Total revenue reached $1.9216 billion, a 12% year‑over‑year increase from $1.7175 billion in Q3 2024, but it fell short of the consensus estimate of $1.990 billion. The miss can be traced to a 3% decline in aerospace revenue, which offset the robust 41% jump in land‑systems sales driven by ammunition contracts and heightened demand from U.S. and European customers. The revenue shortfall, while modest, reflects a mix shift toward lower‑margin aerospace products and a slight slowdown in legacy defense contracts.
GAAP net income climbed to $133.4 million, and non‑GAAP net income rose to $159.8 million, both up sharply from $79.1 million and $98.8 million, respectively, in Q3 2024. GAAP diluted earnings per share hit $2.80, beating the consensus of $2.75 by $0.05 (≈1.8%). The earnings beat is largely attributable to disciplined cost management and a favorable product mix that increased the contribution of higher‑margin land‑systems and cyber‑security contracts. Non‑GAAP EPS of $3.35 also surpassed expectations, underscoring the company’s ability to generate strong operating cash flow despite the aerospace dip.
The order backlog expanded to a record $25.2 billion as of September 30, up $1.4 billion from the $23.8 billion reported at the end of Q2. Roughly 69% of the backlog is outside Israel, highlighting the firm’s growing international footprint, particularly in Europe. A large portion of the backlog consists of long‑term defense contracts that provide multi‑year revenue certainty, reinforcing the company’s resilience amid the global defense super‑cycle.
Segment analysis shows land‑systems revenue surged 41%, driven by ammunition sales and new contracts with U.S. and European forces. Aerospace revenue slipped 3% due to a mix shift toward lower‑margin PGM sales, while the cyber‑security and C4I segments maintained steady growth. The mix shift explains the slight revenue miss and the modest decline in aerospace, but the overall margin expansion—gross profit margin rose to 24.9% from 24.0% and operating margin to 8.9% from 7.3%—demonstrates effective pricing power and operational leverage.
Management reiterated guidance for continued double‑digit revenue growth in 2025, signaling confidence in sustained demand and the strength of the backlog. The company’s focus on R&D and strategic expansion in Europe, coupled with its diversified product portfolio, positions it well to capitalize on rising defense budgets. CEO Bezhalel (Butzi) Machlis emphasized that the record backlog “provides long‑term visibility for the coming years” and highlighted the company’s role in supporting national security amid ongoing global conflicts.
Analysts noted that the EPS beat and margin expansion were key drivers of the positive market reaction, with investors valuing the company’s strong execution and the visibility offered by the backlog. The market’s response underscores the importance of earnings surprises and backlog strength in shaping investor sentiment for defense contractors.
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