Elbit Systems (NASDAQ:ESLT) reported a stronger first quarter of 2026, with management highlighting double-digit growth in revenue, operating profit and earnings per share, as well as a record backlog that surpassed $30 billion for the first time.
Kobi Kagan, the company’s chief financial officer, said first-quarter revenue rose 15.5% to $2.189 billion, compared with $1.896 billion in the first quarter of 2025. He said the quarter’s revenue also exceeded the preceding fourth quarter, reflecting “the strong demand we are witnessing from our key markets.”
GAAP operating income increased to $205.1 million, or 9.4% of revenue, from $149.7 million, or 7.9% of revenue, a year earlier. On a non-GAAP basis, operating income was $222 million, or 10.1% of revenue, compared with $165.1 million, or 8.7% of revenue, in the prior-year period.
GAAP diluted earnings per share rose 42% to $3.34 from $2.35, while non-GAAP diluted EPS increased 51% to $3.87 from $2.57. Kagan said gross margins expanded due to scale and product mix, with GAAP gross margin rising to 25.2% from 24.0% a year earlier.
Backlog tops $30 billion
Elbit’s backlog reached $30.2 billion as of March 31, 2026, up by more than $7 billion from the end of March 2025. Kagan said approximately 71% of the backlog was generated outside Israel. About 49% of the backlog is scheduled to be performed during the remainder of 2026 and in 2027, with the rest scheduled for 2028 and beyond.
The increase in backlog during the quarter came mainly from Israel, Kagan said. President and Chief Executive Officer Bezhalel Machlis said contract awards during the quarter totaled more than $4 billion, nearly double quarterly revenue.
Machlis also highlighted a contract announced the morning of the call, valued at approximately $1.4 billion, from a European customer for military modernization programs. He said the five-year contract includes uncrewed autonomous systems, networked land electronic warfare, precision-guided munitions, artillery, air-to-ground capabilities, electro-optical designating and reconnaissance systems, and software-defined radios.
“This contract reflects the breadth and attractiveness of Elbit Systems’ defense portfolio, as well as our ability to deliver both highly capable best-in-class systems and comprehensive integrated solutions tailored to evolving operational needs,” Machlis said.
Growth led by land, C4I and electronic warfare demand
By geography, Israel accounted for 37% of first-quarter revenue, while Europe contributed 23%, North America 20% and Asia-Pacific 16%. Kagan described Europe as a “meaningful growth engine,” saying the company is seeing strengthening demand trends across the region.
Several segments posted double-digit growth. C4I and Cyber revenue increased 17% from the year-earlier quarter, mainly due to sales of radio systems and command-and-control systems in Europe. ISTAR and electronic warfare revenue also rose 17%, driven by increased sales of airborne high-power laser and electronic warfare systems. Land revenue increased 27%, mainly due to ammunition and munition sales in Israel and Europe.
Elbit Systems of America revenue rose 5%, with increased night vision system sales partly offset by lower medical device sales. Aerospace revenue increased 2%, which Kagan attributed mainly to project mix.
In response to an analyst question about segment trends for the rest of the year, Kagan said management expects Land to lead revenue expansion, supported by strong demand for land projects and programs. He also cited strong demand in ISR and C4I, and said the company was pleased with Elbit Systems of America’s performance, including margin expansion.
Major awards include PULS, Iron Fist and U.S. night vision systems
Machlis outlined several recent awards across the company’s defense portfolio. He cited two contracts for the Iron Fist active protection system, including an order of more than $200 million for U.S. Bradley armored vehicles and another for the CV90 combat vehicle for a NATO country.
Other awards discussed on the call included:
- A $275 million contract to equip a customer with advanced electronic warfare and DIRCM self-protection solutions for helicopters.
- A $277 million award for 30-millimeter turret ammunition from an international customer.
- A $750 million contract, awarded in April, for PULS rocket launchers for the Hellenic Armed Forces.
- A $120 million U.S. Army contract for Elbit Systems of America to develop Soldier Borne Mission Command night vision capability.
- A delivery order valued at approximately $212 million for continued production of Enhanced Night Vision Goggle-Binocular systems for the U.S. Army, with deliveries expected through 2028.
Machlis said the order environment in Europe remains “especially strong,” followed by Asia. He also pointed to continued orders from the Israeli Ministry of Defense, including a $130 million order for advanced systems for 12 new CH-53 helicopters, a $183 million multi-year ammunition order, and more than $100 million in contracts for Digital Ground Army and border defense capabilities.
Investment in capacity, R&D and AI remains a priority
Management said Elbit is increasing capital expenditures to expand production capacity, mainly in Israel and Europe. Machlis said a production facility in southern Israel is progressing, and noted the recent launch of an unmanned aerial system facility in Romania and the completed acquisition of U.K.-based UTACS.
Kagan said the company is targeting capital expenditures of around 3% of revenue in the near future. He said Elbit is investing in land-domain facilities, robotics, automation and AI-related performance and solutions. He also said the company continues to prioritize self-funded research and development, which represented nearly 7% of revenue in the quarter.
Net R&D expenses were $150.4 million, or 6.9% of revenue, compared with $114.3 million, or 6.1% of revenue, a year earlier. Kagan said R&D initiatives include AI capabilities, counter-UAS solutions led by high-power lasers, autonomous airborne, naval and land platforms, multispectral sensing, and advanced precision and standoff munitions.
During the question-and-answer session, Machlis said Elbit is investing “quite a lot” in energy weapons and has already delivered a power laser source for a ground solution in Israel. He said the company is also leading development of an airborne high-power laser and is deploying counter-drone solutions in Israel and Europe. Kagan added that cost competitiveness and cost effectiveness remain major priorities.
Cash flow improves as dividend rises
Net cash provided by operating activities was $281 million in the quarter, compared with $184 million a year earlier. Free cash flow rose to $210 million from $161 million. Kagan said the first-quarter cash flow reflected higher net income and an increase in contract liabilities.
The board declared a dividend of $1 per share, payable July 6, 2026. Kagan said the company recently doubled its dividend payout from 50 cents to $1 per share and continues to consider acquisitions, citing the UTACS acquisition as an example.
Asked about the company’s growth profile, Kagan said Elbit does not provide guidance but maintained that its internal target is “around mid-teens revenue growth this year.” He said management sees a similar outlook for next year, based on demand and conversion effectiveness. Machlis added that the company sees a “huge funnel” of opportunities and is working to convert those opportunities into future backlog.
On supply chain and labor, Machlis said he does not currently see supply chain as a bottleneck for growth, adding that the company has enough materials, including energetics, and has invested in inventories in some cases. He also said Elbit recruited about 2,000 people last year and expects to recruit a similar number this year in Israel and abroad.
About Elbit Systems (NASDAQ:ESLT)
Elbit Systems Ltd. is an Israel-based defense electronics company that designs, develops and supplies a broad range of systems for military, homeland security and commercial aviation customers. The company focuses on integrated, platform-level solutions that combine sensors, communications, command-and-control software and weapons integration to support intelligence, surveillance and reconnaissance (ISR), force protection and mission management.
Its product and service portfolio spans unmanned aircraft systems, electro-optic and signal intelligence systems, electronic warfare and communications equipment, avionics and mission systems for military and commercial aircraft, and land and naval systems.
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