ESLT
T3Elbit Systems Ltd.
Drones '26: Drone OEMs & C-UASDrones '26: Subsea Drones & UUVsModern Warfare '26: ISRModern Warfare '26: Lasers & Directed Energy WeaponsModern Warfare '26: Military Connectivity & Tactical NetworksModern Warfare '26: SONAR & Subsea SystemsModern Warfare '26: Sensors, Targeting & Battlefield PerceptionModern Warfare '26: Warfare in Iran
OverviewElbit Systems Ltd. develops and supplies advanced defense, homeland security, and commercial aviation systems globally, including drones, electro-optics, and C4
Elbit Systems Ltd. develops and supplies advanced defense, homeland security, and commercial aviation systems globally, including drones, electro-optics, and C4ISR. For 2025, Israel contributed 32% of revenues, Europe 27%, North America 21%, and Asia Pacific 16%. The company primarily sells its cutting-edge solutions to governments and defense contractors worldwide.
- What They Do (Plain English & Analogies)
- Elbit Systems is like a high-tech workshop for defense and security, building advanced gadgets and systems for armies, navies, air forces, homeland security, and even commercial planes. They provide everything from the 'eyes' (like advanced cameras and night vision for soldiers and satellites) and 'brains' (command and control systems, cyber defense, AI-powered solutions) to the 'muscle' (precision-guided missiles, artillery, drones, electronic warfare systems, and even futuristic high-power lasers) for modern warfare and security. They equip military and security forces with cutting-edge technology to defend their countries and populations, ensuring soldiers can see at night, pilots can fly safely, and borders are protected.
- Very Brief History
- Elbit Systems was founded in 1966 in Haifa, Israel, as Elbit Computers Ltd., initially focusing on computer-based military systems. It spun off into independent companies in 1996, with Elbit Systems concentrating on defense electronics. The company expanded significantly through strategic mergers and acquisitions, including El-Op Electro-Optics Industries, Elisra, Tadiran, and IMI Systems, broadening its capabilities across various defense sectors and listing on NASDAQ in 1999.
- "Street Stereotype"
- Elbit Systems is generally perceived as a leading Israeli defense contractor, highly regarded for its advanced, 'battle-proven' technology and strong research and development capabilities. Investors and analysts often view it as a key beneficiary of rising global defense budgets and a significant player in the international defense market, particularly in areas like unmanned systems, electro-optics, electronic warfare, and emerging directed energy solutions. However, it also faces scrutiny due to its involvement in the Israeli-Palestinian conflict.
- Subsidiaries On Linked In*
- Elbit Systems of America, Elbit Systems UK, Elbit Systems Deutschland, Elbit Systems Sweden, Elbit Systems Switzerland, AEL Sistemas.
- Customer Sectors & Example Clients
- Elbit Systems' customers are primarily in the defense, homeland security, and commercial aviation sectors. Specific example clients include governments and defense ministries worldwide, such as the Israeli Ministry of Defense (IMOD), the U.S. Army, and various European defense ministries. The company also serves U.S. Customs and Border Protection (CBP), and partners with defense contractors like BAE Systems Hägglunds, General Dynamics Ordnance and Tactical Systems (GD-OTS), KNDS, and Diehl Defence.
- New Customers / Segments They'Re Targeting
- Elbit Systems is primarily targeting continued growth in Europe, which they expect to be a meaningful growth engine, followed by Asia Pacific. They are also focusing on expanding their portfolio in precision-guided munitions and Night Vision solutions, and heavily investing in disruptive R&D initiatives, including advanced AI capabilities, to drive future profitable growth. A significant new segment is high-power laser solutions for both airborne and ground applications, particularly for counter-drone and cruise missile defense, where they aim to be the world's leading supplier.
- Supply Chain And Sourcing Geographies
- Elbit Systems operates a global supply chain with manufacturing and development facilities in Israel (headquarters, R&D, Ramat Beka facility for ammunition/munition production, electronic assemblies), the United States (manufacturing in Alabama, South Carolina, facilities in Texas, Pennsylvania, New Hampshire, Virginia, Florida, including a Roanoke County site for Night Vision expertise and image intensifier manufacturing), and Europe (expanding production facilities in Germany, Sweden, Romania, and existing operations in the UK). AEL Sistemas is based in Porto Alegre, Brazil. The company emphasizes a vertical integration strategy to reduce reliance on external suppliers and control its destiny.
- Sales Geographies And Expansion Plans
- For the full year 2025, Europe contributed 27% of revenues, North America 21%, Asia Pacific 16%, and Israel 32%. Elbit Systems expects Europe to be a meaningful growth engine going forward, followed by Asia Pacific. The company is making significant strategic CapEx investments to expand its production facilities globally, especially in Europe (Germany, Sweden, Romania) and the U.S., to address growing global capacity constraints and meet demand.
