Leonardo DRS, Inc.

Q2 revenue was $913 million, up 10% year over year, with organic revenue growth also up 10%. Adjusted EBITDA was $128 million, up 33% year over year, and adjusted EBITDA margin was 14%, up 240 basis points. Net earnings were $86 million, up 59%, and diluted EPS was $0.32, up 60%; adjusted diluted EPS was $0.35, up 52%. Bookings exceeded $1 billion and book-to-bill was 1.2x, with record funded backlog at quarter-end. For full-year 2026, DRS maintained revenue guidance of $3.9 billion to $3.975 billion, raised adjusted EBITDA guidance to $525 million to $540 million from $515 million to $530 million, and raised adjusted diluted EPS guidance to $1.34 to $1.39. The company kept its 75% conversion assumption for adjusted net earnings to free cash flow, expects capex in the mid-4% range of revenue, and guided Q3 revenue above $1 billion with adjusted EBITDA margin in the mid-13% range. Management said RAFT is expected to close in the fourth quarter and is excluded from 2026 guidance.

John Baylouny said the quarter validated DRS’s strategy of combining sensing, computing, networking, propulsion, and protection across a platform-agnostic portfolio. He emphasized strong demand tied to air defense, counter-UAS, naval modernization, space, and missile-related programs, and framed RAFT as a strategic extension into software, AI, and data fusion. His tone was confident and upbeat, with repeated references to durable demand, record backlog, and disciplined capital deployment.

Michael Dippold highlighted broad-based operational strength, saying revenue, EBITDA, and earnings all beat expectations while the company continued to invest in R&D and capacity. He said adjusted EBITDA margin expansion reflected better execution, favorable mix, operating leverage, and some program risk retirement; excluding that retirement benefit, he said IMS margin would have been closer to 15% in the quarter. He also noted free cash flow was positive, full-year R&D should approach 4% of sales, capex should run in the mid-4% range, and the company is maintaining a 75% free-cash-flow conversion target. On RAFT, he said the deal is being funded from financial strength and should be accretive in the first full year of ownership, though it is not expected to contribute meaningfully in 2026 because of the expected late-fourth-quarter close.

Analysts pressed on the strong IMS margin, and management attributed it to broad execution across naval propulsion and counter-UAS, plus a nonrecurring risk-retirement benefit on a surface-ship program. Questions on RAFT focused on revenue size, margins, and strategic fit; management declined to size the business but said it should be accretive to growth and margins and fills technology and customer gaps, especially around the Army’s data layer. Analysts also asked about counter-UAS, Golden Dome, Europe, naval computing, drones, and supply chain; management said demand remains strong, a continuing resolution should not materially hurt bookings, the supply chain has been strengthened since prior germanium issues, and the company is seeing opportunities in second-sourcing, distributed sensing, and software-enabled mission integration.