L3HARRIS TECHNOLOGIES, INC. /DE/
For the period ended Jan 2, 2026. Filed Feb 12, 2026.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2026 · Filed Feb 12, 2026
LHX$259.89+0.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2025-01-03; filed 2025-02-14.
0000202058-25-000023
ITEM 7. anagement’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2026-01-02; filed 2026-02-12.
0000202058-26-000015
ITEM 7. anagement’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 579 previous paragraphs and 156 current paragraphs.
34 unchanged; 94 reworded; 28 added; 198 removed; 253 previous and 0 current paragraphs rearranged.
Tables are not compared: 18 previous and 14 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (28)
Current report
On March 15, 2025, the President signed into law a full-year CR for GFY 2025, funding the government through September 30, 2025, with $893 billion for defense funding, including $851 billion for the DoW. This was in line with the 1% increase permitted by the caps under the Fiscal Responsibility Act of 2023 for GFY 2025. Notably, the CR provided funding at the account level, not the program level, allowing federal agencies more discretion with how they prioritize funding for programs.
Current report
On May 2, 2025, the White House released a preliminary GFY 2026 budget that included a flat national defense topline of $893 billion (including $849 billion for DoW) and included an additional $119 billion from reconciliation funding in 2026 for a total of approximately $1 trillion. The administration requested $557 billion for non-defense funding, down from $721 billion in GFY 2025, resulting in material funding declines for some agencies, including a $6 billion cut to NASA.
Current report
On July 4, 2025, the President signed Congress’ reconciliation package which included $155 billion for national defense spending to fund DoW priorities, including priorities closely aligned with L3Harris interests and opportunities, such as Golden Dome, munitions, and shipbuilding, $165 billion for Department of Homeland Security priorities, $12.5 billion for the Federal Aviation Administration (“FAA”) for air traffic control modernization efforts and $10 billion for NASA. The administration has stated that it expects departments and agencies will be able to access significant amounts of this additional funding in GFY 2026, specifically noting the expectation that the DoW will access $113 billion in GFY 2026. The reconciliation package also raises the debt ceiling by $5 trillion and enacts key changes to the federal tax code, further discussed under the “U.S. Federal Tax Reform” heading below.
Current report
On October 1, 2025, after Congress failed to reach an agreement on a short-term spending deal or full-year appropriation, the federal government experienced its longest shutdown on record, lasting 43 days. It was resolved with a CR lasting until January 30 th for agencies that did not yet have full-year appropriations.
Current report
The Commerce-Justice-Science appropriations bill, which provides funding for NASA and National Oceanic and Atmospheric Administration (“NOAA”), was signed into law on January 23, 2026. The bill provides $6 billion above the Administration’s GFY 2026 budget request for NASA and rejects the proposed termination of the Space Launch System (“SLS”) and Orion following the Artemis III mission and directs the inclusion of an SLS-based option in any competition for future Artemis launch services. The bill also provides $6 billion for NOAA, an increase of more than $1.5 billion above the Administration’s GFY 2026 request.
Current report
The final GFY 2027 National Defense Authorization Act (“NDAA”) was signed into law in December 2025. The NDAA provides authorization of appropriations for the DoW, nuclear weapons programs of the Department of Energy, and other defense-related activities. In addition to serving as an authorization of appropriations, the NDAA establishes defense policies and restrictions, and addresses organizational administrative matters related to the DoW.
Current report
Congress passed the Defense Appropriations bill on February 3, 2026, providing $859 billion for DoW programs, an increase of 1% or ~$9 billion over the President’s Budget Request. In addition, Congress provided just over $22 billion for the FAA via the Transportation-Housing and Urban Development bill, more than $1 billion above the GFY 2025 enacted level. This includes $4 billion in resources for facilities and equipment, nearly $1 billion more than the prior year.
Current report
Internationally, almost all NATO allies have committed to spend 5% of GDP annually over the next decade on defense and security-related expenditures, with 3.5% on core defense articles and another 1.5% on critical infrastructure, cyber and other key areas.
