Leonardo DRS Announces Financial Results for Third Quarter 2026

The 2026 outlook now assumes a 13.0% tax rate, down from 16.5% previously.

Rhea-AI Summary

Leonardo DRS (DRS) reported third-quarter 2026 revenue growth of 11% year over year and raised its full-year financial outlook. Revenue reached $1,066 million, while net earnings rose 60% to $115 million and diluted earnings per share increased 65% to $0.43. Adjusted EBITDA, a non-GAAP earnings measure, rose 27% to $149 million, with its margin reaching 14.0%.

Quarterly bookings totaled $1,639 million, and funded backlog reached $5.6 billion, up 21% year over year. Both operating segments increased revenue and operating earnings. The company now expects 2026 revenue of $3,950 million–$3,985 million and adjusted diluted earnings per share of $1.50–$1.53. Quarterly operating cash flow and free cash flow declined year over year to $96 million and $61 million, respectively. A regular $0.09-per-share dividend is payable November 25, 2026, to holders of record November 12.

39 points · 1 major

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0 major · 6 points

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Positive

• Major point. Forward-looking: it has not happened yet and may not happen.2026 revenue guidance raised to $3,950 million–$3,985 million, from $3,900 million–$3,975 million.
• Moderate pointThird-quarter revenue increased 11% year over year to $1,066 million.
• Moderate pointThird-quarter net earnings increased 60% year over year to $115 million.
• Moderate pointThird-quarter net margin expanded 330 basis points to 10.8% year over year.
• Moderate pointThird-quarter adjusted EBITDA increased 27% year over year to $149 million.
• Moderate point. Forward-looking: it has not happened yet and may not happen.2026 tax-rate outlook lowered to 13.0% from 16.5%.
• Moderate pointThird-quarter bookings reached $1,639 million, versus $1,307 million a year earlier. 17% of market cap
• Moderate pointFunded backlog reached a record $5.6 billion, up 21% year over year.

31 minor points

• Minor pointThird-quarter diluted earnings per share increased 65% year over year to $0.43.
• Minor pointThird-quarter adjusted EBITDA margin expanded 180 basis points to 14.0% year over year.
• Minor pointThird-quarter adjusted diluted earnings per share increased 59% year over year to $0.46.
• Minor point. Forward-looking: it has not happened yet and may not happen.2026 adjusted EBITDA guidance raised to $545 million–$555 million, from $525 million–$540 million.
• Minor point. Forward-looking: it has not happened yet and may not happen.2026 adjusted diluted earnings-per-share guidance raised to $1.50–$1.53, from $1.34–$1.39.
• Minor pointThird-quarter orders relative to revenue reached 1.5x, versus 1.4x a year earlier.
• Minor pointAdvanced Sensing and Computing third-quarter revenue rose 14% year over year to $659 million.
• Minor pointAdvanced Sensing and Computing third-quarter operating earnings rose 27% year over year to $57 million.
• Minor pointAdvanced Sensing and Computing third-quarter operating margin expanded 80 basis points to 8.6% year over year.
• Minor pointAdvanced Sensing and Computing third-quarter bookings reached $1,017 million, versus $757 million a year earlier.
• Minor pointAdvanced Sensing and Computing third-quarter adjusted EBITDA rose 22% year over year to $78 million.
• Minor pointAdvanced Sensing and Computing third-quarter adjusted EBITDA margin rose 80 basis points to 11.8% year over year.
• Minor pointIntegrated Mission Systems third-quarter revenue rose 12% year over year to $428 million.
• Minor pointIntegrated Mission Systems third-quarter operating earnings rose 33% year over year to $64 million.
• Minor pointIntegrated Mission Systems third-quarter operating margin expanded 250 basis points to 15.0% year over year.
• Minor pointIntegrated Mission Systems third-quarter bookings reached $622 million, versus $550 million a year earlier.
• Minor pointIntegrated Mission Systems third-quarter adjusted EBITDA rose 34% year over year to $71 million.
• Minor pointIntegrated Mission Systems third-quarter adjusted EBITDA margin rose 280 basis points to 16.6% year over year.
• Minor pointNine-month revenue increased 9% year over year to $2,825 million.
• Minor pointNine-month net earnings increased 49% year over year to $263 million.
• Minor pointNine-month diluted earnings per share increased 51% year over year to $0.98.
• Minor pointNine-month net margin expanded 250 basis points to 9.3% year over year.
• Minor pointNine-month adjusted EBITDA increased 29% year over year to $382 million.
• Minor pointNine-month adjusted EBITDA margin expanded 210 basis points to 13.5% year over year.
• Minor pointNine-month adjusted diluted earnings per share increased 47% year over year to $1.07.
• Minor pointNine-month bookings reached $3,609 million, versus $3,151 million a year earlier.
• Minor pointNine-month operating cash flow improved to $65 million, from $59 million used a year earlier.
• Minor pointAdvanced Sensing and Computing nine-month revenue rose 11%; operating earnings rose 36% year over year.
• Minor pointIntegrated Mission Systems nine-month revenue rose 10%; operating earnings rose 34% year over year.
• Minor pointLong-term debt declined to $165 million at September 30, 2026, from $321 million at December 31, 2025.
• Minor pointShort-term borrowings and current long-term debt declined to $10 million, from $26 million at year-end 2025.

