% of that solid, 4% is organic, and about 0.9% is from acquisitions, one early in 2025 and one small one early this year. From a segment perspective, we think the highest growth will probably be in our digital imaging and aerospace and defense, with aerospace and defense probably over 6%. And digital imaging overall about 5% led by really FLIR, which we expect will grow about 6.5%.

I hope that answers your question.

Greg Konrad — Analyst, Jefferies

Yeah, that’s perfect. And you gave a little bit of color in the opening, but just following up on defense, how much was it up overall in the quarter? And then you mentioned flir. Can you just maybe give a little bit more more color on FLIR defense growth? And then you know what, what’s kind of driving the outperformance in and electronics just given that growth, thinking about that broader portfolio.

Robert Mehrabian — Executive Chairman

Okay, let me start with FLIR defense. I think we’re looking at about 9% growth in that area. Pretty much all of our products in the FLIR defense are growing, specifically drones, both nanodrones and loitering drones, surveillance systems, you name it. And of course we do supply both and cooled, visible and more importantly infrared detectors, not only to our own drone manufacturers but also to everyone else across the world that’s making drones. From an A and D perspective, the growth has been again in a variety of our components.

As you know, we make everything from lasers to detectors readouts, semiconductors, switches, all of these are seeing various degrees of growth and the business is very healthy, both supplying our own products, but more importantly supplying products from that are required as the various conflicts are increasing both in Europe and the Middle East.

Greg Konrad — Analyst, Jefferies

Thank you. I’ll leave it at 2. Thanks.

Robert Mehrabian — Executive Chairman

Thanks Greg.

Operator

The next question comes from the line of Amit Malhotra with ubs. Please proceed.

Zachary Walljasper

Hi, this is Zach Wall Jasper on for Amit today. So just two questions for me. Can you just help give some color around the order trends between the segments? And then the second question for me is just around the full year guide. So at a high level, you know, first quarter came in a little above and then we’re raising a little above that. So there’s not too much incremental pickup expected. But if you help flush out, you know, the puts and takes for the balance of the year that you guys are seeing, that’ll be helpful.

And then like should the typical earnings seasonality, you know, still hold for 2026. Thank you.

Robert Mehrabian — Executive Chairman

Sure. Let me start with the overall, which I mentioned. The overall book to build right now is 1.16. It is led by digital imaging and specifically both FLIR as well as DULCE E2B. That’s where we have probably the highest book to build. Iodine certainly we talked about in January. Digital Imaging right now is looking like about 1.38 in book to build in instruments, a lot of short cycle stuff, but it’s still holding above one, just slightly over one amd, which is a little lumpy because both A and D and engineer systems are lumpy because we get big orders and there’s a period of quiescence and then we pick up more orders, they’re just below one right now.

Certainly AMD is, but I think what’s happened to us is for whatever products that we’re able to put out and increase production, there’s very strong demand. And that’s why we think across our portfolio we’re going to do very well. We would think that we’ll have a little more sales in the second half versus the first half. And in January we were saying the first half would be a little much, a little lower than we had. So. So we’re kind of guiding our second half maybe at 51% versus first half at 49%.

Whereas in January we were thinking the first half would be more like 48% and the second half 52% in terms of our revenue. So we remain bullish but also cautious not to over promise, promise what we can deliver and stay within the framework that we’ve operated for the last 25 years.

Andrew Buscaglia — Analyst, BMP Paribas

Great. It’s super helpful, thank you.

Operator

The next question comes from the line of Andrew Buscaglia with BMP Paribas. Please proceed.

Andrew Buscaglia — Analyst, BMP Paribas

Hey, good morning everyone.

Robert Mehrabian — Executive Chairman

Andrew,

Andrew Buscaglia — Analyst, BMP Paribas

Just want to touch on the Q2 guidance. Just that it reflects the point at the midpoint EPS declining sequentially, which is atypical historically, like with just seasonality. I’m wondering where’s the biggest pain point? I think my guess is instrumentation like the test and measurement area being a little weaker than expected in Q1. But wondering, yeah, what are the dynamics affecting that Q2 guide?

Robert Mehrabian — Executive Chairman

Let me just put it. The big picture is the following. In Q1 we had some good tax benefits. Year over year our tax benefits increased because of stock option exercises. Increased about 10, 11 cents year over year. In Q2 where we sit right now, we’re not projecting similar tax benefits. Now if our stock were to move up and our people start exercising more options, that would change. But right now we’re not projecting that. So we’re taking that part out. We’re projecting more like $0.03 rather than having the increase that we had.