- How Key Themes May Help/Hurt
- The buildout of 'Defense Primes / Large-Scale Integrators' significantly helps Elbit Systems. As a leading global defense prime, Elbit is well-positioned to capitalize on the surge in demand for layered counter-UAS and electronic warfare systems, driven by rising DoD and NATO budgets. The company's strong offerings in UAVs (Hermes series), electronic warfare, and emerging directed energy solutions directly align with the need for interoperable detection-to-kill chains. Elbit's heavy investment in AI capabilities across multiple platforms also positions it to benefit from the theme's focus on AI-driven operations. However, the theme also presents risks, such as the potential for low-cost commercial jammers and AI edge kits to commoditize C-UAS margins, and the inherent integration complexity of multi-vendor and AI-based systems potentially limiting deployment speed and effectiveness.
3 Main Long-Term Bull Details
- Record and Growing Backlog with International Diversification: Elbit Systems reported a record order backlog of $28.1 billion as of December 31, 2025, representing a $5.5 billion increase from 2024. Approximately 72% of this backlog is from outside Israel, with Europe expected to be a primary growth engine, providing strong revenue visibility and reducing reliance on any single country's defense budget.
- Technological Leadership and R&D Investment in Emerging Areas: The company consistently invests heavily in disruptive R&D, exceeding $500 million in 2025, focusing on advanced AI capabilities, precision-guided munitions, Night Vision solutions, and breakthrough directed energy weapons like airborne high-power lasers. This commitment to innovation positions Elbit as a market leader in critical and evolving defense domains.
- Strong Financial Performance and Operational Excellence: Elbit Systems delivered double-digit growth in revenues (16% in 2025), operating profit, and EPS, along with record free cash flow exceeding $0.5 billion in 2025. This consistent financial strength, coupled with expanding production capacity globally and operational leverage, demonstrates the company's ability to translate demand into profitable growth and create long-term stakeholder value.
3 Main Long-Term Bear Details
- Geopolitical Risks and Regional Instability: Elbit's significant presence and primary base in Israel expose it to heightened geopolitical risks and regional conflicts, which can lead to operational disruptions and potential international scrutiny or divestment actions. While international backlog is growing, Israel still contributed 32% of revenues in 2025.
- Dependence on Government Budgets and Procurement Cycles: As a defense contractor, Elbit's revenue and growth are heavily reliant on government defense budgets and often lengthy procurement cycles. Fluctuations in these budgets or political shifts could lead to reduced outlays, impacting future orders and revenue.
- Intense Competition and Rapid Technological Obsolescence: The defense technology sector is highly competitive and characterized by rapid technological advancements. The risk of competitors developing superior or lower-cost solutions, or new technologies quickly rendering existing systems obsolete, could erode Elbit's market share and profitability, particularly in areas like counter-UAS where low-cost commercial solutions could commoditize margins.
- Competitors And Differentiation
- Elbit Systems faces competition from a range of defense and aerospace companies. Key competitors include major defense primes like Lockheed Martin (especially with its HIMARS/GMARS system for rocket artillery), Thales, Kratos, General Atomics, Northrop Grumman, and Israel Aerospace Industries (IAI). Other competitors mentioned include Bharat Electronics, Saab, Esterline, HENSOLDT Optronics, Rafael (for Active Protection Systems like Trophy), and NORINCO MLRS (for rocket artillery). Elbit differentiates itself through: * **Technological Leadership & R&D**: Heavy investment in disruptive R&D, including AI enhancements and advanced high-power laser solutions, to predict future market demand and offer cutting-edge, battle-proven systems. * **Integrated Solutions**: Providing comprehensive platform-level solutions that combine sensors, communications, command-and-control software, and weapons integration. * **Vertical Integration**: A strategy to reduce dependency on external suppliers and control key technologies in-house, such as diodes and detectors. * **Agility and Open Architecture**: Systems like the PULS rocket artillery are noted for their modularity, open architecture allowing integration of different munitions, and quicker delivery timelines compared to some competitors. * **Cost-Effectiveness**: The PULS system, for example, offers similar capabilities at a more affordable price with additional features.
- Recent Performance & What The Market'S Focused On
- Elbit Systems reported strong Q4 and full year 2025 results, with full year revenues increasing by 16% to $7.939 billion and quarterly revenues surpassing the $2 billion mark for the first time. The company achieved double-digit growth across all key metrics: sales, operating profit, earnings per share, and backlog, which grew by $5.5 billion to $28.1 billion. Free cash flow also reached a record $553 million. The market is focused on Elbit's ability to sustain this strong international order momentum, particularly in Europe, and effectively convert its substantial backlog into revenue and profit. Key areas of interest include the continued expansion of margins, the performance of the Aerospace segment, and the progress and new orders for emerging technologies like directed energy systems and AI enhancements.
