ELBIT SYSTEMS LTD
| Revenue | $7.9B |
|---|---|
| Operating income | $671.4M |
| Net income | $534.3M |
| Free cash flow | $552.8M |
| Operating margin | 8.5% |
| Net margin | 6.7% |
| Return on equity | 12.9% |
| Period | 2025 |
OpenFilings analyst
Our analyst
Agentic read of the latest earnings call — recommendation updates when we process a new transcript. Research synthesis, not investment advice.
Positive quarter supports a constructive stance, but the call does not justify chasing the stock without evidence of faster backlog conversion.
Q2 revenue rose 15.9% to $2.287 billion, non-GAAP operating margin expanded to 10.4%, non-GAAP EPS increased 28% to $4.14, and backlog reached a record $32 billion, up 34% year over year. The key tension is that backlog growth remains far ahead of revenue growth, while part of Q2 benefited from one-time mix and Israeli replenishment demand; management quantified neither conversion acceleration nor a formal earnings outlook.
- Backlog Conversion
- Europe Defense
- Us Defense
- Maritime Systems
- High Power Laser
- Autonomy
Near term
The $1.4 billion European modernization program, approximately $750 million Greek PULS award, $370 million of U.S. Customs and Border Protection awards, and $212 million ENVG-B order reinforce order momentum, but investors still need delivery and margin evidence rather than additional bookings alone.
U.S. growth should remain strong but may moderate from Q2's 17% because management attributed part of the performance to favorable one-time project mix. Night vision, maritime systems, and CBP programs are the main near-term offsets.
Q2 free cash flow was $150 million versus $71 million, with 86% cash conversion; continued inventory discipline and contract-liability growth are important for validating earnings quality.
Israel represented 37% of Q2 revenue, helped by post-conflict inventory replenishment. A normalization in Israeli demand could expose the underlying international growth rate.
Longer term
International demand is the strongest structural driver: 73% of backlog is generated outside Israel, and Europe and Asia-Pacific were identified as growth engines. Approximately 42% of backlog is scheduled for delivery in the remainder of 2026 and 2027, providing substantial visibility but not necessarily near-term revenue acceleration.
Capacity expansion is rising materially, with annual company-funded capex increased from approximately $220 million to $300 million. Customer co-funding or full funding of local capacity could improve returns and delivery timing, but the call provided no quantified commitments or conversion benefit.
Maritime electronic warfare, sonar buoys, unmanned surface vessels, ship modernization, and high-power laser systems offer credible multi-year growth avenues. However, several laser opportunities remain developmental or at the customer-evaluation stage rather than booked revenue.
The integrated portfolio and willingness to transfer technology to local partners may improve win rates in sovereign-defense markets. The competitive risk is that localization can also give customers and partners more control over manufacturing and potentially reduce Elbit's long-term share of economics.
Autonomy is strategically relevant and Elbit has expanded through Bluewhite Robotics, but management's answer emphasized portfolio breadth and flexibility rather than standalone software traction, recurring revenue, or evidence of a durable software moat.
Red flags
Management declined to quantify how much the $300 million capex plan or customer-funded investments could accelerate backlog conversion. The only numerical evidence offered was historical: backlog growth of 34% versus revenue growth of 16%.
The company has no formal revenue, margin, or EPS guidance in the call. 'Mid-teen growth' was cited as a historical/current pattern, not a firm forward outlook.
Q2 Elbit Systems of America growth was aided by a one-time favorable project mix, while Aerospace revenue declined 8% for the same reason in the opposite direction; quarterly segment mix is therefore noisy.
The effective tax rate rose to 16.4% from 5.6% because of OECD Pillar II minimum-tax rules, creating a structural headwind to EPS versus the unusually low prior-year base.
The 37% Israeli revenue contribution and replenishment-driven Land growth of 32% create exposure to normalization in domestic demand and to geopolitical volatility.
Recommendation history
OpenFilings analyst view from primary-source filings and earnings calls — not investment advice.
From latest 20-F · 2024-03-28
- Cash Runway Medium
Red flags
- Cash Runway Medium — Cash runway ~2.7 years