So primarily that’s it. Just to cut through it. Everything else I’m comfortable with.

Andrew Buscaglia — Analyst, BMP Paribas

Okay, maybe could you comment further than on that instrumentation comment I made earlier? Just that was a weak start to the year. What do you think drove that and how do you see the cadence of that niche over the next nine months?

Robert Mehrabian — Executive Chairman

Well, I’m going to just make one short comment and then I want to let George answer that there are different parts through instrumentation. Strong marine performance for us, especially underwater vehicles. You know, these are vehicles that are used across the world. Some of them for mine countermeasures. Very strong performance, but slightly lower margin than some of our high margin like test and measurement. I’ll let George kind of expand a little bit. George?

George C. Bobb III — President and Chief Executive Officer

Yes. So I think I will focus on test and measurement, which is where we had the decline in Q1. And there are two parts of that business really. There’s the oscilloscope side of the business where we saw year over year growth and continue to see good demand and high bandwidth applications, power applications, for example, people who are designing power supplies for data centers. And from sales into the in vehicle networks market protocol sales were down year over year and that was really due to the timing of PCI Express Gen 6 CPUs and GPUs.

So we go through on the protocol side kind of two phases. There’s a silicon designer phase where we sell to silicon designers and then there’s a phase of integration of chips when they come to the market. So what we expect this year is for those chips to come to market in the second half of the year. And we still expect full year growth in the low single digits in testing measurement. So overall, as Robert said, strong performance in marine, strong performance in environmental test and measurement.

A little weak here in Q1, but still expect full year growth in the low single.

Robert Mehrabian — Executive Chairman

That’s great. George mentioned various aspects. We still expect instrumentation to grow over 4% for the year.

Andrew Buscaglia — Analyst, BMP Paribas

Okay, thank you guys.

Operator

And the next question comes from the line of Jim Ricciuti with Needham and Company. Please proceed.

Jim Ricchiuti — Analyst, Needham And Company

Hi, thank you. Good morning. I know it’s probably early yet, but are you seeing signs of potential increases in your defense business just related to the conflict in Iran?

Robert Mehrabian — Executive Chairman

Yes, the variety of them. First, we are being approached by the government. Actually the government is making some investments. We haven’t announced it yet, but they’re making some investments in getting our capacities increased in certain specific areas, which I can’t go into until the releases are approved. Second, we’re seeing obviously increased demand for anything that has to do with drones and counter drones. And we’re also seeing some demand for underwater vehicles. There are a lot of inquiries right now, some orders, but we expect orders to really start picking up in the next six months.

Jim Ricchiuti — Analyst, Needham And Company

Got it. That’s helpful, Robert. Thank you. And just on the MA pipeline, just given valuation levels, are you still thinking the focus this year is going to be mainly tuck ins or is there the potential for something larger?

Robert Mehrabian — Executive Chairman

I think tuck ins first, maybe some mid size acquisitions like we did early in 2025. The larger ones, they come not that frequently and we’re looking at some obviously, but people are willing to pay some outrageous prices to get the revenue and we’ll have to see. But I would say the answer to your question specifically tuck ins first, mid size, second, larger. We’ll have to wait and see what fits our portfolio. We don’t want to go outside our portfolio too much in getting a very large acquisition and then have to do a whole new segment et Cetera, that’s not us.

So there we have.

Jim Ricchiuti — Analyst, Needham And Company

And mainly in the instrumentation, digital imaging, or are there still some potential opportunities in A and D?

Robert Mehrabian — Executive Chairman

I would say in all of our segments, probably, with the exception of engineered systems, where we’re not looking at acquisitions because it’s a business that’s growing and the government’s investing in that. So it’d be in almost all of our segments. Depends on what we get.

Guy Hardwick — Analyst, Barclays

Okay, thank you.

Robert Mehrabian — Executive Chairman

For sure.

Operator

The next question comes from the line of Jordan Lyones with Bank of America. Please proceed.

Jordan Lyonnais — Analyst, Bank Of America

Hey, good morning. Thank you for taking the question. On the growth that you guys called out for space, can you give us a sense if that is related to golden dome? And then two, just for the FY27 budget request, the 70 billion that they want for drone funding and the dawn program. How are you guys thinking about that? If that funding gets approved and for that much funding to come through, can you support those volumes for your own systems and as a supplier to everyone?