- Brands And Revenue Segments
- Key brands include PULS (Precise and Universal Launching System), Iron Fist (Active Protection System), DIRCM (Directed Infrared Countermeasures), and Hermes (Unmanned Aircraft Systems). Revenue segments and their Q4 2025 year-over-year revenue changes were: * C4I and Cyber: Increased by 19% * ISTAR and EW: Increased by 39% * Land: Increased by 22% * Elbit Systems of America: Increased by 9% * Aerospace: Decreased by 14%
Bull / Bear DetailsElbit Systems is a leading global defense prime positioned for sustained growth, driven by a record $28.1 billion backlog, robust international demand, and stra
Thesis
Elbit Systems is a leading global defense prime positioned for sustained growth, driven by a record $28.1 billion backlog, robust international demand, and strategic CapEx investments in expanding production capacity. The company benefits from rising global defense budgets, continuous R&D in disruptive technologies like high-power lasers and AI, and operational excellence leading to significant margin expansion. (Updated: 2026-03-20)
Bull case
Elbit's record $28.1 billion backlog, up $5.5 billion from 2024, with 72% derived from outside Israel, underpins strong future revenue visibility and sustained international demand. The company achieved double-digit growth across revenues (16% FY25), operating profit, EPS, and backlog, demonstrating its ability to capitalize on rising global defense spending, particularly with Europe as a key growth engine.
The company continues its strong margin expansion trajectory, with non-GAAP operating income reaching 9.8% in Q4 2025, alongside record free cash flow exceeding $0.5 billion. Strategic CapEx investments, increasing to $300 million in 2026, are expanding global production capacity, incorporating advanced robotics and AI, and strengthening vertical integration. These initiatives enhance operational efficiency and backlog profitability, driving sustained financial performance.
Elbit is a leader in high-growth defense areas, notably directed energy weapons, securing contracts for airborne high-power lasers and controlling the technology in-house, addressing a huge market demand against drone threats. The PULS rocket artillery system's backlog surpassed $2 billion, highlighting its market-leading position. Continuous heavy R&D investment in AI enhancements and precision-guided munitions ensures a robust pipeline of advanced, battle-proven solutions.
Bear case
Despite strong international diversification, Israel contributed 32% of Elbit's 2025 revenues, exposing the company to heightened geopolitical risks and regional instability. The ongoing conflicts in the Middle East, as noted by management, introduce potential operational disruptions and volatility in domestic demand, requiring sustained international expansion to mitigate this concentration risk.
The Aerospace segment experienced a notable 14% year-over-year revenue decrease in Q4 2025, primarily due to reduced training and simulation sales in Europe and higher Precision Guided Munition sales in the prior year. This accelerated decline, compared to previous quarters, indicates ongoing challenges within a key segment, potentially tempering overall top-line expansion despite strong performance in other areas.
While significant opportunities exist, the conversion of parliamentary approvals and initial orders, such as for the PULS system in Greece and Germany, into firm backlog and revenue can be protracted. Management confirmed these are "not a contract yet" or "not yet full production," indicating potential delays in realizing revenue from these promising opportunities and highlighting the long, complex defense procurement cycles.
Bull / Bear Case
- Bear Case
- Elbit's significant valuation, with a P/E ratio of 84x-103x and EV/EBITDA of 44x-54x, is substantially higher than its historical averages (P/E ~30x-45x, EV/EBITDA ~18x) and industry peers (P/E ~40x-50x, EV/EBITDA ~11x-17x), indicating it is significantly overvalued. Despite strong international diversification, Israel contributed 32% of 2025 revenues, exposing the company to geopolitical risks and potential volatility. The Aerospace segment experienced a notable 14% year-over-year revenue decrease in Q4 2025, indicating ongoing challenges. Furthermore, the conversion of parliamentary approvals for key systems like PULS in Greece and Germany into firm backlog and revenue can be protracted, introducing delays in realizing revenue from promising opportunities.
- Bull Case
- Elbit Systems is poised for sustained growth, driven by a record $28.1 billion backlog, with 72% from international customers, particularly Europe, ensuring strong revenue visibility. The company achieved double-digit growth across revenues (16% FY25), operating profit, EPS, and backlog, demonstrating its ability to capitalize on rising global defense spending. Strategic CapEx investments, increasing to $300 million in 2026, are expanding global production capacity with advanced robotics and AI, enhancing operational efficiency and backlog profitability. Elbit leads in high-growth defense areas like directed energy weapons (airborne high-power lasers) and the PULS rocket artillery system, backed by continuous heavy R&D investment, ensuring a robust pipeline of advanced, battle-proven solutions.
- More Compelling & Why
- Given the current valuation, the Bear Case is more compelling. ESLT's P/E ratio of 84x-103x is significantly stretched compared to its historical averages (P/E ~30x-45x) and the Aerospace & Defense industry averages (P/E ~40x-50x). The strongest argument for the bear case is this extreme overvaluation, which is not fully justified by the projected growth, especially with the decline in the Aerospace segment and geopolitical risks. My view would flip to bullish if ESLT's valuation metrics normalized closer to industry averages and historical levels, or if the company demonstrated a clear path to significantly accelerated, sustainable growth (e.g., 20%+ revenue growth for several years) that could justify such a premium.