Current report
U.S. Federal Tax Reform
Current report
In third quarter 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted, introducing amendments to the U.S. federal income tax code, including permanent reinstatement of immediate expensing for domestic research expenditures, a reduction in the benefit of the R&D credit, restoration of full expensing for qualified machinery, equipment and other short-lived assets, and several modifications to existing international tax provisions. Certain provisions are effective for 2025, the effects of which have been recognized in third quarter 2025 and are reflected in the Consolidated Financial Statements and the Notes. Certain other provisions are effective in future fiscal years.
Current report
We continue to monitor and evaluate the potential impact of current and proposed changes in trade policies and in particular, tariffs. In response to enacted tariffs, we are seeking exemptions, evaluating alternative sources of materials and subcontracted components, as well as engaging in supplier negotiations to help manage cost impacts and are considering price adjustments and other strategies to support profitability. There was no material impact on our 2025 results.
Current report
Revenue. Revenue increased $540 million, or 3%, for fiscal 2025 compared to fiscal 2024 due to higher revenues across all of our segments excluding the impact of the CAS disposal group divestiture, primarily from higher volumes, including new program ramps, and increased international deliveries.
Current report
G&A expenses decreased $138 million, or 4%, for fiscal 2025 compared with fiscal 2024 primarily due to an increase in gains recognized in connection with the monetization of certain legacy end-of-life assets, lower LHX NeXt implementation costs, including lower third-party consulting expenses of $59 million, lower amortization of acquisition-related intangibles and merger, acquisition, and divestiture-related expenses, partially offset by an increase in business divestiture-related losses.
Current report
See “Item 1. Business” of this Report for a description of the sectors in each segment.
Current report
CS revenue increased in fiscal 2025 compared with fiscal 2024 primarily due to higher revenue of $179 million in Tactical Communications associated with increased international deliveries for our software-defined resilient communications equipment, partially offset by lower DoW demand, and higher revenue of $82 million in Broadband Communications from program ramps, including the Next Generation Jammer Electronic Warfare program. Such increases were partially offset by lower revenue of $40 million in PSPC from lower volume on civil communication products.
Current report
IMS revenue remained flat in fiscal 2025 compared with fiscal 2024 primarily due to lower revenue of $459 million from the CAS disposal group divestiture in first quarter 2025. Excluding the divestiture impact, IMS revenue increased $471 million, primarily due to higher revenues of $359 million in ISR from ramp on multiple classified programs and Airborne Early Warning and Control aircrafts for the Republic of Korea Air Force, $61 million in Maritime from new program ramp and $41 million in Targeting and Sensor Systems.
Current report
SAS operating income increased in fiscal 2025 compared with fiscal 2024 primarily due to stabilized program performance, an increase in gains of $23 million recognized in connection with the monetization of legacy end-of-life assets aligned with our transformation and value creation priorities and LHX NeXt driven cost savings, partially offset by unfavorable mix.
Current report
AR revenue increased in fiscal 2025 compared with fiscal 2024 primarily due to higher revenues of $235 million in Missile Solutions from increased production volume on key missile and munitions programs and new program ramp and $56 million in Space Propulsion & Power Solutions from higher volume on a NASA program.
Current report
AR operating income decreased primarily due to a $85 million non-cash charge for impairment of goodwill in connection with the Space Technology disposal group, partially offset by higher volume and LHX NeXt driven cost savings.
Current report
The $670 million change in net cash provided by investing activities in fiscal 2025 compared with net cash used in investing activities in fiscal 2024 was primarily due to a $547 million increase in proceeds from the sale of businesses in fiscal 2025 (see “Divestitures” section below), net of cash divested, and the absence of a $100 million contribution to our rabbi trust assets made in fiscal 2024.
Current report
The $858 million increase in net cash used in financing activities in fiscal 2025 compared with fiscal 2024 was primarily due to increases in repayments of long-term debt, net of issuances of $825 million, cash used to repurchase common stock of $600 million and a decrease in net repayments of commercial paper of $569 million in fiscal 2025. Our primary financing activities are further discussed below.