Negative

• Moderate pointThird-quarter operating cash flow fell year over year to $96 million, reflecting higher working-capital cash use.
• Moderate pointCash declined to $294 million at September 30, 2026, from $647 million at December 31, 2025.
• Moderate pointRaft acquisition remains pending; 2026 guidance excludes it.
• Minor pointThird-quarter free cash flow fell year over year to $61 million.
• Minor pointThird-quarter general and administrative expenses increased to $142 million, from $123 million a year earlier.
• Minor pointNine-month capital expenditures increased to $97 million, from $90 million a year earlier.

News Explained

The raised 2026 outlook excludes pending Raft LLC; the company also spent approximately twelve million dollars repurchasing common shares.

During the third quarter, Leonardo DRS repurchased 288,633 common shares for approximately $12 million, using company cash for the completed buyback.

The raised 2026 guidance excludes the pending acquisition of Raft LLC, so it does not incorporate that transaction.

Key Figures

Revenue: $1,066 million; +11% year over year Net earnings: $115 million; +60% year over year Diluted EPS: $0.43; +65% year over year +5 more

Revenue

$1,066 million; +11% year over year

Third quarter 2026

Net earnings

$115 million; +60% year over year

Third quarter 2026

Diluted EPS

$0.43; +65% year over year

Third quarter 2026

Bookings

$1,639 million; 1.5x book-to-bill

Three months ended September 30, 2026

Funded backlog

$5,640 million; +21% year over year

At quarter end

2026 revenue guidance

$3,950 million–$3,985 million

Raised from $3,900 million–$3,975 million

2026 Adjusted EBITDA guidance

$545 million–$555 million

Raised from $525 million–$540 million

2026 Adjusted Diluted EPS guidance

$1.50–$1.53

Raised from $1.34–$1.39

Previous Earnings Reports

5 past events · Latest: Jul 30

Same Type 5 events

1. Jul 30

   Q2 earnings

   24h Move

   -2.0%

   Revenue and earnings grew, and the company raised adjusted EBITDA and EPS guidance.

2. May 05

   Q1 earnings

   24h Move

   -0.8%

   Revenue, net earnings, adjusted EBITDA and adjusted diluted EPS increased year over year.

3. Feb 24

   Q4 earnings

   24h Move

   +14.9%

   The company reported 2025 results and initiated 2026 revenue and adjusted EPS guidance.

4. Oct 29

   Q3 earnings

   24h Move

   -4.4%

   Revenue, net earnings, adjusted EBITDA and adjusted diluted EPS increased year over year.

5. Jul 30

   Q2 earnings

   24h Move

   -10.3%

   Revenue, earnings and per-share results increased, and the company revised 2025 guidance upward.

24h Move is the share-price change in the day after each event; other market factors may also have contributed.

Key Terms

non-gaap financial measures, book-to-bill ratio, free cash flow, diluted weighted average number of shares outstanding

4 terms

non-gaap financial measures financial

"Adjusted EBITDA and Adjusted Diluted EPS are non-GAAP financial measures"

Non-GAAP financial measures are numbers companies use to show their financial performance that exclude certain expenses or income. They help investors see how the company might perform without one-time costs or other unusual items, giving a different perspective from official reports. However, since they can be adjusted, they don’t always tell the full story and should be looked at alongside standard financial figures.

book-to-bill ratio financial

"representing a 1.5x book-to-bill ratio"

The book-to-bill ratio compares the value of new orders a company receives to the value of products it ships out or bills for over a certain period. If the ratio is above 1, it means the company is getting more orders than it is completing, which can indicate growth. If it's below 1, it suggests demand is slowing down.

free cash flow financial

"The company’s free cash flow generation was $61 million in the quarter."

Free cash flow is the amount of money a company has left over after paying all its expenses and investing in its business, like buying equipment or updating facilities. It shows how much cash is available to reward shareholders, pay down debt, or save for future growth. This helps investors understand if a company is financially healthy and able to grow.

View in glossary

diluted weighted average number of shares outstanding financial

"Diluted weighted average number of shares outstanding (WASO)"

The diluted weighted average number of shares outstanding is the time-weighted average number of common shares for a reporting period after adding the incremental shares that would be issued from all dilutive potential common securities (for example, stock options, warrants, convertible debt and convertible preferred stock). Companies calculate it by starting with the basic weighted-average shares and then applying standard methods—commonly the treasury-stock method for options and warrants and the if-converted method for convertible instruments—to estimate how many additional shares those instruments would create; securities that would be anti-dilutive for the period are excluded. It is the denominator used to compute diluted earnings per share and therefore reflects a hypothetical share count assuming conversion of all instruments that would reduce reported EPS.