Robert Mehrabian — Executive Chairman

Yeah. Let me start by saying that right now, as Steve mentioned, and so did George, with investing in our businesses, Both from a CapEx, we’ve increased CapEx about 35% over last year in the first quarter and expect to keep doing that throughout the year. So we’re investing in capacity because we, frankly, our demand is larger than our capacity in certain areas, so we’re investing in that second. We’re also increasing some R and D expenditures. We increased R and D by $10 million just in the first quarter.

That’s to us, to me, that’s about 14 cents a share that we added in our investments because we think those are going to be good investments. There’s going to be good demand for them. Now, having said that, I’ll let George talk about Golden Dome. Right now, we’re pretty well set on tranche programs, the SDA tranche programs. We’ve won just about everything with minor exceptions here and there. So I don’t expect to get much more than that. But going to the Golden Dome, I’ll have George answer that.

George C. Bobb III — President and Chief Executive Officer

Sure. So I just as a follow on to that, what I would say is, you know, certainly on the tranche programs, as Robert mentioned, we’ve done very well there. And that’s what’s driven a lot of the growth on the infrared imaging space side of the business. And we think we’re very well positioned for Golden Dome as it evolves. Given the fact that we’ve been on all of these space development agency trucks programs,

Robert Mehrabian — Executive Chairman

We’ll see how much budget goes in there, in reality. Right. Asking for increased budgets is one thing, getting it is another. But eventually there will obviously be some monies. Either way, we’re ready. But right now, with what we have and what we’re seeing in terms of the book to Bill, we feel we should invest in our own businesses, which is very unusual for us at this point in the year.

Jordan Lyonnais — Analyst, Bank Of America

Thank you so much.

Robert Mehrabian — Executive Chairman

For sure.

Operator

The next question comes from the line of Joe Giordano with TD Cowan. Please proceed.

Joseph Giordano

Hi guys. Hi,

Robert Mehrabian — Executive Chairman

Joe.

Joseph Giordano

You had previously last quarter talked about your unmanned business. $500 million growing about 10%. I think the general view is that feels pretty conservative given recent events. Just curious for a bit of an update there and then if you can maybe talk about the subsea stuff specifically, like where are you position on potential trade of hormuz minesweeping? What types of products would that be for you? Just any sort of color you can give there on how that might materialize over the next couple quarters here.

Thank you.

Robert Mehrabian — Executive Chairman

Sure, sure. Okay, let’s start with the unmanned. As you know, we make unmanned systems, air, ground and subsea. I don’t know if there are many companies that are able to do all of that. Our unmanned air systems is growing very fast. Our Black Hornets, which are the nano drones, over the last bunch of years, including this year, just that one drone, Black Hornet 3. Now Black Hornet 4 will have revenues of about $500 million over that period, we expect. And we have received already orders for Black Hornet both in this country and some for Europe.

And of course, Middle Eastern conflict is demanding more. Second, we’ve introduced our rogue one, which is armed drone. We have our first contracts. Those would increase substantially with time. We have other systems coming along the way. And then if we go to sub C, we have different kinds of underwater drones. They’re not just any. We have, for example, gliders that can stay down very long periods of time and can go large distances. And then we also have our gavia vehicles, various ranges of it that go to different depths and those are the ones that are used for detecting mines and we have some nice orders for that in Europe.

Overall, I’d say I would remain with the 500 million for now. But it’s. Some of the pockets are growing higher than 10%. So broadly speaking, I think we are approaching almost $2 billion in revenue between defense, global defense, US defense drones, EW missiles, munitions, ET cetera. That’s a big chunk of our revenue for this year. It’s about 30 to 35% of the whole company. So you Know when you get that part of your portfolio growing that fast and you’re actually investing dollars the way we are, you know, we’ve always been kind of very cautious with our money.

That ought to tell you that we’re kind of bullish about this area.

Guy Hardwick — Analyst, Barclays

Thanks guys.

Operator

The next question comes from the line of Guy Hardwick with Barclays. Please proceed.

Guy Hardwick — Analyst, Barclays

Hi, good morning. Good morning, Robert. Just wonder if you could maybe update us on your margin outlooks, particularly in digital imaging where it seems that you’ve had a positive mix effect with the industrial and scientific cameras picking up.

