Elbit Systems (NASDAQ:ESLT) reported what management described as a “strong year and quarter” on its fourth-quarter 2025 earnings call, highlighting double-digit growth in revenue, operating profit, earnings per share, and order backlog, alongside record free cash flow.
Revenue tops $2 billion in Q4 as full-year sales rise 16%
Chief Financial Officer Kobi Kagan said fourth-quarter revenue increased 11% year over year to $2.149 billion, up from $1.93 billion in the fourth quarter of 2024. He noted it was the first time Elbit’s quarterly revenue surpassed $2 billion.
Segment performance in the quarter was mixed, with growth in most areas offset by a decline in aerospace:
- C4I & Cyber revenue increased 19%, driven mainly by sales of radios and command-and-control systems in Europe and Israel.
- ISTAR & EW revenue increased 39%, primarily due to higher sales of maritime and electro-optic systems, including electronic warfare and counter-UAS solutions.
- Land revenue increased 22%, mainly due to ammunition and munition sales in Israel and Europe.
- Elbit Systems of America revenue increased 9%, reflecting increased sales of night vision and maritime systems, partially offset by lower sales of medical devices.
- Aerospace revenue decreased 14%, which management attributed mainly to training and simulation activity in Europe and higher sales of precision-guided munitions in the prior-year quarter.
By geography for 2025, management said Europe represented 27% of revenue, North America 21%, Asia Pacific 16%, and Israel 32%. Kagan said the company expects Europe to be a “meaningful growth engine going forward,” followed by Asia Pacific. Chief Executive Officer Bezhalel Machlis later said Europe would remain Elbit’s “primary growth engine,” with Germany playing a central role.
Margins and earnings expand as operating income rises
Elbit reported improved profitability in the quarter and for the year. GAAP gross margin in the fourth quarter was 24.7% of revenue, compared to 24.1% in the prior-year quarter. GAAP gross margin for 2025 was 24.4%, up from 24.0% in 2024. On a non-GAAP basis, gross margin was 25.0% in Q4, compared to 24.5% a year earlier, and 24.7% for the full year.
GAAP operating income in Q4 rose to $192 million, or 9.0% of revenue, compared to $141 million, or 7.3%, in Q4 2024. Non-GAAP operating income for the quarter was $210 million, or 9.8% of revenue, compared to $157 million, or 8.2%, in the prior-year quarter.
For the full year, GAAP operating income increased to $671 million (8.5% of revenue) from $489 million (7.2%) in 2024. Non-GAAP operating income was $737 million (9.3%) versus $550 million (8.1%) a year earlier. Kagan said the company reached its internal targets for operating profit margins.
GAAP diluted EPS in Q4 was $3.52, compared to $2.00 a year ago, while non-GAAP diluted EPS was $3.56 versus $2.66. For 2025, GAAP diluted EPS was $11.39, compared to $7.18 in 2024, and non-GAAP diluted EPS was $12.75 versus $8.76. Kagan said full-year non-GAAP EPS was “well ahead” of internal targets.
On spending, Elbit reported net R&D expense of $517 million in 2025, or 6.5% of revenue, compared to $466 million, or 6.8%, in 2024. Kagan said the increase was mainly tied to investments to expand the precision-guided munitions portfolio and night vision solutions, and he also pointed to “disruptive R&D initiatives,” including advanced AI capabilities. Marketing and selling expenses were $399 million (5.0% of revenue) versus $375 million (5.5%) in 2024, and G&A expenses were $347 million (4.4%) versus $311 million (4.6%).
Backlog climbs to $28.1 billion; free cash flow hits a record
Elbit ended 2025 with an order backlog of $28.1 billion, approximately $5.5 billion higher than at the end of 2024. Kagan said around 72% of the backlog was generated outside Israel. He added that about 54% of the backlog is scheduled to be performed during 2026 and 2027, with the remainder slated for 2028 and beyond. Backlog growth, he said, was driven by international customer demand.
Cash generation also improved. Net cash provided by operating activities in 2025 was $778 million, up from $535 million in 2024. Kagan said operating cash flow was affected mainly by increased contract liabilities, offset by higher inventories and trade receivables. Free cash flow totaled $553 million, up 73% from $320 million in 2024, which management called a record and “surpassing the $0.5 billion-mark.”
The company’s board declared a dividend of $1 per share, which Kagan described as another dividend increase for 2025.
Management highlights directed energy wins and production expansion
Machlis pointed to key contract awards during 2025, including contracts from Israel’s Ministry of Defense (IMOD) for an airborne high-power laser combat jet fighter pod and a high-power laser solution for helicopters. He said these awards strengthen Elbit’s position as a supplier of next-generation directed energy weapons.
He also cited large-scale contract wins, including what he described as the company’s largest-ever contract from an international customer for strategic solutions worth approximately $2.3 billion, and another contract earlier in the year worth $1.6 billion to deliver defense solutions to European countries.
Machlis said Elbit’s PULS rocket artillery system continues to be a strong performer, particularly in Europe, and that PULS backlog surpassed the $2 billion mark. He noted that in December the Hellenic Parliament approved a budget for the purchase of PULS for Greece’s armed forces, but emphasized during Q&A that it is “not a contract yet” and is not included in backlog. He made similar comments about Germany, saying Elbit has an initial contract for a small quantity and that a larger potential opportunity is not yet in backlog.
CapEx expected to rise in 2026 as company targets capacity and supply-chain resilience
Responding to analyst questions about capacity and demand, management said Elbit increased capital expenditures to $225 million in 2025 and expects CapEx of around $300 million in 2026. Kagan said the investments are aimed largely at expanding land-related production capacity and electronics assembly, both in Israel and outside Israel. Machlis added that some customers are also investing alongside Elbit to expand production capacity.
Machlis said Elbit expects to start delivering equipment from its Ramat Beka facility in Israel “quite soon,” and that operating two production lines in parallel should help meet growing demand. He added that some production sites are operating in three shifts, and that new facilities are being equipped with robotics and AI to improve productivity.
On supply chain, Machlis said Elbit’s strategy is to remain “very vertical” and reduce reliance on external suppliers, citing internal development of components such as diodes and detectors. He also said the company built inventory in areas where materials were constrained to support current and anticipated demand.
In discussing high-power laser technology, Machlis said using high-power lasers from the air can address challenges faced by ground-based systems, such as weather, dust, and turbulence, while also extending range and enabling threats to be engaged farther from borders. He said the company has made progress overcoming technical challenges including miniaturization and precision tracking, and argued the technology could change how countries defeat swarms and other threats. He added that Elbit controls the technology in-house and sees strong demand, and he expects the capability to create a new revenue and profit stream in the near future.
Management closed the call by saying Elbit entered 2026 “stronger, more resilient, and better positioned than ever,” citing record backlog, technology progress, and ongoing capacity expansion.
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.