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• Revenue: $1.1 billion, up 11% year-over-year
• Net Earnings: $115 million, up 60% year-over-year
• Adjusted EBITDA: $149 million, up 27% year-over-year
• Diluted EPS: $0.43, up 65% year-over-year
• Adjusted Diluted EPS: $0.46, up 59% year-over-year
• Bookings: $1.6 billion (book-to-bill ratio of 1.5x)
• Record Funded Backlog: $5.6 billion, up 21% year-over-year
• Raises 2026 guidance for Revenue, Adjusted EBITDA and Adjusted Diluted EPS
• Dividend: Company declares cash dividend of $0.09 per share to be paid on November 25, 2026
  
  

ARLINGTON, Va., Oct. 29, 2026 (GLOBE NEWSWIRE) -- Leonardo DRS, Inc. (Nasdaq: DRS), a leading provider of advanced defense technologies, today reported financial results for the third quarter 2026, which ended September 30, 2026.

CEO Commentary
“Leonardo DRS delivered a strong third quarter, with 11% organic revenue growth and profitability growing even faster. Bookings exceeded $1.6 billion, representing a 1.5x book-to-bill ratio — both our strongest since becoming a public company four years ago. These results reinforce a strategy that is working — investing ahead of demand, in both differentiated capability and capacity, to help our customers maintain overmatch and enable us to scale when the mission requires it. Our record funded backlog, together with improved visibility into the fourth quarter, gives us confidence to raise and narrow our full-year revenue and profitability outlook,” said John Baylouny, President and CEO of Leonardo DRS.

Summary Financial Results

(In millions, except per share amounts)	Three Months Ended,						Nine Months Ended
	September 30,						September 30,
	2026		2025		Change		2026		2025		Change
Revenues	$1,066		$960		11%		$2,825		$2,588		9%
Net Earnings	$115		$72		60%		$263		$176		49%
Net Margin	10.8%		7.5%		330 bps		9.3%		6.8%		250 bps
Diluted weighted average number of shares outstanding (WASO)	268.275		268.426				268.617		268.749
Diluted Earnings Per Share (EPS)	$0.43		$0.26		65%		$0.98		$0.65		51%
Non-GAAP Financial Measures (1)
Adjusted EBITDA	$149		$117		27%		$382		$295		29%
Adjusted EBITDA Margin	14.0%		12.2%		180 bps		13.5%		11.4%		210 bps
Adjusted Net Earnings	$124		$78		59%		$287		$195		47%
Adjusted Diluted EPS	$0.46		$0.29		59%		$1.07		$0.73		47%

(1) The company reports its financials in accordance with U.S. generally accepted accounting principles (“GAAP”). Information about the company’s use of non-GAAP financial measures, including a reconciliation of the non-GAAP financial measures to the most comparable financial measures calculated and presented in accordance with U.S. GAAP, is provided under "Non-GAAP Financial Measures."

The company reported 11% revenue growth in the third quarter 2026. The year-over-year growth was primarily led by programs related to tactical radars, naval power and propulsion programs and progress on our space sensing programs.

Rigorous program execution across the portfolio, favorable mix and operating leverage of greater volume drove meaningful Adjusted EBITDA growth and margin expansion. The strong operational performance, coupled with a lower tax rate, supported year-over-year growth in third quarter net earnings, Adjusted Net Earnings, diluted EPS and Adjusted Diluted EPS.

Cash Flow
Net cash provided by operating activities was $96 million for the third quarter. The company’s free cash flow generation was $61 million in the quarter. Both operating and free cash flow generation were lower than the third quarter 2025 due to higher cash used to fund working capital, partially offset by increased earnings.

Year to date, both operating and free cash flow remain well ahead of the prior-year period, driven by higher profitability and more efficient working capital management.

Dividends and Stock Repurchases
During the third quarter, dividends paid to stockholders totaled approximately $24 million or $0.09 per share of common stock. Today, Leonardo DRS announced that its Board of Directors declared a cash dividend of $0.09 per share of common stock payable on November 25, 2026, to stockholders of record on November 12, 2026.

In addition, the company repurchased 288,633 shares of its common stock for approximately $12 million in the third quarter, pursuant to a previously announced stock repurchase program.

Balance Sheet
At the end of the third quarter, the company held $294 million of cash and had no outstanding borrowings under its credit facility. The company’s strong balance sheet provides flexibility to pursue organic and inorganic growth opportunities to create shareholder value.