Key Factors
| Key Factor | Why It Matters | What To Watch | What It Signals | Where/How To Track | Free Alt Data | Paid Alt Data |
|---|---|---|---|---|---|---|
| Deployment Milestones or New International Orders for High-Power Laser Systems | Elbit's advanced high-power laser systems, especially airborne solutions, are considered a 'breakthrough' against drone threats and a significant future revenue stream. Successful deployment and international contracts validate technological leadership and open new market opportunities. | Announcements of initial operational capability (IOC) for airborne or ground high-power laser systems outside Israel, or new international contracts for these systems exceeding $100 million in value. Specific mentions of 'operational' status or 'delivery' from the IMOD contracts. | Bullish: Announcement of successful deployment or new international orders for high-power laser systems (e.g., >$100 million). Bearish: Delays in deployment or lack of significant new international orders for two consecutive quarters. | Company press releases, investor conference calls, SEC filings (Form 6-K), defense industry news outlets (e.g., Defense News, Janes). | Defense industry news feeds (e.g., Breaking Defense, FlightGlobal), government defense procurement websites (e.g., European Defence Agency, USASpending.gov for relevant contract types). | Janes: Defense market intelligence reports on directed energy programs; IHS Markit Aerospace & Defense: Market forecasts and contract tracking for laser weapon systems. |
| Quarterly Order Backlog Growth and International Contribution | A growing order backlog, particularly from international customers, underpins Elbit's sustained revenue potential and indicates strong global demand for its defense systems. The current backlog of $28.1 billion provides significant future revenue visibility. | Quarter-over-quarter and year-over-year growth rates of the total order backlog. The percentage of backlog derived from outside Israel (target >70%). Backlog scheduled for performance in the next 12-24 months. | Bullish: Quarterly backlog growth exceeding $1.5 billion, with international orders contributing significantly (e.g., >70% of the increase). Bearish: Quarterly backlog decline, or international backlog growth slowing significantly below expectations. | Company earnings reports, investor presentations, and conference call transcripts (e.g., Q1 2026 earnings call, expected May 2026). | Company investor relations website (for published financial reports). | FactSet: Historical and projected backlog data; S&P Capital IQ: Financial models and analyst estimates for backlog. |
| New Large-Scale International Defense Contracts, particularly in Europe | Elbit's record backlog and strong international demand, especially from Europe, are key drivers of future revenue growth. Securing large contracts, like the recent $2.3 billion and $1.6 billion deals, provides long-term revenue visibility and confirms market leadership. | Total value of new international contracts announced within a quarter, with a focus on Europe. Specific contract wins for the PULS rocket artillery system or other key platforms like Iron Fist and DIRCM. | Bullish: Announcement of new international contracts exceeding $1 billion, or multiple smaller contracts totaling over $500 million within a quarter, with a strong European component. Bearish: Lack of significant new contract announcements for two consecutive quarters, or contract values below historical averages. | Company press releases, investor conference calls, SEC filings (Form 6-K), defense ministry announcements (e.g., German Ministry of Defence, Hellenic Parliament approvals). | Defense news websites (e.g., Defense News, European Defence Review), government procurement portals (e.g., Tenders Electronic Daily for EU contracts). | Bloomberg Terminal: Defense contract announcements and news sentiment; Refinitiv Eikon: Defense sector contract data and analysis. |
| Non-GAAP Operating Income Percentage and Margin Expansion Trajectory | Sustained expansion of non-GAAP operating income percentage indicates improved operational efficiency and profitability, which is crucial for justifying Elbit's valuation and demonstrating its ability to translate strong demand into shareholder value. | Quarterly non-GAAP operating income as a percentage of revenues. Management commentary on the drivers of margin expansion (e.g., backlog profitability, operational leverage, R&D efficiency). | Bullish: Non-GAAP operating income percentage consistently exceeding 10% and demonstrating a clear trajectory towards mid-teens (12-15%). Bearish: Non-GAAP operating income percentage declining or failing to show continued expansion. | Company earnings reports, investor presentations, and conference call transcripts (e.g., Q1 2026 earnings call, expected May 2026). | Company investor relations website (for published financial reports). | Bloomberg Terminal: Consensus analyst estimates for operating margins; FactSet: Historical and projected profitability metrics. |
| Strategic Capital Expenditure (CapEx) and Production Capacity Expansion Milestones | Elbit's increased CapEx and expansion of production facilities are critical to meeting growing global demand and converting its record backlog into revenue. Successful operationalization of new facilities will directly impact future delivery capabilities and revenue growth. | Announcements regarding the progress and operationalization of new production facilities (e.g., Ramat Beka, Germany, Sweden, Romania, U.S.). Updates on the planned CapEx spend for 2026 (around $300 million). | Bullish: Confirmation of new facilities becoming operational ahead of schedule or on time, and CapEx spend meeting or exceeding targets. Bearish: Delays in facility operationalization or significant reductions in planned CapEx. | Company earnings calls and transcripts, investor presentations, company press releases. (e.g., Q1 2026 earnings call, expected May 2026). | Local government economic development news (for facility openings), industry trade publications covering defense manufacturing. | Industrial real estate data providers: Tracking new facility construction and operational status; Supply Chain Management platforms: Monitoring Elbit's manufacturing footprint expansion. |
