L3Harris Technologies (LHX -1.53%), a global supplier of advanced defense and commercial technologies, announced its Q2 FY2025 financial results on July 24, 2025. The company outperformed expectations on both revenue and non-GAAP earnings per share (EPS): revenue was $5.43 billion versus an analyst consensus of $5.31 billion, and EPS reached $2.78 compared to the $2.48 forecast. These figures marked a 2% rise in revenue and a 16% increase in non-GAAP EPS compared to the prior year. Solid organic growth and exceptional order activity were the most notable positives. However, adjusted free cash flow declined 20% to $574 million year over year. Overall, the period marked continued momentum for the company, with higher earnings and increased demand balanced by operational and cash flow pressures.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $2.78 | $2.48 | $2.40 | 16% |
| Revenue (GAAP) | $5.426 billion | $5.31 billion | $5.30 billion | 2% |
| Operating Margin (GAAP) | 10.5% | 9.0% | 1.5 pp | |
| Adjusted Segment Operating Margin | 15.9% | 15.6% | 0.3 pp | |
| Adjusted Free Cash Flow (Non-GAAP) | $574 million | $714 million | (20%) |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
About L3Harris Technologies and Its Strategic Focus
L3Harris Technologies is a leading defense technology company that provides advanced solutions for communication, surveillance, space, and missile defense. Its core business involves designing and manufacturing systems and products that serve U.S. government agencies, allied militaries, and select commercial customers. Most sales come through large, often multi-year contracts, especially from the U.S. Department of Defense.
Recently, the company has concentrated on four main areas to support long-term growth: securing and executing government contracts, developing new technology through research and innovation, increasing its international market presence, and maintaining a robust supply chain. Strategic partnerships with companies like Palantir Technologies (AI integration), Amazon, and Shield AI have strengthened its position in areas such as data-driven decision-making and autonomous systems. Its focus on resilient communications and streamlined portfolio realignment, including exiting non-core commercial markets, positions it to pursue priority defense growth opportunities.
Quarter Highlights: Demand, Segment Trends, and Key Developments
The second quarter stood out for record bookings. Orders totaled $8.3 billion, resulting in a book-to-bill ratio of 1.5x (orders divided by revenue). This ratio is an important industry measure, signaling that incoming orders significantly outpaced revenue, which translates to a strong pipeline of future sales. Notably, L3Harris secured a $1.1 billion award from the Dutch Ministry of Defense for radio modernization just after the close of Q1 FY2025, demonstrating growing traction across NATO countries.
The company saw organic revenue growth across all segments, but reported growth was influenced by business portfolio changes. The divestiture of its Commercial Aviation Solutions business earlier in the year resulted in uneven performance between segments. For example, Integrated Mission Systems saw reported revenue decline by 3%, but when excluding divested business, organic revenue actually grew 6%. Communication Systems revenue improved 2%, buoyed by resilient communications solutions and increasing international demand. The recently acquired Aerojet Rocketdyne segment delivered 10% revenue growth, driven by missile and munitions programs ramping up.
Adjusted segment operating margin expanded 30 basis points to 15.9% in the second quarter of 2025. This continued a multi-quarter trend of steady improvement. Segment-specific margin shifts reflected the new business mix: Integrated Mission Systems improved by 120 basis points, while Space & Airborne Systems saw a 30 basis point contraction due to program mix and legacy contract pressures. The company’s ongoing LHX NeXt transformation program, designed to drive cost efficiencies and process enhancements, contributed to these gains. However, the departure of high-margin divested units means sustained margin improvement will depend on strong performance in remaining segments.
On the product and innovation front, L3Harris highlighted its progress in several key areas. The company advanced work on next-generation missile defense systems such as the “Golden Dome” -- an architecture that combines satellite tracking (via its HPTSS satellites) and interceptor propulsion. These are designed to defend against sophisticated threats like hypersonic missiles. The company also contributed to award-winning Space Force satellite tracking programs, supported major U.S. Army command and control (C2) network programs, and furthered partnerships for integrating artificial intelligence and autonomy into defense solutions. These technical milestones reflect ongoing investment in advanced research and the importance of federal priorities for innovation in future U.S. military capabilities.
Financial Outlook and What to Watch Next
Management raised its full-year 2025 outlook to reflect the solid demand environment and strong first-half performance. Updated guidance calls for revenue of about $21.75 billion (previously $21.4–21.7 billion), non-GAAP EPS of $10.40 to $10.60 (up from $10.30–$10.50), and adjusted free cash flow of $2.65 billion (up from $2.4–2.5 billion). The company raised its adjusted segment operating margin target to the mid-to-high 15% range for 2025. The company’s long-term “financial framework” also remains in place, with management reaffirming targets for low double-digit margins and about $23 billion in sales for 2026.
In addition, the company declared a dividend, extending its multi-decade track record of annual increases. The drop in non-GAAP adjusted free cash flow, attributed to working capital timing and cash used for settlement of a longstanding legal matter, will be a key area for investors to monitor in the second half of the year. Other important watchpoints include execution on new defense program ramps, performance in international growth markets, and the company’s ability to manage tax and supply chain risks amid a shifting global defense spending landscape.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