Bookings and Funded Backlog

(Dollars in millions)	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2026		2025		2026		2025
Bookings	$1,639		$1,307		$3,609		$3,151
Book-to-Bill	1.5x		1.4x		1.3x		1.2x
Funded Backlog	$5,640		$4,678		$5,640		$4,678

New funded bookings totaled $1.6 billion. Customer demand remained robust, led by contributions from naval power and propulsion, tactical radars and force protection programs. Funded backlog at quarter end reached a new record of $5.6 billion, a 21% increase year-over-year.

Segment Results
Advanced Sensing and Computing (ASC) Segment

(Dollars in millions)	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2026		2025		Change		2026		2025		Change
Revenues	$659		$580		14%		$1,805		$1,633		11%
Operating Earnings	$57		$45		27%		$146		$107		36%
Operating Margin	8.6%		7.8%		80 bps		8.1%		6.6%		150 bps
Bookings	$1,017		$757				$2,137		$1,985
Book-to-Bill	1.5x		1.3x				1.2x		1.2x
Non-GAAP Financial Measures (1)
Segment Adjusted EBITDA	$78		$64		22%		$209		$164		27%
Segment Adjusted EBITDA Margin	11.8%		11.0%		80 bps		11.6%		10.0%		160 bps

(1) The company reports its financials in accordance with U.S. GAAP. Information about the company’s use of non-GAAP financial measures, including a reconciliation of the non-GAAP financial measures to the most comparable financial measures calculated and presented in accordance with U.S. GAAP, is provided under "Non-GAAP Financial Measures."

Healthy demand for naval network computing and tactical radars supported ASC quarterly bookings. The segment’s revenue growth was driven primarily by programs associated with tactical radars and space sensing programs. Adjusted EBITDA and margin rose versus third quarter 2025 on strong operational delivery, favorable mix and volume leveraging.

Integrated Mission Systems (IMS) Segment

(Dollars in millions)	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2026		2025		Change		2026		2025		Change
Revenues	$428		$383		12%		$1,056		$964		10%
Operating Earnings	$64		$48		33%		$154		$115		34%
Operating Margin	15.0%		12.5%		250 bps		14.6%		11.9%		270 bps
Bookings	$622		$550				$1,472		$1,166
Book-to-Bill	1.5x		1.4x				1.4x		1.2x
Non-GAAP Financial Measures (1)
Segment Adjusted EBITDA	$71		$53		34%		$173		$131		32%
Segment Adjusted EBITDA Margin	16.6%		13.8%		280 bps		16.4%		13.6%		280 bps

(1) The company reports its financials in accordance with U.S. GAAP. Information about the company’s use of non-GAAP financial measures, including a reconciliation of the non-GAAP financial measures to the most comparable financial measures calculated and presented in accordance with U.S. GAAP, is provided under "Non-GAAP Financial Measures."

Quarterly IMS bookings were well balanced across electric power and propulsion and force protection programs, and revenue growth reflected strength across naval power and propulsion programs. Adjusted EBITDA and margin expanded significantly over third quarter 2025, supported by operational leverage from higher volume and strong execution within electric power and propulsion programs, despite increased investment in internal research and development.

2026 Guidance
Leonardo DRS is increasing 2026 guidance for Revenue, Adjusted EBITDA and Adjusted Diluted EPS based on strong year-to-date performance, as specified in the table below:

Measure	Current 2026 Guidance	Prior 2026 Guidance
Revenue	$3,950 million - $3,985 million	$3,900 million - $3,975 million
Adjusted EBITDA	$545 million - $555 million	$525 million - $540 million
Tax Rate	13.0%	16.5%
Diluted WASO	269.0 million	269.0 million
Adjusted Diluted EPS	$1.50 - $1.53	$1.34 - $1.39

The guidance excludes the pending acquisition of Raft LLC (“Raft”).

The company does not provide a reconciliation of forward-looking Adjusted EBITDA and Adjusted Diluted EPS due to the inherent difficulty in forecasting and quantifying the adjustments that are necessary to calculate such non-GAAP measures without unreasonable effort. Material changes to any one of these items could have a significant effect on future GAAP results.

Conference Call
Leonardo DRS management will host a conference call beginning at 10:00 a.m. ET on October 29, 2026 to discuss the financial results for its third quarter 2026.

A live audio broadcast of the conference call along with a supplemental presentation will be available to the public through links on the Leonardo DRS Investor Relations website (https://investors.leonardodrs.com).

A replay of the conference call will be available on the Leonardo DRS website approximately 2 hours after the conclusion of the conference call.

About Leonardo DRS
Leonardo DRS, Inc. (Nasdaq: DRS) is at the forefront of developing transformative defense technologies using its proven agility and delivering innovative solutions for U.S. national security customers and allies worldwide. We specialize in rapidly providing high-performance, multi-domain capabilities across next-generation advanced sensing, network computing, force protection, and electric power and propulsion. Our reputation as a trusted provider is built on a continuous focus on practical innovation, delivering quality, and meeting our customers’ most demanding mission requirements. For further information on our complete range of capabilities, visit www.LeonardoDRS.com.