Current report
During fiscal 2024, we closed the issuance and sale of $2.25 billion aggregate principal amount of long-term fixed-rate debt consisting of 5.05% notes, due June 2029, 5.25% notes, due June 2031 and 5.35% notes, due June 2034 and used the proceeds to repay the entire outstanding $2.25 billion, variable rate-term loan facility utilized to finance the fiscal 2023 acquisition of TDL. Additionally, we closed the issuance and sale of the $600 million 5.50% 2054 Notes and repaid the $350 million of our 3.950% notes, due May 28, 2024.
Current report
As of January 2, 2026, we had $10.4 billion of outstanding long-term debt, net of current portion of $673 million.
Current report
We strategically manage our pension obligations by pursuing opportunities, to reduce exposure to pension volatility while maintaining financial flexibility. During fiscal 2025, we executed transactions to purchase nonparticipating single premium group annuity contracts and transfer $1.4 billion of our benefit obligation associated with certain U.S. or Canadian pension plans to insurance providers. The contracts were funded with $1.4 billion of associated plan assets and did not require any additional cash contributions. We expect to continue evaluating opportunities to strategically manage our pension obligations, including the potential for additional pension de-risking transactions in the future, subject to market conditions and plan funding levels. These actions align with our long-term strategy to reduce exposure to pension volatility while maintaining financial flexibility.
Current report
For the impacts of changes in estimates on our Consolidated Financial Statements, see “Business Segment Results of Operations” in this MD&A and Note 1: Significant Accounting Policies in the Notes.
Current report
Space Technology disposal group. For information related to the Space Technology disposal group pending divestiture, including goodwill allocation, impairment testing and resulting impairment see Note 6: Goodwill and Intangible Assets in the Notes.
Current report
See Note 6: Goodwill and Intangible Assets in these Notes for further information.
Current report
Fiscal 2024 Impairment Tests. We completed our annual goodwill impairment assessment for all reporting units as of September 30, 2024 and concluded that no impairment existed for any of the reporting units.
Removed paragraphs (198)
Previous report
financial condition and results of operations forfiscal 2024 compared with fiscal 2023. A discussion offiscal 2023
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Report.
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and 74%, infiscal 2024,2023 and 2022, respectively.
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On March 9, 2024, the President signed the first tranche of GFY 2024 appropriations funding bills into law,
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which funded six government agencies, including the National Aeronautics and Space Administration, the National
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Oceanic and Atmospheric Administration, and the Federal Aviation Administration, through the remainder of GFY
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2024 which ended on September 30, 2024. A second funding bill, signed into law on March 23, 2024, funded all
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remaining agencies, including the DoD, through the remainder of GFY 2024. The bill provided approximately
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$844 billion in funding for DoD. This was in line with our expectations for 3% growth for defense over GFY 2023
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levels and in line with the first year of the Fiscal Responsibility Act of 2023 (“FRA”) caps.
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On March 11, 2024, the President’s Budget Request for GFY 2025 was released. The DoD requested
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$850 billion, a 1% topline increase consistent with the FRA caps.
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On April 24, 2024, the President signed into law a supplemental GFY 2024 appropriations package that included
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$67 billion in funding for key DoD programs, bringing the DoD funding for GFY 2024 to$911 billion.
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Congress has not yet reached a final agreement on GFY 2025 funding. A short-term CR was enacted on
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December 21, 2024 that will fund the U.S. Government until March 14, 2025. While operating under a CR,
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government agencies are allocated a portion of GFY 2024 enacted funds, and DoD is prohibited from starting new
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programs. If Congress does not enact all 12 GFY 2025 appropriations bills by April 30, 2025, a 1% automatic
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sequestration cut will go into effect as mandated by the FRA.
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Further complicating the budget outlook is the need to raise the debt ceiling in 2025. Congressional inaction
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may lead to a default and potentially create economic instability.
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The macroeconomic environment continues to present challenges, which have impacted our business and may
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continue to impact our future results. The ongoing uncertainty relates to the impacts of inflation, interest rates and
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ongoing federal deficits, which could raise the cost of borrowing for the federal government impacting U.S.
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capabilities across our domains.
