Leonardo DRS Lifts Guidance Again as Margins, Bookings Accelerate
The defense electronics maker posted 10% revenue growth and a 59% jump in net earnings, prompting its second consecutive full-year guidance increase.
Leonardo DRS (DRS), the defense electronics and sensing systems maker, reported accelerating growth and widening margins in the second quarter and raised its full-year 2026 guidance for the second straight quarter.
Revenue rose 10% year over year to $913 million, up from 6% growth in the first quarter, though still below the 18% pace posted in the third quarter of 2025. Net earnings grew 59% to $86 million, well ahead of the 24% growth recorded in the first quarter and the 15% growth in the fourth quarter of 2025, pushing net margin up 290 basis points to 9.4%.
Adjusted EBITDA margin expanded to 14.0%, up 240 basis points from a year earlier and an acceleration from the 210-basis-point expansion in the first quarter. The improvement marked a reversal from late 2025, when margins compressed 20 basis points in the fourth quarter and 10 basis points in the third. Both operating segments contributed: the Advanced Sensing and Computing unit's operating margin rose to 8.3%, up 150 basis points from a year earlier, while Integrated Mission Systems expanded more sharply to 15.9%, up 450 basis points.
Bookings reached $1,085 million in the quarter, a book-to-bill ratio of 1.2x, up from $885 million and a 1.0x ratio in the first quarter, when bookings had fallen from $991 million a year earlier. The rebound pushed funded backlog to a record $5,092 million, up 17% year over year and up from $4,686 million at the end of the first quarter. Free cash flow turned positive at $6 million in the quarter, narrowing an $89 million outflow for the first half after a $95 million outflow in the first quarter alone, a trend of improved quarterly linearity.
Leonardo DRS raised its full-year 2026 Adjusted EBITDA guidance to a range of $525 million to $540 million, from $515 million to $530 million previously, and lifted its Adjusted Diluted EPS guidance to $1.34 to $1.39, from $1.26 to $1.30. Revenue guidance was held at $3,900 million to $3,975 million, while the company lowered its expected tax rate to 16.5% from 18.5%. The increase followed a similar move in the first-quarter release, where guidance was raised across key metrics after the company had initiated 2026 guidance in the fourth quarter of 2025.
The company also disclosed a pending $450 million acquisition of Raft, aimed at expanding its multi-domain artificial intelligence, data fusion and mission software capabilities, a transaction not reflected in the raised guidance. Cash on the balance sheet fell to $270 million from $328 million at the end of the first quarter after $191 million of debt repayments during the period.
The quarter's results followed a leadership transition at the top of the company: the third-quarter 2025 release was signed by Bill Lynn as chairman and chief executive, while the fourth-quarter 2025 release and subsequent 2026 filings carried the signature of John Baylouny as president and chief executive. Fourth-quarter results had also included two non-recurring items, a $73 million net-present-value benefit tied to a Quantum Laser intellectual-property license and a $67 million revenue headwind from the wind-down of a legacy ground-surveillance program, neither of which reappeared in the 2026 filings.