Leonardo DRS Contacts

Investors		Media
Camilla Yanushevsky		Charles Jones
Director, Investor Relations		Director, Marketing and Corporate Communications
+1 571 309 8216		+1 571 737 8800
investorrelations@drs.com		charles.jones@drs.com

Forward-Looking Statements
In this press release, when using the terms the “company”, “Leonardo DRS”, “we”, “us” and “our,” unless otherwise indicated or the context otherwise requires, we are referring to Leonardo DRS, Inc. This press release contains forward-looking statements and cautionary statements within the meaning of the Private Securities Litigation Reform Act of 1995. Some of the forward-looking statements can be identified by the use of forward-looking terms such as “believes,” “expects,” “may,” “will,” “shall,” “should,” “would,” “could,” “seeks,” “aims,” “strives,” “targets,” “projects,” “guidance,” “intends,” “plans,” “estimates,” “anticipates” or other comparable terms. Forward-looking statements include, without limitation, all matters that are not historical facts. They appear in a number of places throughout this press release and include, without limitation, statements regarding our intentions, beliefs, assumptions or current expectations concerning, among other things, financial goals, financial position, results of operations, cash flows, prospects, strategies or expectations, the proposed acquisition of Raft, including the expected timing of completion of the transaction, the satisfaction of closing conditions, the receipt of regulatory approvals, the anticipated benefits of the transaction, the expected impact of the transaction on DRS or Raft’s financial results, including expected accretion and tax benefits, the expected financing of the transaction, plans for the integration of the acquired business, and the impact of prevailing economic conditions.

Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control. We caution you that forward-looking statements are not guarantees of future performance or outcomes and that actual performance and outcomes may differ materially from those made in or suggested by the forward-looking statements contained in this press release. In addition, even if future performance and outcomes are consistent with the forward-looking statements contained in this press release, those results or developments may not be indicative of results or developments in subsequent periods. New factors emerge from time to time that may cause our business not to develop as we expect and it is not possible for us to predict all of them. Factors that could cause actual results and outcomes to differ from those reflected in forward-looking statements include, without limitation: disruptions, including from government shutdowns, or deteriorations in our relationship with the relevant agencies of the U.S. government, as well as any failure to pass routine audits or otherwise comply with governmental requirements including those related to security clearance or procurement rules, including the False Claims Act; significant delays, including from government shutdowns, or reductions in appropriations for our programs and changes in U.S. government priorities and spending levels more broadly; any failure to comply with the amended and restated proxy agreement with the U.S. Department of War (“DoW”); the effect of inflation and other cost pressures on our supply chain and/or our labor costs; our mix of fixed-price, cost-plus and time-and-materials type contracts and any resulting impact on our cash flows due to cost overruns; failure to properly comply with various covenants of the agreements governing our debt could negatively impact our business; our dependence on U.S. government contracts, which often are only partially funded and are subject to immediate termination, some of which are classified and the concentration of our customer base in the U.S. defense industry; our use of estimates in pricing and accounting for many of our programs that are inherently uncertain and which may not prove to be accurate; our ability to realize the full value of our backlog; our ability to predict future capital needs or to obtain additional financing if needed, on terms acceptable to us, if at all; our ability to respond to the rapid technological changes in the markets in which we compete; the effect of global and regional economic downturns and rising interest rates; our ability to maintain an effective system of internal control over financial reporting; our inability to appropriately manage our inventory; our inability to fully realize the value of our total estimated contract value or bookings; our ability to compete efficiently, including due to U.S. government organizational conflict of interest rules which may limit new contract opportunities or require us to wind down existing contracts; our relationships with other industry participants, including any contractual disputes or the inability of our key suppliers to timely deliver our components, parts or services; preferences or set-asides for small or small disadvantaged businesses could impact our ability to be a prime contractor; any failure to meet our contractual obligations including due to potential impacts to our business from supply chain risks, such as longer lead times and shortages of electronics and other components; any security breach, including any cyber-attack, cyber intrusion, insider threat, or other significant disruption of our IT networks and related systems, as well as any act of terrorism or other threat to our physical security and personnel; our ability to fully exploit or obtain patents or other intellectual property protections necessary to secure our proprietary technology, including our ability to avoid infringing upon the intellectual property of third parties or prevent third parties from infringing upon our own intellectual property; the conduct of our employees, agents, affiliates, subcontractors, suppliers, business partners or joint ventures in which we participate which may impact our reputation and ability to do business; the outcome of litigation, arbitration, investigations, claims, disputes, enforcement actions and other legal proceedings in which we are involved; various geopolitical and economic factors, laws and regulations including the Foreign Corrupt Practices Act, the Arms Export Control Act, the International Traffic in Arms Regulations, the Export Administration Regulations, recent U.S. tariffs imposed or threatened to be imposed on other countries and any related retaliatory actions taken by such countries and those that we are exposed to as a result of our international business; our ability to obtain export licenses necessary to conduct certain operations abroad, including any attempts by Congress to prevent proposed sales to certain foreign governments; our ability to attract and retain technical and other key personnel; the occurrence of prolonged work stoppages; the unavailability or inadequacy of our insurance coverage, customer indemnifications or other liability protections to cover all of our significant risks or to pay for material losses we incur; future changes in U.S. tax laws and regulations or interpretations thereof; future changes in the DoW’s and other governments’ budgets; certain limitations on our ability to use our net operating losses to offset future taxable income; termination of our leases or our inability to renew our leases on acceptable terms; changes in estimates used in accounting for our pension plans, including with respect to the funding status thereof; changes in future business or other market conditions that could cause business investments and/or recorded goodwill or other long-term assets to become impaired; risks related to our proposed acquisition of Raft, including the failure to complete the transaction on the anticipated timeline or at all, the failure to realize the anticipated benefits of the transaction, including expected accretion and tax benefits, integration difficulties, retention of key personnel, transaction and integration costs, and increased indebtedness incurred to fund the transaction; adverse consequences from any acquisitions such as operating difficulties, dilution and other harmful consequences or any modification, delay or prevention of any future acquisition or investment activity by the Committee on Foreign Investment in the United States; natural disasters, severe weather or other significant disruptions; failure to properly contain a global pandemic in a timely manner could materially affect how we and our business partners operate; our compliance with environmental laws and regulations and any environmental liabilities that may affect our reputation or financial position; any conflict of interest that may arise because Leonardo US Holding, LLC, our majority stockholder, or Leonardo S.p.A., our indirect majority stockholder, may have interests that are different from, or conflict with, those of our other stockholders, including as a result of any ongoing business relationships Leonardo S.p.A. may have with us and their significant ownership in us may discourage change of control transactions (our amended and restated certificate of incorporation provides that we waive any interest or expectancy in corporate opportunities presented to Leonardo S.p.A.); or our obligations to provide certain services to Leonardo S.p.A., which may divert human and financial resources from our business.