Robert Mehrabian — Executive Chairman

I think as George mentioned and web mentioned a little bit, for the quarter our margin went up about 58 basis points. We’re projecting that to continue throughout the year. So we think will end up the year about 60 basis points above last year. And it’ll be led by Digital imaging at over 100 basis points, 105, 107 basis points, which is, you know, something that we’ve been striving for ever since the acquisition of FLIR. But now FLIR’s doing well and legacy digital imaging with also 82 is picking up.

So the margins overall would go about 60 basis points led by Digital Imaging. Aerospace and Defense is not far behind at about 70 basis points.

Guy Hardwick — Analyst, Barclays

And just generally talking about your say, long cycle versus short cycle trends, it sounds like you don’t think there’s a bump to the order book in the defense site. Yes, but perhaps in the next six months. Does that suggest a pretty good outlook for defence for next year rather than kind of an acceleration this year in terms of revenues?

Robert Mehrabian — Executive Chairman

No. I hope I didn’t give the impression that we don’t expect acceleration this year. We do because our orders are way up right now in our defense businesses. We expect it to pick up more. Mean to be greedy, but we expect it to pick up more in the next six months or so because of the use of munitions, the significant use of munitions in the Middle East. Having said that, we are already experiencing very strong defense orders across all of our portfolio from components to systems.

George C. Bobb III — President and Chief Executive Officer

Thank you.

Robert Mehrabian — Executive Chairman

For sure.

Operator

The next question comes from the line of John Godden with Citi. Please proceed.

Unidentified Participant

Hey guys, thank you for taking my question. I wanted to just ask or kick off with a big picture question about M and A and the strategy. A couple years ago we saw new issues, you know, IPOs, businesses being created that really focused on kind of roll ups and industrial roll ups with an aerospace and defense focus. More recently they’ve been that plus broader industrials as well. And you know, when you Think about the amount of new kind of industrial compounders, industrial roll ups, companies focused on finding niche highly engineered products, etc.

You know, it definitely feels a little more crowded today than maybe years ago. You guys started this theme. I mean, decades ago in the history books you started it, but, but even just one decade ago, you were ahead of many of the others. I wanted to just sort of take the temperature on the market at large. You know, are you rubbing up against competitors more? Is it harder to get deals done? Are sellers reshaping the processes in the face of, you know, different and maybe more buyers, you know, seeking the same opportunities?

I just feel like with, with all the IPL activity, it’s worth kind of level setting, recalibrating and taking your temperature.

Robert Mehrabian — Executive Chairman

Yeah, I don’t know. It’s a, it’s a very kind of difficult question to answer that. We’ve always had competition. Some of the. Let me begin somewhere else. In the last 12 months, 13 months, we’ve already spent $900 million in acquisitions. In the last 25 years, we’ve spent $12.8 billion in acquisitions, only 4 of it with our stock, so 10.8 of it with cash, which we generate. And in the last 12, 13 months, 900 million. So I think our. And we’ve made 75 acquisitions in the past 25 years. Yes, it’s getting crowded.

On the other hand, people that are conglomerates that are putting things together, they also have a tendency to put them together, then take them apart. If you look at various conglomerates, we’ve been the beneficiary of taking them apart. We’ve gotten a few businesses from conglomerates that suddenly decided, well, you know, this thing doesn’t fit, or we want to concentrate. So we’ve been getting some really nice carve outs in the recent past. We’ve always had competition, we’ll always have going forward.

That’s not what worries me. What worries me is the crazy prices that people have been willing to pay. Fortunately, some of that is switching over to this AI and data center domain and bless them, let them spend their money in that area and we will stick to the things we know. So I don’t, I don’t really see a lot of competition increases.

Unidentified Participant

Okay, that was great color. And if I could just sort of clarify some of the commentary on defense and maybe a little bit on airspace, but it’s very loud and clear that defense demand signals are strong, bookings are strong. You know, one of the challenges in the past, at different times with Teledyne, is that the bookings are strong, but it doesn’t necessarily translate into the immediate quarters. And there could be some confusion about kind of short versus long cycle exposure. When we see all these strong demand trends in defense, is that going to translate immediately?

Can you maybe just talk about the short cycle elements of your portfolio a little bit more? You mentioned munitions. I just want to make sure that we’re all kind of hearing that loud and clear, but also translating into the models the right way.