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Infiscal 2024, we made considerable progress with our LHX NeXt initiative, our targeted three-year program
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Revenue. As described in more detail in Note 13: Acquisitions and Divestitures and elsewhere in the Notes,
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during fiscal 2024 and 2023, we completed certain business divestitures. There was no significant revenue
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attributable to divested businesses.
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Products revenue. The following table presents products revenue by segment, net of intersegment:
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Products revenue forfiscal 2024 increased $1,440 million, due tothe inclusion of a full year ofproducts revenue
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from AR, rather than a partial year of revenue in fiscal 2023(“the AR Partial Year”)following the July 28, 2023
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acquisition of Aerojet Rocketdyne Holdings, Inc.(“AJRD”), as well asincreased products revenues of$441 million
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and$264 million at CS and IMS, respectively, partially offset by decreased products revenue of$91 million at SAS.
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Services revenue. The following table presents services revenue by segment, net of intersegment:
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Services revenue forfiscal 2024 increased $466 million, from the inclusion of a full year of services revenue
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from AR rather thanthe AR Partial Year, as well asincreased services revenue of$101 million at SAS, partially offset
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by decreased services revenues of$68 million and$36 million at CS and IMS, respectively.
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See the “Business Segment Results of Operations” discussion below in this MD&A for further information.
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Cost of Revenue.
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Reworded paragraphs (94)
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The following Management’s Discussion and Analysis (“MD&A”) is intended to assist in an understanding of our
Current wording
The following Management’s Discussion and Analysis (“MD&A”) is intended to assist in an understanding of our financial condition and results of operations for fiscal 2025 compared with fiscal 2024. A discussion of fiscal 2024 compared to fiscal 2023 can be found in Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended January 3, 2025 (our “Fiscal 2024 Form 10-K”). This MD&A is provided as a supplement to, should be read in conjunction with and is qualified in its entirety by reference to, our Consolidated Financial Statements and accompanying Notes appearing elsewhere in this Report. Except for the historical information contained herein, the discussions in this MD&A contain forward-looking statements that involve risks and uncertainties. Our future results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in Part I. Item 1A. Risk Factors of this Report. For additional information, see Part I. Item 1. Business - Cautionary Statement Regarding Forward-Looking Statements of this Report.
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We are the Trusted Disruptor in the defense industry. With customers’ mission-critical needs in mind, we deliver
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We are the Trusted Disruptor in the defense industry. With customers’ mission-critical needs in mind, we deliver end-to-end technology solutions connecting the space, air, land, sea and cyber domains in the interest of national security. We support customers in more than 100 countries, with our largest customers being various departments and agencies of the U.S. Government, their prime contractors and international allies. Our capabilities have defense and civil government applications, as well as commercial applications. As of January 2, 2026, we had approximately 45,000 employees, including approximately 18,000 engineers and scientists.
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serve, and we report our financial results in four business segments: SAS, IMS, CS and AR. See Note 14: Business
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We structure our operations primarily around the capabilities we provide and we report our financial results in four business segments: CS, SAS, IMS, and AR. Revenue is disaggregated at the segment level into categories that the Chief Operating Decision Maker (“CODM”) believes best depict the nature, amount, timing, and uncertainty of revenue and cash flows. These categories do not distinguish between product and service revenue because management evaluates the business on a combined, consolidated revenue and cost of revenue basis. The CODM, as well as segment management, are not provided with and do not review revenue or cost of revenue disaggregated between products and services at the segment or sector level; accordingly, this information is not used in resource allocation decisions. Accordingly, and because we do not believe such disaggregation assists in an understanding of our financial condition and results of operations, product and service revenue and the related cost of revenue are not disaggregated herein. See Note 14: Business Segments in the Notes for further information regarding our business segments.
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The percentage ofour revenue that was derived from sales to U.S. Government customers, including foreign
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The percentage of our revenue that was derived from sales to U.S. Government customers, whether directly or through prime contractors, including foreign military sales funded through the U.S. Government, was 75%, 76% and 76%, in fiscal 2025, 2024 and 2023, respectively.
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The overall defense spending environment, both in the U.S. and internationally, reflects the continued impacts of
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The overall defense spending environment, both in the U.S. and internationally, reflects the continued impacts of global conflicts and geopolitical tensions, and changes to U.S. Government or international spending priorities have and could in the future impact our business.