You should read this press release completely and with the understanding that actual future results may be materially different from expectations. All forward-looking statements made in this press release are qualified by these cautionary statements. These forward-looking statements are made only as of the date of this press release and we do not undertake any obligation, other than as may be required by law, to update or revise any forward-looking or cautionary statements to reflect changes in assumptions, the occurrence of events, unanticipated or otherwise and changes in future operating results over time or otherwise.

Other risks, uncertainties and factors, including those discussed in our SEC filings under “Risk Factors” of our latest Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q, all of which may be viewed or obtained through the investor relations section of our website at www.LeonardoDRS.com, could cause our actual results to differ materially from those projected in any forward-looking statements we make. Readers should read the discussion of these factors carefully to better understand the risks and uncertainties inherent in our business and underlying any forward-looking statements.

Consolidated Statements of Earnings (Unaudited)
(Dollars in millions, except per share amounts)	Three Months Ended								Nine Months Ended
	September 30,								September 30,
		2026				2025				2026				2025
Revenues		1,066				960				2,825				2,588
Cost of revenues		(803	)			(738	)			(2,113	)			(1,988	)
Gross profit		263				222				712				600
General and administrative expenses		(142	)			(123	)			(401	)			(361	)
Amortization of acquired intangible assets		(5	)			(5	)			(16	)			(16	)
Other operating expenses, net		—				(1	)			—				(1	)
Operating earnings		116				93				295				222
Interest income (expense), net		1				(4	)			3				(7	)
Other, net		(1	)			(2	)			(5	)			(3	)
Earnings before taxes		116				87				293				212
Income tax provision		(1	)			(15	)			(30	)			(36	)
Net earnings	$115				$72				$263				$176
Net earnings per share from common stock:
Basic earnings per share	$0.43				$0.27				$0.99				$0.66
Diluted earnings per share	$0.43				$0.26				$0.98				$0.65