Key Reported Metrics
| Metric | Why It Matters | Last Period |
|---|---|---|
| Total Revenue | Total Revenue is a primary indicator of overall business growth. For Elbit Systems, strong revenue growth reflects increasing global defense spending and successful contract wins, especially in the counter-UAS and European markets, validating the 'Drones '25' investment thesis. | 11.3% |
| Order Backlog | Order Backlog is crucial for defense contractors as it provides long-term revenue visibility. A growing backlog, particularly from international and European orders, indicates sustained demand for Elbit's advanced defense systems and future revenue potential. | 24% |
| Non-GAAP Operating Income | Non-GAAP Operating Income reflects the company's core profitability and operational efficiency. Strong growth in this metric, alongside margin expansion, demonstrates Elbit's ability to manage costs and integrate complex systems profitably, despite potential market pressures. | 34% |
Key QuestionsGiven Elbit's record $28.1 billion backlog and significant CapEx investments to expand global production capacity, will the company effectively operationalize n
Given Elbit's record $28.1 billion backlog and significant CapEx investments to expand global production capacity, will the company effectively operationalize new facilities and overcome potential supply chain constraints to accelerate revenue conversion and maintain double-digit growth?
- Question 2
Can Elbit Systems sustain its strong non-GAAP operating income margin expansion trajectory, particularly above 9.8%, through operational leverage and a favorable contract mix, or will increased CapEx and potential competitive pressures temper further improvement?
- Question 3
Will the significant investments and contract wins in high-power directed energy systems translate into a material new stream of revenue and profit in the near future, effectively offsetting the recent 14% decline in the Aerospace segment and driving overall strategic expansion?
Rerating Thresholds
| Metric | What'S Needed For Rerating | Why It Matters | Earnings Date |
|---|---|---|---|
| Total Revenue | Total Revenue growth needs to exceed 15% year-over-year for Q4 2025, significantly beating current analyst consensus estimates of approximately 8.5-9.9%. Additionally, strong forward guidance for fiscal year 2026 revenue growth in the mid-to-high teens (e.g., 15-20% year-over-year) would be crucial, potentially aligning with the 18.1% growth projected by some analysts due to increased defense funding. This would demonstrate accelerating growth, particularly driven by international contracts and a rebound in the Aerospace segment [cite: Ticker_EarningsTranscriptSummary, 16, 43]. | ESLT's current valuation is significantly stretched with a P/E ratio of approximately 88x, substantially higher than its historical averages and industry peers [cite: Ticker_BullBearCase, 17, 33]. Sustained, accelerated double-digit revenue growth, particularly above the industry (6-7%) and peer average (5-12%), is essential to justify this premium and signal that the company can grow into its valuation. This would validate the investment thesis of durable backlog growth and margin tailwinds from counter-drone and other advanced defense systems, driving investor confidence and a positive rerating. | 2026-03-17 |
| Order Backlog | For Elbit Systems Ltd. (ESLT) to rerate higher, its order backlog metric needs to demonstrate a significant acceleration beyond its current 14% year-over-year growth. Specifically, the company would likely need to report a quarterly order backlog increase exceeding $1.5 billion, with international orders continuing to contribute over 70% of this increase. This would translate to a year-over-year backlog growth rate of 20% or more, signaling sustained and accelerating demand for its defense solutions, particularly in Europe and other international markets, and significantly surpassing the existing bullish signal of quarterly backlog growth exceeding $1 billion. [cite: Ticker_KeyFactors, Ticker_KeyReportedMetrics] | Hitting this threshold would signal to investors that Elbit Systems is not only maintaining its strong growth trajectory but accelerating it, further solidifying its competitive position in the booming global defense market. This sustained, accelerated growth, particularly from diversified international contracts, would justify its premium valuation by demonstrating robust future revenue visibility and the ability to capitalize on rising defense budgets and geopolitical demand, potentially leading to a re-evaluation of its long-term earnings power. | 2026-03-17 |