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For a discussion of U.S. Government funding risks and international business risks see “Item 1. Business -
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For a discussion of U.S. Government funding risks and international business risks see “Item 1. Business - International Business,” “Item 1A. Risk Factors” and Note 15: Legal Proceedings, Commitments and Contingencies in the Notes of this Report.
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Government spending priorities and the demand for our products. For a discussion of inflation-related risks, see
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The ongoing uncertainty related to the impacts of inflation, as well as the interest rate environment and ongoing federal deficits could in the future impact U.S. Government spending priorities for our products and services. For a discussion of inflation-related risks, see “Item 1A. Risk Factors” of this Report.
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As a proven alternative to traditional primes and new entrants, our flexible business model allows us to operate
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As a proven alternative to traditional primes and new entrants, our flexible business model allows us to operate as either a prime, merchant supplier, or subcontractor, offering both commercial pricing and traditional government acquisition approaches. Our products are used across many customer platforms and this platform-agnostic approach gives us a unique advantage in rapidly adapting to the changing threat environment while effectively partnering with new entrants and non-traditional contractors. Customer demand for our solutions remains robust, and we ended fiscal 2025 with contractual backlog of $38.7 billion, a 13% increase over the prior year. Also in fiscal 2025, we invested $536 million (2% of total revenue) in company-funded R&D focused on technologies that expand our capabilities across our domains.
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designed to enhance organizational agility and performance by leveraging our scale and relationships across
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In fiscal 2025, we continued to make progress with our LHX NeXt initiative, our targeted program designed to enhance organizational agility and performance by leveraging our scale and relationships across segments, driving operational efficiency and competitiveness for the enterprise. We are investing in enterprise tools and optimized, revamped processes to unlock further opportunities for margin expansion and create additional value for our shareholders. Beginning fiscal 2026, LHX NeXt will be fully integrated within our operations as standard practice, with ongoing cost savings measured as operational improvement, which we refer to as e3 (excellence, everywhere, everyday).
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Our strategic priorities continue to be performance, growth and innovation. We plan to continue to invest,
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Our strategic priorities continue to be performance, growth and innovation. We plan to continue to invest, consistent with profitable growth opportunities, and sustain our culture of innovation, while delivering on our commitments to investors, our customers and on every contract we are awarded. We intend to accomplish this by:
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•Focusing on profitable growth while securing strategic positions as a primeor subcontractor; and
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•Focusing on profitable growth while securing strategic positions as a prime or subcontractor; and
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We use the following key financial performance measures to manage our business, which are discussed in detail
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We use the following key financial performance measures to manage our business, which are discussed in detail below in the “Operations Review” and “Liquidity and Capital Resources” sections of this MD&A:
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We use these measures, along with other performance measures that are not defined by U.S. Generally
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We use these measures, along with other performance measures that are not defined by U.S. Generally Accepted Accounting Principles (“GAAP”), to assess the success of our business and our ability to create shareholder value. We believe these measures are balanced among long-term and short-term performance, growth and innovation. We also use these and other performance metrics for executive compensation purposes.
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Gross margin as a percentage of revenue remained flat compared tofiscal 2023. For discussion of operating income
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Gross Margin. Gross margin for fiscal 2025 increased compared to fiscal 2024, largely due to higher volumes, primarily in our AR and CS segments, partially offset by a $204 million decrease reflecting the absence of the CAS disposal group as a result of the March 2025 divestiture. Gross margin as a percentage of revenue remained flat compared to fiscal 2024. For discussion of operating income by segment see “Business Segment Results of Operations” below in this MD&A for further information.
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(1)Costs associated with transforming multiple functions, systems and processes to increase agility and competitiveness, including third-party
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(1)Includes costs associated with transforming multiple functions, systems and processes to increase agility and competitiveness, including third-party consulting, workforce optimization and incremental IT expenses for implementation of new systems. See Note 14: Business Segments in the Notes and the “Operating Environment, Strategic Priorities and Key Performance Measures” section for more detail on our LHX NeXt initiative and implementation costs.