Robert Mehrabian — Executive Chairman

That’s a good question. That’s a very good question. Let me just say it’s mixed. Yes, some of our orders that we get are long, two, three, four years in duration. Some of our orders are yet to come because of the conflicts in, in the Middle East. And of course, there’s European growth in defense, where we’re getting some healthy orders. By and large, when we think about part of our portfolio growing 9, 10% organically, that’s very healthy. We haven’t had that for a while. On the other hand, I’m not going to be the one standing here and telling people that we’re going to grow 20% a year like I’ve heard others do.

That’s not us. It might happen if the munitions that are being used are replaced faster, but the government cycles are tedious even when there’s urgent need. So I would balance it to say that we do have the great backlog. We have about 4.6 billion in our backlog right now and those will translate into revenue. The good thing is that based on what we see both in the Middle east, but also European defense increases, as well as Ukraine conflict, as well as what’s happening in China and Taiwan. All of these directionally.

All of these things favor the portfolio that we’ve developed both in legacy Teledyne and of course with FLIR acquisition.

Unidentified Participant

That’s great. If I could slip in just one more related question on aerospace. I know your aerospace exposure is very small and your commercial aftermarket exposure is even smaller as a percentage of that, but is there any tea leaf reading there just on the back of what’s going on in the Middle East? High oil prices. It’s obviously much more topical with the companies that are more kind of aerospace, heavier. Aerospace, pure plays.

Robert Mehrabian — Executive Chairman

I’ll let George address that one, please.

George C. Bobb III — President and Chief Executive Officer

Yes, you mentioned that it’s a relatively smaller part of the business, which it is. It’s about 4% of our revenue, give or take. The business actually has split about 1/3 OEM, 2/3 aftermarket. And what we’ve seen in the aftermarket, the Aftermarket was healthy in Q1, so not seeing anything in the near term as a result of that conflict.

Guy Hardwick — Analyst, Barclays

Thanks, guys. Appreciate it.

George C. Bobb III — President and Chief Executive Officer

Good.

Operator

The next question comes from the line of Noah Poponak with Goldman Sachs. Please proceed.

Noah Poponak — Analyst, Goldman Sachs

Hey, good morning, everyone.

Robert Mehrabian — Executive Chairman

Morning, Noah.

Noah Poponak — Analyst, Goldman Sachs

Hey, Robert. Is it possible to state or quantify what short cycle industrial revenue growth was in the quarter and what defense revenue growth was in the quarter and then what’s in the full year 2026 Revenue Growth Guidance for each of those.

Robert Mehrabian — Executive Chairman

Right. Let me start with the government. We had a 9% growth in US government. We had in non US government total, we had another 4% growth. This is organic. Where we grew most also was in international domain. We had a little shrinkage in the US commercial, but we grew significantly internationally. What happened to us now is our international businesses have become 48% of our portfolio. Now 20 years ago that was less than 15%. So the growth’s been international and US government. US government being at 9% and international about 8.5%.

I don’t know whether I picked up everything you asked

Noah Poponak — Analyst, Goldman Sachs

And I guess what was. Do you. Are you able to quantify what growth was in short cycle Industrial? I guess as you’ve defined it during the downturn you experienced in machine vision, test and measurement, semiconductor? I guess I’m trying to get a sense for how much that recovered in the quarter in the 5% organic total company that you had.

Robert Mehrabian — Executive Chairman

Yeah, I think generally the short cycle grew at about lower single digits, 3 to 4% defense, high single digits. There’s a difference between machine vision and semiconductors. They’re very healthy. We had good growth there. On the other hand, we had a little shrinkage intestine measurement. So okay, the first quarter, that’s what we saw.

Noah Poponak — Analyst, Goldman Sachs

That helps. And I think you’ve discussed this a little bit. But just the revenue number you’re now providing for the full year, I think would require the organic to slow a bit through the rest of the year. Sounds like defense orders would suggest it can hold or accelerate. Maybe nine is just a tough law of large numbers starting point. And then it sounds like short cycle industrial still has room to accelerate. Why would total company organic not accelerate?

Robert Mehrabian — Executive Chairman

Well, you got me there. I’m a little conservative. NOAA as you know us to be, we expect revenue to keep growing throughout the year, year over year. We had growth in the first quarter, we expect growth in the second quarter, in the third and the fourth quarter. So when we, when I look at the rest of the year, in January, we thought the first half of the year would be 48% of the total. Second half, 52% of the total. We switched that. Now we think the second half would be a little less. And the reason for that is frankly it’s us a little conservatism and we think we’re going to have less benefit in the second half of the year from foreign exchange.