| Non-GAAP Operating Income | For Elbit Systems (ESLT) to rerate higher, its Non-GAAP Operating Income percentage needs to consistently exceed 10%, ideally demonstrating a clear trajectory towards the mid-teens (12-15%) in the near to medium term. This would represent a significant expansion from its Q3 2025 Non-GAAP operating income of 9.7% and place it more competitively among higher-margin peers in the Aerospace & Defense sector, where the industry median is 7.58%. Achieving this would signal sustained profitability improvement, surpassing current investor expectations and justifying a premium valuation. | Consistently achieving a double-digit Non-GAAP Operating Income percentage is critical for ESLT's rerating as it directly addresses concerns about the stock's rich valuation. This demonstrates the company's ability to translate its substantial backlog into enhanced profitability and operational efficiency, validating the investment thesis. It signals to investors that Elbit Systems is not only growing revenue but also improving its competitive position and generating stronger shareholder value, thereby justifying a higher trading multiple. | 2026-03-17 |
Earnings Transcript Summary
· 2025Q4 Earnings Call
| 3 Things Management Is Most Focused On | Call Takeaway & Tone | Prior Quarter'S Y/Y Growth By Segment | 3 Things Analysts Most Pressed On (And Mgmt Responses) | Revenue Segments |
|---|---|---|---|---|
| 1. Sustaining strong financial performance and growth: Management highlighted achieving double-digit growth across all key metrics (sales, operating profit, EPS, backlog) and generating record free cash flow, expressing pride in these results and outstanding execution. 2. Strategic CapEx investments to expand global production capacity: The company is making significant strategic CapEx investments, increasing spend to around $300 million in 2026, to address growing global capacity constraints, particularly in Israel (Ramat Beka facility) and Europe (Germany, Sweden, Romania), to meet high demand for munitions and electronic assemblies. 3. Heavy investment in disruptive R&D initiatives, including AI and advanced solutions: Elbit continues to invest heavily in R&D (over $0.5 billion, 6.5% of revenues), focusing on expanding its portfolio of precision-guided munitions, Night Vision solutions, and disruptive AI capabilities to drive future profitable growth and reinforce market leadership, often with partial support from the Israeli Ministry of Defense. | The overall takeaway from the call is highly positive and confident. Elbit Systems delivered very strong Q4 and full-year 2025 results, achieving double-digit growth across all key financial metrics, including revenues, operating profit, EPS, and backlog, alongside record free cash flow. Management expressed confidence in the company's ability to sustain this growth, driven by a record $28.1 billion backlog, strategic CapEx investments in expanding global production capacity, and continuous heavy R&D in disruptive technologies like AI and high-power lasers. Europe is highlighted as a primary growth engine, and the company is actively addressing increased global demand and supply chain considerations. The tone was optimistic, emphasizing continued growth, profitability, and cash generation. | Aerospace: decreased by 3% year-over-year. C4I and Cyber: increased by 14% year-over-year. ISTAR and EW: increased by 5% year-over-year. Land: increased by 41% year-over-year. Elbit Systems of America: decreased by 2% year-over-year. | 1. **Capacity and CapEx investments to meet unprecedented high demand and supply chain issues:** Kristine Liwag inquired about the meaning of CapEx investments for maximum revenue generation and the timeline for new capacity, considering Red Sea supply issues. Management responded by detailing increased CapEx to $300 million for 2026, investments in factories in Israel (Ramat Beka tripled) and Europe, and customer co-investments. They also highlighted vertical integration and inventory building to mitigate supply chain risks. 2. **Breakthrough in directed energy (high-power lasers) and their role against low-cost drone swarms:** Kristine Liwag asked about the technological breakthrough in high-power lasers and their application against drone swarms. Management explained the advantage of airborne lasers (overcoming ground challenges, greater range, eliminating threats far away), the technical challenges overcome, and the huge demand for such solutions, positioning Elbit as a leading player controlling the entire technology in-house. 3. **Opportunity set for the PULS system in Europe (Greece, Germany) and its differentiation:** Ellen Page questioned the opportunity for the PULS system, specifically regarding recent media reports and budget approval from Greece, and what differentiates it from peers. Management clarified that the Greek and German contracts are not yet in the backlog but are expected. They emphasized the PULS system's unique generic launcher, ability to fire different missiles (including loitering munition), open architecture, and joint venture partnerships in Europe for local development and production (EuroPULS). | C4I and Cyber revenues increased by 19% in the fourth quarter of 2025. ISTAR and EW revenues increased by 39%. Land revenues increased by 22%. Elbit Systems of America revenues increased by 9%. Aerospace revenues decreased by 14%. |
· 2025Q3 Earnings Call
| 3 Things Management Is Most Focused On | Call Takeaway & Tone | Prior Quarter'S Y/Y Growth By Segment | 3 Things Analysts Most Pressed On (And Mgmt Responses) | Revenue Segments |
|---|---|---|---|---|