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unallocated corporate expenses, such as a portion of management and administration, legal, environmental, compensation, retiree benefits
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(3)Includes a portion of management and administration, legal, environmental, compensation, retiree benefits, the FAS/Cost Accounting Standards (“CAS”) operating adjustment (as defined in Note 1: Significant Accounting Policies), eliminations and other.
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(3)Includes other segment G&A expenses such as payroll and benefits, outside services, facilities, insurance and other expenses, as well as
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(4)Includes other segment G&A expenses, primarily payroll and benefits, outside services, facilities and insurance.
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Impairment of Goodwill and Other Assets. In fiscal 2024, we recognized a$14 million non-cash charge for
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Impairment of Goodwill and Other Assets. In fiscal 2025, we recognized a $85 million non-cash charge for impairment of goodwill in connection with execution of the agreement to sell a newly established technology company, consisting of certain product lines of our SPPS sector (“SPPS business”), reported in our AR segment, and our Space Avionics & Communications division (“SA&C business”), reported in our IMS segment (collectively, the “Space Technology disposal group”), as discussed in Note 13: Acquisitions and Divestitures. In fiscal 2024, we recognized a $14 million non-cash charge for impairment of goodwill in connection with the divestiture of our antenna and related businesses (“Antenna disposal group”) and a $24 million non-cash charge for impairment of other assets in our CS segment associated with the Tactical Data Links (“TDL”) acquisition.
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Non-service FAS Pension Income and Other, Net. The following table presents the components of non-service
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Non-service FAS Pension Income and Other, Net. The following table presents the components of non-service FAS pension income and other, net:
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components of net periodic benefit income under our defined benefit plans. See Note 9: Retirement Benefits in the Notes for more
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(1)Includes the non-service cost components of net periodic benefit income under our defined benefit pension and other postretirement benefit plans (collectively, “defined benefit plans”). See Note 9: Retirement Benefits in the Notes for further information.
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(2)Other, net primarily includes changes in the market value of our rabbi trust assets, gains and losses on our equity investments in
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(2)Primarily includes gains and losses on our equity investments in nonconsolidated affiliates and royalty income.
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Interest Expense, Net. Our net interest expense increased $132 million infiscal 2024 compared with fiscal 2023
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Interest Expense, Net. Our net interest expense decreased $78 million, or 12%, in fiscal 2025 compared with fiscal 2024 primarily due to lower average outstanding notes under our commercial paper program (“CP Program”)
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discussion below in this MD&A and Note 8: Debt and Credit Arrangements in the Notes for further information.
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during 2025. See the “Liquidity and Capital Resources” discussion below in this MD&A and Note 8: Debt and Credit Arrangements in the Notes for further information.
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effective tax rate for both years benefited from R&D credits, tax deductions for foreign derived intangible income
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Income Taxes. Our effective tax rate increased to 16.9% in fiscal 2025 compared with 5.3% in fiscal 2024. The increase in effective tax rate (“ETR”) for fiscal 2025 was primarily due to a state legislative change that required us to establish a valuation allowance on state R&D credit carryforwards, the CAS disposal group divestiture, and the enactment of the OBBBA, representing unfavorable impacts of 3.9%, 2.4% and 1.8%, respectively. Our ETR for both years benefited from favorable impacts of R&D credits, favorable resolution of audit uncertainties, and tax deductions for foreign derived intangible income (“FDII”). See Note 7: Income Taxes in the Notes for further information.
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income from the combined effects of reasons noted in the sections above, notably the absence of a prior year CAS
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Diluted EPS. Diluted EPS increased 8% in fiscal 2025 compared with fiscal 2024 primarily due to higher net income from the combined effects of reasons noted in the sections above.
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communications; integrated vision solutions; and public safety radios, system applications and equipment. See
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CS. Our CS segment includes software defined communication products and waveforms for domestic and international customers; broadband communications; integrated vision solutions; and public safety radios, system applications and equipment.
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CS segment operating income increased infiscal 2024 compared with fiscal 2023 primarily due to LHX NeXt
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CS segment operating income increased in fiscal 2025 compared with fiscal 2024 primarily due to LHX NeXt driven cost savings realized during fiscal 2025 and the absence of a $24 million non-cash charge for impairment of other assets at Broadband Communications that occurred in fiscal 2024 related to the TDL acquisition, partially offset by unfavorable mix associated with a higher proportion of domestic development volume.