Consolidated Balance Sheets (Unaudited)
(Dollars in millions, except per share amounts)	September 30,				December 31,
		2026				2025
ASSETS
Current assets:
Cash and cash equivalents	$294				$647
Accounts receivable, net		358				334
Contract assets		1,083				931
Inventories		374				352
Prepaid expenses		45				26
Other current assets		25				36
Total current assets		2,179				2,326
Noncurrent assets:
Property, plant and equipment, net		572				512
Intangible assets, net		94				112
Goodwill		1,238				1,238
Deferred tax assets		87				88
Other noncurrent assets		204				210
Total noncurrent assets		2,195				2,160
Total assets	$4,374				$4,486
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current portion of long-term debt	$10				$26
Accounts payable		257				351
Contract liabilities		594				585
Other current liabilities		296				269
Total current liabilities		1,157				1,231
Noncurrent liabilities:
Long-term debt		165				321
Pension and other postretirement benefit plan liabilities		28				35
Deferred tax liabilities		3				3
Other noncurrent liabilities		131				166
Total noncurrent liabilities	$327				$525
Stockholders' equity:
Preferred stock, $0.01 par value: 10,000,000 shares authorized; none issued		$—				$—
Common stock, $0.01 par value: 350,000,000 shares authorized; 266,711,588 and 265,822,404 shares issued and outstanding as of September 30, 2026 and December 31, 2025, respectively		3				3
Additional paid-in capital		4,983				5,083
Accumulated deficit		(2,052	)			(2,315	)
Accumulated other comprehensive loss		(44	)			(41	)
Total stockholders' equity		2,890				2,730
Total liabilities and stockholders' equity	$4,374				$4,486

Consolidated Statements of Cash Flows (Unaudited)
(Dollars in millions)	Nine Months Ended
	September 30,
		2026				2025
Operating activities
Net earnings	$263				$176
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Depreciation and amortization		77				69
Deferred income taxes		(4	)			—
Stock-based compensation expense		17				19
Changes in assets and liabilities:
Accounts receivable		(24	)			(74	)
Contract assets		(153	)			(182	)
Inventories		(22	)			(46	)
Prepaid expenses		(19	)			(5	)
Other current assets		7				19
Other noncurrent assets		14				13
Defined benefit obligations		(7	)			(6	)
Accounts payable		(85	)			(80	)
Contract liabilities		9				41
Other current liabilities		33				9
Other noncurrent liabilities		(41	)			(12	)
Net cash provided by (used in) operating activities		65				(59	)
Investing activities
Capital expenditures		(97	)			(90	)
Proceeds from sales of assets		1				—
Purchases of investments		—				(15	)
Other		1				—
Net cash used in investing activities		(95	)			(105	)
Financing activities
Net decrease in borrowings (maturities of 90 days or less)		(5	)			(1	)
Repayments of borrowings		(191	)			(9	)
Proceeds from stock issuance		8				9
Repurchases of common stock		(28	)			(24	)
Payments of employee taxes withheld from stock-based awards		(25	)			(21	)
Dividends paid		(21	)			(21	)
Dividends paid to related party		(51	)			(51	)
Other		(10	)			(7	)
Net cash used in financing activities		(323	)			(125	)
Effect of exchange rate changes on cash and cash equivalents		—				—
Net decrease in cash and cash equivalents		(353	)			(289	)
Cash and cash equivalents at beginning of year		647				598
Cash and cash equivalents at end of period	$294				$309

Non-GAAP Financial Measures (Unaudited)
In addition to the results reported in accordance with U.S. GAAP included throughout this document, the company has provided information regarding “Adjusted EBITDA,” “Adjusted EBITDA Margin,” “Segment Adjusted EBITDA,” “Segment Adjusted EBITDA Margin,” “Adjusted Net Earnings,” “Adjusted Diluted Earnings Per Share” and “Free Cash Flow” (each, a non-GAAP financial measure).

We believe the non-GAAP financial measures presented in this document will help investors understand our financial condition and operating results and assess our future prospects. We believe these non-GAAP financial measures, each of which is discussed in greater detail below, are important supplemental measures because they exclude unusual or non-recurring items as well as non-cash items that are unrelated to or may not be indicative of our ongoing operating results. Further, when read in conjunction with our GAAP results, these non-GAAP financial measures provide a baseline for analyzing trends in our underlying businesses and can be used by management as a tool to help make financial, operational and planning decisions. Finally, these measures are often used by analysts and other interested parties to evaluate companies in our industry by providing more comparable measures that are less affected by factors such as capital structure.

We recognize that these non-GAAP financial measures have limitations, including that they may be calculated differently by other companies or may be used under different circumstances or for different purposes, thereby affecting their comparability from company to company. In order to compensate for these and the other limitations discussed below, management does not consider these measures in isolation from or as alternatives to the comparable financial measures determined in accordance with U.S. GAAP. Readers should review the reconciliations below and should not rely on any single financial measure to evaluate our business.

We define these non-GAAP financial measures as:

Adjusted EBITDA and Adjusted EBITDA Margin are defined as net earnings before income taxes, net interest expense, amortization of acquired intangible assets, depreciation, deal-related transaction costs, restructuring costs and other one-time non-operational events (which include non-service pension expense, legal liability accrual reversals, executive transition costs and foreign exchange impacts), then in the case of Adjusted EBITDA Margin dividing Adjusted EBITDA by revenues.

