L3Harris Cash Flow Swings Positive as Guidance Rises Again
L3Harris Technologies posted $879 million in operating cash flow in the second quarter, a reversal from a $95 million shortfall three months earlier.
L3Harris Technologies (LHX) reported second-quarter revenue of $5.881 billion, up 8% from a year earlier, and raised its full-year guidance for the second consecutive quarter.
The growth rate itself told a decelerating story. Revenue expansion slowed from 12% year-over-year growth in the first quarter, and diluted earnings per share of $3.13 rose 28% from a year earlier, down from 33% growth to $2.72 in the prior period. Operating margin reached 11.1%, up 60 basis points, a smaller gain than the 120-basis-point improvement to 11.4% reported in the first quarter.
What changed most sharply was cash generation. Operating cash flow of $879 million and free cash flow of $771 million each rose 37% from a year earlier, reversing a first quarter in which the company posted negative operating cash flow of $95 million and negative free cash flow of $187 million. The swing came alongside a new disclosure of $973 million in proceeds from a subsidiary's Series A preferred stock issuance, which also introduced a $14 million non-cash preferred stock dividend that reduced net income available to common shareholders, a line item absent from the two prior anchor releases.
Orders and backlog continued to build even as the pace of bookings eased. L3Harris booked $7.3 billion in orders for a book-to-bill ratio of 1.2 times, pushing backlog to a record $42 billion, though both figures moderated from the first quarter's $7.8 billion in orders and 1.4 times book-to-bill, when backlog stood at $40.7 billion.
Segment performance diverged. Communications & Spectrum Dominance operating margin expanded 230 basis points to 26.9%, accelerating from its already strong 140-basis-point gain for the year to date. Space & Mission Systems moved the other direction, with margin compressing 60 basis points to 9.8% as the segment lapped a $75 million asset-sale gain booked a year earlier, a contrast with the first quarter, when the same segment's margin had expanded 60 basis points to 10.5%. The results also mark the first quarter under a new three-segment structure, Space & Mission Systems, Communications & Spectrum Dominance, and Missile Solutions, replacing the four-segment framework used as recently as the fourth quarter of 2024.
L3Harris raised its 2026 revenue guidance to a range of $23.2 billion to $23.7 billion, up from $23 billion to $23.5 billion, and lifted earnings-per-share guidance to $11.80 to $12.00 from $11.40 to $11.60. The increase followed a smaller guidance raise in the first quarter, when the company lifted its EPS range to $11.40-$11.60 from $11.30-$11.50.
The anchor release also dropped the non-GAAP framing that had featured prominently in the fourth-quarter 2024 report, presenting operating margin, segment margin and free cash flow on a GAAP basis without adjusted figures.
The quarter closed out a leadership transition set in motion earlier in the year, when Ken Sharp became chief financial officer effective March 16, 2026, and Ken Bedingfield moved to lead Missile Solutions ahead of its planned initial public offering.