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IMS. Our IMS segment includes ISR; passive sensing and targeting; electronic attack; autonomy; power and
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IMS. Our IMS segment includes multi-mission ISR systems; passive sensing and targeting; electronic attack platforms; autonomy; power and communications; networks; and the CAS disposal group, which includes aviation products and pilot training operations and was divested on March 28, 2025.
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monetization of legacy end of life assets, aligned with our transformation and value creation priorities, in addition to
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IMS operating income decreased in fiscal 2025 compared with fiscal 2024 primarily due to a $104 million decrease from the CAS disposal group divestiture in first quarter 2025 and unfavorable program performance, including negative estimate at completion (“EAC”) adjustments of $38 million on a classified Maritime program and $25 million from the resolution of a contract matter related to lower utilization on the Canadian Maritime Helicopter Program as it nears completion. Such decreases were largely offset by a $75 million gain recognized in the second quarter of fiscal 2025 in connection with monetization of legacy end-of-life assets, aligned with our transformation and value creation priorities, higher volume, favorable mix impact from higher airborne electro-optical sensors volume and LHX NeXt driven cost savings.
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SAS. Our SAS segment includes space payloads, sensors and full-mission solutions; classified intelligence and
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SAS. Our SAS segment includes satellites and space payloads, sensors and full-mission solutions; classified intelligence and cyber; airborne combat systems, and mission networks for air traffic management operations.
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million in Intel & Cyber, primarily from program growth and$82 million in Mission Networks from higher volumes,
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SAS revenue increased in fiscal 2025 compared with fiscal 2024 due to higher revenue of $375 million in Mission Networks from higher FAA volume, offset by lower revenues of $166 million in Space Systems from lower volume associated with program timing, $129 million in Intel & Cyber from lower classified program volume and $76 million in Airborne Combat Systems from the May 2024 Antenna disposal group divestiture.
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defense, and hypersonic and tactical systems; and space propulsion and power systems for national security space
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AR. Our AR segment includes missile solutions with propulsion technologies for strategic defense, missile defense, hypersonic, tactical and fuzing systems; and space propulsion and power systems for national security space and exploration missions.
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included in management’s evaluation of segment operating performance.
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Unallocated Corporate Items. Unallocated corporate items include income and expenses not included in management’s evaluation of segment operating performance.
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(2)Includes amortization of intangible assets acquired in connection with business combinations. Because our acquisitions benefit the entire
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(1)Includes amortization of intangible assets acquired in connection with business combinations. Because our acquisitions benefit the entire Company, the amortization was not allocated to any segment.
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third-party consulting, workforce optimization and incremental IT expenses for implementation of new systems. For further information on
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(2)Includes costs associated with transforming multiple functions, systems and processes to increase agility and competitiveness, including third-party consulting, workforce optimization and incremental IT expenses for implementation of new systems. For further information on our LHX NeXt initiative and implementation costs see Note 14: Business Segments in the Notes and the “General and Administrative Expenses” discussion above in this MD&A.
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regarding the FAS/CAS operating adjustment.
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(4)Includes a portion of management and administration, legal, environmental, compensation, retiree benefits, the FAS/CAS operating adjustment (as defined in Note 1: Significant Accounting Policies), eliminations and other.
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We prioritize cash flow generation through our commitment to operational excellence, efficient balance sheet
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We prioritize cash flow generation through our commitment to operational excellence, efficient balance sheet management and continuous cost reduction efforts. We consistently assess various capital deployment options, considering both our long-term outlook and the evolving market conditions, recognizing the importance of adaptability as market dynamics change over time.
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Our primary capital deployment priorities involve a focus on funding the business, including investing intraining,
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Our primary capital deployment priorities involve a focus on funding the business through capital expenditures, including investing in training, facilities and digital infrastructure, debt repayment and returning cash to our shareholders through dividends and share repurchases.