We got some nice benefits in the first half of the year. In Q1 we had about 2%. We think that will drop down to maybe 0.6 in Q2 and then we’re projecting zero in the last two quarters. Now if that were to flip. So when I look at the year we’re thinking now foreign exchange is going to contribute 0.6%, 0.5%. If that shifts, of course, our revenue would increase correspondingly. Some of the conservatives has to do with foreign exchange.

Noah Poponak — Analyst, Goldman Sachs

I understand. Last one for me is just on the instrumentation margin. Maybe you could just, maybe just talk about how you see that progressing through the rest of the year. And then I guess that segment had really nice margin expansion the last three or four years. Now we have this quarter. How should we think about the right kind of medium term a few years out instrumentation margin?

Robert Mehrabian — Executive Chairman

Let me start by saying historically our instrumentation margins have been the healthiest in the company. We think with progression through the year, this year our margins will keep increasing. I think this was our lowest margin quarter and primarily because of test and measurement, we think the margins will go up every quarter and we should end the year closer to 27.5% to get there. We’re projecting 29% margin in the fourth quarter for that segment. So as George said, our underwater vehicles don’t have as great a margin as do our test and measurement.

But we’re anticipating a comeback in our protocol analyzers. Our oscilloscopes are already doing well. So I think margins will increase as the year goes on.

Noah Poponak — Analyst, Goldman Sachs

Okay. Always appreciate your time. Thanks so much.

Robert Mehrabian — Executive Chairman

Thank you, Noah.

Operator

And the next question comes from the line of Rob Jamison with Vertical Research Partners. Please proceed.

Robert Jamieson — Analyst, Vertical Research Partners

Hey, good morning guys. Appreciate the caller this morning and thanks for taking my questions. Just a couple. Just on aerospace and defense margin, you know, much better in the quarter than I expected. Was just curious on the better expansion outlook for that quarter or for the for the segment versus last quarter. You know, was there anything mix related that we saw in this quarter or that you’re expecting through the rest of the year or is this more some of the cost efficiencies from the QOPTIC and acquisition integration?

Robert Mehrabian — Executive Chairman

I think I’ll Let George answer this but it has to do a lot to do with acquisitions.

George C. Bobb III — President and Chief Executive Officer

Yeah, that’s right. So I’d answer it maybe a couple ways. One on the acquisition side our playbook is pretty simple. We acquire companies at reasonable valuations and then we work to improve them. And we’ve really seen over the last year with the Keyoptic acquisition and the Micropac acquisition in the aerospace and defense electronics segment a lot of good work there on margin improvement. Also did benefit a little bit From Mix in Q1 we sell for example our avionics spares, some high reliability semiconductors, things like that that were somewhat better year for year but fundamentally I think you know, cost discipline, always improving the acquisitions and then yes a little bit of benefit from fix.

Robert Jamieson — Analyst, Vertical Research Partners

Perfect, thank you. And then just quick can I get a update on just how you’re thinking about free cash flow for the full year and then just with the increase in Capex investment that you called out as well, how should we think about that kind of in like the 2 1/2% of sales range for the year?

Robert Mehrabian — Executive Chairman

Let me start with free cash flow. We’ve been fortunate in the last in 2425 to generate over 1 billion in free cash flow. We expect that to happen again this year. First half is a little slower than that but I will pick it up the second half of the year because we’re spending more on Capex. Capex this year we’re projecting at about $150 million which is an increase versus last year and of course we’re spending a little more on inventory, we’re spending a little more on where we have some cautions approach to some of the product or supply chain that comes out of China with the restrictions.

And so we’re investing in some inventory, we’re investing in some machining facilities for germanium, etc. Having said all of that 115 capex over a billion in free cash flow. I hope we’ll get to 1.1 billion.

Jordan Lyonnais — Analyst, Bank Of America

Perfect. Thank you.

Operator

Thank you. This concludes question and answer session and I’d like to turn the call back over to management for closing remarks.

Robert Mehrabian — Executive Chairman

Thank you very much. I’ll ask Jason to conclude the conference call.

Jason VanWees — Vice Chairman

Thanks Robert. And again thanks to everyone for joining us today and of course if you have follow up questions please feel free to call me or send me an email. My number is on the earnings release. Thanks all. Bye.

Operator

This concludes today’s conference. You may disconnect your lines at this time and we thank you for your participation.