(Dollars in millions)	Three Months Ended								Nine Months Ended
	September 30,								September 30,
		2026				2025				2026				2025
Net earnings	$115				$72				$263				$176
Income tax provision		1				15				30				36
Interest (income) expense, net		(1	)			4				(3	)			7
Amortization of intangibles		5				5				16				16
Depreciation		22				18				61				53
Deal-related transaction costs		4				—				4				—
Restructuring costs		—				1				—				1
Other one-time non-operational events		3				2				11				6
Adjusted EBITDA	$149				$117				$382				$295
Adjusted EBITDA Margin		14.0	%			12.2	%			13.5	%			11.4	%

Segment Adjusted EBITDA and Segment Adjusted EBITDA Margin are defined as operating earnings before amortization of acquired intangible assets, depreciation, deal-related transaction costs, restructuring costs and other one-time non-operational events, then in the case of Segment Adjusted EBITDA Margin dividing Segment Adjusted EBITDA by revenues.

Advanced Sensing and Computing (ASC) Segment Adjusted EBITDA

(Dollars in millions)	Three Months Ended								Nine Months Ended
	September 30,								September 30,
		2026				2025				2026				2025
Operating earnings	$57				$45				$146				$107
Amortization of intangibles		5				5				16				16
Depreciation		15				12				42				36
Restructuring costs		—				1				—				1
Other one-time non-operational events		1				1				5				4
Segment Adjusted EBITDA	$78				$64				$209				$164
Segment Adjusted EBITDA Margin		11.8	%			11.0	%			11.6	%			10.0	%

Integrated Mission Systems (IMS) Segment Adjusted EBITDA

(Dollars in millions)	Three Months Ended								Nine Months Ended
	September 30,								September 30,
		2026				2025				2026				2025
Operating earnings	$64				$48				$154				$115
Depreciation		7				6				19				17
Other one-time non-operational events		—				(1	)			—				(1	)
Segment Adjusted EBITDA	$71				$53				$173				$131
Segment Adjusted EBITDA Margin		16.6	%			13.8	%			16.4	%			13.6	%

Adjusted Net Earnings and Adjusted Diluted EPS are defined as net earnings excluding amortization of acquired intangible assets, deal-related transaction costs, restructuring costs and other one-time non-operational events (which include non-service pension expense, legal liability accrual reversals, executive transition costs and foreign exchange impacts) and the related tax impacts, then in the case of Adjusted Diluted EPS dividing Adjusted Net Earnings by the diluted weighted average number of shares outstanding (WASO).

(In millions, except per share amounts)	Three Months Ended								Nine Months Ended
	September 30,								September 30,
		2026				2025				2026				2025
Net earnings	$115				$72				$263				$176
Amortization of intangibles		5				5				16				16
Deal-related transaction costs		4				—				4				—
Restructuring costs		—				1				—				1
Other one-time non-operational events		3				2				11				6
Tax effect of adjustments (1)		(3	)			(2	)			(7	)			(4	)
Adjusted Net Earnings	$124				$78				$287				$195
Per share information
Diluted WASO		268.275				268.426				268.617				268.749
Diluted EPS	$0.43				$0.26				$0.98				$0.65
Adjusted Diluted EPS	$0.46				$0.29				$1.07				$0.73

(1) Calculation uses an estimated statutory tax rate on non-GAAP adjustments.

Free Cash Flow is defined as the sum of the cash flows provided by (used in) operating activities, transaction-related expenditures (net of tax), capital expenditures and proceeds from sale of assets.

(Dollars in millions)	Three Months Ended								Nine Months Ended
	September 30,								September 30,
		2026				2025				2026				2025
Net cash provided by (used in) operating activities	$96				$107				$65				($	59	)
Transaction-related expenditures, net of tax		3				—				3				—
Capital expenditures		(38	)			(30	)			(97	)			(90	)
Proceeds from sales of assets		—				—				1				—
Free Cash Flow	$61				$77				($	28	)		($	149	)

FAQ

AI-generated questions and answers. How Rhea-AI works. Not financial advice.

What were Leonardo DRS's third-quarter 2026 earnings?

Leonardo DRS earned $115 million, or $0.43 per diluted share, in the third quarter of 2026. Net earnings increased 60% and diluted earnings per share increased 65% year over year. Revenue increased 11% to $1,066 million.

What is Leonardo DRS's updated 2026 financial guidance?

Leonardo DRS expects 2026 revenue of $3,950 million–$3,985 million, adjusted EBITDA of $545 million–$555 million, and adjusted diluted earnings per share of $1.50–$1.53. All three ranges increased from the prior outlook.

Does Leonardo DRS's 2026 guidance include the Raft acquisition?

The 2026 guidance excludes the pending acquisition of Raft. The updated outlook therefore does not incorporate that transaction.