| 1. Sustaining double-digit growth and margin expansion: Management highlighted the seventh consecutive quarter of double-digit growth and significant margin expansion, attributing it to strong demand, particularly in Europe and Israel. They emphasized continued improvement in backlog profitability and operational efficiency. 2. Strategic investments in R&D and operational excellence: The company continues to invest in R&D to secure future profitable growth and maintain market leadership. They also focus on operational excellence through investments in ERP systems, robots, cobots, and AI to drive profitability and cash conversion. 3. Expanding global presence and securing large international contracts: Management is focused on leveraging strong international demand, especially in Europe, and actively pursuing M&A opportunities in strategic markets like the U.S. They announced record-breaking contracts, including the largest in Elbit's history and a significant European contract, demonstrating their commitment to equipping customers with advanced solutions globally. | The overall takeaway from the call is highly positive and confident. Elbit Systems delivered robust third-quarter 2025 results, marked by double-digit year-over-year growth in revenues, backlog, and EPS, along with significant margin expansion and solid free cash flow. Management expressed confidence in the company's global leadership and its ability to capitalize on strong demand for defense solutions, particularly in Europe and Israel. Key themes included strategic investments in R&D and operational efficiency, securing record-breaking international contracts, and the growing potential of UAVs and directed energy weapons. The ceasefire in Israel was viewed as an opportunity to regroup and further focus on international business. The tone was optimistic, emphasizing continued growth, profitability, and cash generation. | Aerospace: increased by 12% year-over-year; C4I and Cyber: increased by 21% year-over-year; ISTAR and EW: increased by 15% year-over-year; Land: increased by 45% year-over-year; Elbit Systems of America: increased by 4% year-over-year. | 1. **Domestic demand post-ceasefire and margin trade-offs with international orders:** An analyst inquired about the endurance of domestic demand after the ceasefire and how a potential slowdown in Israeli bookings might affect margins as orders shift internationally. Management responded by stating they anticipate a flattish backlog in Israel and expect future growth to come predominantly from outside Israel, particularly Europe, which is seen as the primary growth area for the backlog. 2. **Trajectory of the Aerospace business:** An analyst asked about the future trajectory of the Aerospace segment, given its decline in the current quarter despite some drone orders. Management expressed belief in continued single-digit growth for this segment, citing embedded avionics in most Western platforms and strong global demand for UAVs and loitering munitions. They also noted that the Aerospace segment grew 9% over the first nine months of the year. 3. **Opportunities in directed energy, especially outside Israel:** An analyst questioned the emerging opportunities in directed energy, specifically regarding the IRON BEAM system and potential for solutions outside Israel. Management confirmed significant interest from many countries for ground high-power laser systems, building on Israel's success. They also highlighted leading the airborne high-power laser system development, seeing it as a potential 'game changer' and a very important future growth engine for Elbit, alongside other confidential energy weapons. | Aerospace: decreased by 3% year-over-year; C4I and Cyber: increased by 14% year-over-year; ISTAR and EW: increased by 5% year-over-year; Land: increased by 41% year-over-year; Elbit Systems of America: decreased by 2% year-over-year. |
Transcript Tidbits
| About Expanding Eligible Market | About Competition | About The Broader Industry | Where Things Are Headed | Updates On Theme | Broader Themes Emerging | Bullish-Leaning Quotes (Short) | Bearish-Leaning Quotes (Short) | Hiring |
|---|---|---|---|---|---|---|---|---|
| Europe contributed 27% of revenues in 2025, surpassing the $2 billion mark, and is expected to be a primary growth engine going forward, followed by Asia Pacific. Approximately 72% of the current backlog was generated from outside of Israel, driven by international customer demand. The company is expanding production facilities globally, especially in Europe (Germany, Sweden, Romania) and the U.S., and customers are also investing with Elbit to create additional capacity. | Elbit's diverse global customer base is highlighted as a key differentiator, ensuring the company is not reliant on any single country's defense budget. The company has strengthened its position as the world's leading supplier of next-generation directed energy weapons. The PULS rocket artillery system continues to be a high runner, with its backlog surpassing the $2 billion mark, and is described as the 'leading solution, which is available currently in the market'. Elbit controls the entire technology for its directed energy solutions in-house, positioning it as a leading player in this domain. | There is intensified global demand for advanced defense systems, with the company noting that 'as one conflict ends, another begins' in the Middle East. The Israeli government approved a further addition to the defense budget of ILS 39 billion (about USD 13 billion). Addressing growing global capacity constraints is a critical element of Elbit's long-term strategy, leading to significant strategic CapEx investments. Many countries are currently fighting drones and cruise missiles with expensive missiles, which is deemed 'not sustainable', indicating a huge demand for alternative solutions like high-power lasers. | Elbit expects Europe to remain its primary growth engine, anticipating strong revenue growth as countries continue to rearm. The company plans to increase its CapEx spend in 2026 to around $300 million to meet high demand, especially for munition and ammunition. Elbit expects to start delivering equipment from the Ramat Beka facility 'quite soon' in 2026. Management believes there is 'very significant, double-digit potential of growth also in the future', citing the 24% backlog growth compared to 16% revenue growth in 2025. High-Power Laser solutions are anticipated to be a 'breakthrough' when