Leonardo DRS (DRS 2.00%), a U.S. defense technology firm specializing in sensing, computing, and electric power systems for military applications, reported its second quarter fiscal 2025 earnings on July 30, 2025. The most important headline from the earnings release was that Both revenue (GAAP) and adjusted earnings per share (non-GAAP) outpaced analyst forecasts. Revenue reached $829 million, ahead of the $827.46 million GAAP consensus, while adjusted diluted earnings per share (EPS) came in at $0.23, topping the $0.21 estimate. Net earnings (GAAP) jumped to $54 million, up from $38 million in the year-ago period. These results reflected consistent momentum in backlog, customer demand, and profitability, though bookings declined compared to a year earlier. Leadership raised revenue and adjusted diluted EPS guidance, citing confidence in demand and execution. Overall, it was a solid period with record backlog, margin expansion in the Integrated Mission Systems segment, and improvements in key performance metrics.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| Adjusted Diluted EPS (Non-GAAP) | $0.23 | $0.21 | $0.18 | 28 % |
| Revenue | $829 million | $827.46 million | $753 million | 10 % |
| Net Earnings | $54 million | $38 million | 42 % | |
| Adjusted EBITDA | $96 million | $82 million | 17 % | |
| Bookings | $853 million | $941 million | (9.3 %) | |
| Backlog | $8.6 billion | $7.9 billion | 9 % |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
About Leonardo DRS: Business and Focus Areas
The company delivers defense technology and solutions focused on advanced sensors, integrated mission systems, and power and propulsion equipment for military customers, primarily the U.S. Department of Defense (DoD). Its primary markets are in sensing (such as infrared imaging and advanced radar), network computing (for real-time battlefield communication and decision-making), and electric power systems for warships and vehicles.
Recent strategic efforts have centered on accelerating innovation, enhancing defense technology capabilities, and investing in research and development (R&D) to stay at the forefront of defense needs. Securing large, multi-year contracts with the U.S. government remains central, as does managing complex supply chains and compliance with U.S. government contracting rules. Key success factors include the ability to align with shifting DoD priorities, timely execution of high-profile programs, effective supply chain risk management, and sustained innovation in critical systems.
Quarterly Highlights: What Drove Results
The second quarter delivered growth across nearly all key financial metrics. Revenue (GAAP) rose 10%, driven by higher volumes in programs related to electric power and propulsion equipment (such as Columbia Class submarine systems), advanced infrared sensing, and ground network computing. Net earnings (GAAP) climbed 42%, supported by both higher revenue and improved profitability. Adjusted EBITDA, which is earnings before interest, taxes, depreciation, and amortization and a measure of underlying operating performance, increased by 17% compared to the same period last year.
Backlog, the value of contracted work not yet performed, reached $8.6 billion, up 9% from a year earlier. This provides strong visibility for future revenue. Bookings (new orders in the period) totaled $853 million, down from $941 million in Q2 2024. The book-to-bill ratio remained at 1.0x, meaning new orders matched revenue, a key indicator that the company maintained its work pipeline at a steady rate.
The company's Advanced Sensing and Computing segment, which includes infrared sensors (used in surveillance and targeting) and ground network computing technology, grew revenue 10%, but margins narrowed due to increased R&D investments and a less favorable mix of work. A specific challenge in this segment was higher costs related to disruptions from a single-source optics supplier for infrared sensing components, which led to one-time charges and reduced profit margins in the previous quarter. Management is now including price adjustment clauses in future contracts and working to diversify suppliers to address such risks.
In the Integrated Mission Systems segment, which provides electric propulsion and power systems (mainly for Navy programs), revenue climbed 9%. and adjusted EBITDA (non-GAAP) jumped 41% year-over-year. The segment's adjusted EBITDA margin rose to 13.1%. Management cited strong performance on electric power programs and force protection technologies as the key drivers. Expanded investment in R&D also continued, especially on next-generation missile sensors and new artificial intelligence (AI) processors designed to enhance real-time battlefield threat detection.
Looking Ahead: Guidance and Investor Considerations
Management raised its guidance for the 2025 fiscal year. The company now expects revenue of $3.53 billion to $3.60 billion, up from its previous range of $3.43 billion to $3.53 billion. Adjusted diluted EPS is forecast between $1.06 and $1.11, an increase from the earlier range of $1.02 to $1.08. The adjusted EBITDA outlook is also slightly increased, with the expectation of continued margin expansion in the electric power and propulsion business.
Investors should monitor trends in segment margins, especially in the Advanced Sensing and Computing business, where input cost pressures and supplier issues have caused recent volatility. Bookings were $853 million, down from $941 million in Q2 2024, so future order flow and its impact on backlog will be important variables to watch. Cash flow usage rose compared to a year ago, largely due to working capital investments to fund growth, and leadership highlighted ongoing efforts to manage supply chain risks. Continued alignment with DoD priorities and execution on committed programs will shape company performance for the remainder of the year.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