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foreign subsidiaries, a significant portion of which we believe can be repatriated to the U.S. with minimal tax cost.
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As of January 2, 2026, we had cash and cash equivalents of $1,069 million, of which $356 million was held by our foreign subsidiaries, a significant portion of which we believe can be repatriated to the U.S. with minimal tax impact.
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Program, we may issue unsecured commercial paper notes up to a maximum aggregate amount of$3.0 billion. From
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CP Program. As of January 2, 2026, we had no outstanding notes under our CP Program. Our CP Program serves as a source of short-term financing under which we may issue unsecured commercial paper notes up to a maximum aggregate amount of $3.0 billion, supported by amounts available under our credit facilities, discussed below. From time to time, we use borrowings under the CP Program for general corporate purposes and working capital management, including the funding of acquisitions, debt repayment, dividend payments and repurchases of our common stock. See the “Financing Activities” discussion below in this MD&A for further information about our CP Program.
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Rearranged previous paragraphs (253)
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compared tofiscal 2022 can be found in Part II. Item 7. Management's Discussion and Analysis of Financial
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Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended
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December 29, 2023 (our “Fiscal 2023 Form 10-K”). This MD&A is provided as a supplement to, should be read in
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conjunction with and is qualified in its entirety by reference to, our Consolidated Financial Statements and
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accompanying Notes appearing elsewhere in this Report. Except for the historical information contained herein, the
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discussions in this MD&A contain forward-looking statements that involve risks and uncertainties. Our future results
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could differ materially from those discussed herein. Factors that could cause or contribute to such differences
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include, but are not limited to, those discussed in Part I. Item 1A. Risk Factors of this Report. For additional
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information, see Part I. Item 1. Business - Cautionary Statement Regarding Forward-Looking Statements of this
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end-to-end technology solutions connecting the space, air, land, sea and cyber domains in the interest of global
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security. We support government customers in more than 100 countries, with our largest customers being various
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departments and agencies of the U.S. Government, their prime contractors and international allies. Our products and
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services have defense and civil government applications, as well as commercial applications. As of January 3, 2025,
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we had approximately 47,000 employees, including approximately 18,000 engineers and scientists.
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Segments in the Notes for further information regarding our business segments.
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military sales funded through the U.S. Government, whether directly or through prime contractors, was 76%,76%
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global conflicts and geopolitical tensions, and changes to U.S. Government or international spending priorities have
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and could in the future impact our business.
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International Business,” “Item 1A. Risk Factors” and “Item 3. Legal Proceedings” of this Report.
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“Item 1A. Risk Factors” of this Report.
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as either a prime, merchant supplier, or subcontractor, offering both commercial pricing and traditional government
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acquisition approaches. Our products are used across many customer platforms and this platform-agnostic
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approach gives us a unique advantage in rapidly adapting to the changing threat environment while effectively
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partnering with new entrants and non-traditional contractors. Customer demand for our solutions remains robust,
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and we ended fiscal 2024 with backlog of$34.2 billion, a 5% increase over the prior year. Also infiscal 2024, we
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invested$515 million (2% of total revenue) in company-funded R&D focused on technologies that expand our
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segments, driving operational efficiency and competitiveness for the enterprise. With this program we are investing
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in enterprise tools and optimized, revamped processes to unlock further opportunities for margin expansion and
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create additional value for our shareholders.
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consistent with profitable growth opportunities, and sustain our culture of innovation, while delivering on our
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commitments to investors, our customers and on every contract we are awarded. We intend to accomplish this by:
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below in the “Operations Review” and “Liquidity and Capital Resources” sections of this MD&A:
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Accepted Accounting Principles (“GAAP”), to assess the success of our business and our ability to create
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shareholder value. We believe these measures are balanced among long-term and short-term performance, growth
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and innovation. We also use some of these and other performance metrics for executive compensation purposes.
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by segment see “Business Segment Results of Operations” below in this MD&A for further information.
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consulting, workforce optimization and incremental ITexpenses for implementation of new systems.
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impairment of goodwill in connection with the divestiture of our antenna and related businesses (“Antenna disposal
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FAS pension income and other, net:
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information on the composition of non-service FAS pension income.
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