operational, bringing a 'new stream of revenues and profit in the near future'. The company also expects margin expansion to continue due to operational leverage and strong growth. | Counter-UAS | Artificial Intelligence (AI) is a broader theme, with Elbit investing heavily in AI enhancements across multiple platforms and integrating intelligent capabilities across defense systems and core operations to strengthen decision-making, operational agility, and scalability. Robotics are also being integrated into new production facilities to increase effectiveness and productivity. | ''closing another strong year and quarter, delivering double-digit growth in revenues, operating profit, EPS and backlog''. ''first time our quarterly revenues surpassing the $2 billion mark''. ''backlog of orders as of December 31, 2025, was $28.1 billion, approximately $5.5 billion higher than the backlog at the end of 2024''. ''record free cash flow, surpassing the $0.5 billion mark''. ''We are confident in our ability to sustain our growth''. ''the potential of growth is very significant, the double-digit potential of growth also in the future''. | ''Aerospace revenues decreased by 14%, mainly due to training and simulation in Europe and higher sales of PGM in fourth quarter of 2024''. ''The [indiscernible] war continued for the most part of 2025. But as in the Middle East, as one conflict ends, another begins.'' ''With regards to the Greek opportunity, it's not a contract yet. We didn't receive it yet.''. ''The same is true also in Germany. We got an initial contract in Germany for a small quantity and which is not yet full production in Germany, but the potential that we believe that will mature in the future, but it's not yet in our backlog.''. |
| About Expanding Eligible Market | About Competition | About The Broader Industry | Where Things Are Headed | Updates On Theme | Broader Themes Emerging | Bullish-Leaning Quotes (Short) | Bearish-Leaning Quotes (Short) | Hiring |
|---|---|---|---|---|---|---|---|---|
| Elbit Systems is seeing growth predominantly outside of Israel, especially in Europe, which contributed 28% of revenues in Q3 2025. Approximately 69% of the current backlog is derived from orders outside of Israel. The company expanded operations in Europe by opening new facilities in Sweden and Germany to enhance local delivery capabilities. The U.S. market is considered a strategic home market, with plans to pursue opportunities in border protection, leveraging past success with the CBP. Global coalition demand, including Indo-Pacific and Middle East deals, is broadening the addressable market beyond the U.S., de-risking single-buyer exposure. | Elbit aims to maintain its position as a market leader through continuous R&D investment. The company's seventh consecutive quarter of double-digit growth demonstrates global leadership on the modern battlefield. Elbit's recently tested and proven solutions position it as a leading authority in the rapidly changing industry. The company secured its largest contract in history, which is a testament to the superiority of its products and technologies. Elbit offers a unique integrated solution for UAVs, including sensors and payloads. A potential competitive threat mentioned in existing knowledge is the risk of low-cost commercial jammers and AI edge kits commoditizing C-UAS margins. | Defense budgets continue to rise globally, with customers seeking cutting-edge, battle-proven systems. There is a huge demand for UAVs and loitering munitions. High-power lasers in the air are anticipated to be a 'game changer' in combating drones and cruise missiles. A surge in hostile-drone incidents has pushed the U.S. and allies to fund layered counter-UAS and electronic-warfare systems. DoD and NATO budgets are upshifting, with the FY26 U.S. request topping $4 billion for counter-UAS/RDT&E and the EU EDF allocating over €800 million for C-UAS collaboration, creating a decade-long funding tail. | Elbit expects continued growth in the Aerospace segment, projecting single-digit revenue growth, aligning with the U.S. budget's growth rate. The company anticipates many more orders for ground high-power lasers in Israel next year and sees significant potential for airborne high-power laser systems. Directed energy weapons are considered a 'very important growth engine' for Elbit's future. The company plans to maintain internal targets for continued profitability improvement and cash conversion. Elbit is actively exploring M&A opportunities in the U.S. and intends to expand its position in this market. | Drones: | Artificial Intelligence (AI) is emerging as a broader theme, with Elbit using AI for operational excellence, including processes and decision-making across land, air, and maritime domains. | ''double-digit year-over-year growth in revenues, backlog and EPS.'', ''solid 12% growth in quarterly revenues year-over-year'', ''We are very pleased with this margin expansion trajectory.'', ''Elbit's seventh consecutive quarter of double-digit growth further demonstrates our global leadership'', ''largest contract in Elbit history'', ''This is the fifth consecutive quarter where we delivered positive free cash flow'', ''We really believe that this energy weapon activity is a very important growth engine for Elbit for the future.'' | ''Aerospace, third quarter revenues decreased by 3% year-over-year, mainly due to a decrease in Precision Guided Munition sales in Asia Pacific'', ''Elbit Systems of America, revenues decreased by 2% due to a decrease in Electronic systems and medical instrument sales'', ''Budget squeeze: deficit politics or peace dividend shrinks FY-27 drone-defense outlays despite 2025 spike'', ''Tech leapfrogged: low-cost commercial jammers & AI edge kits commoditize C-UAS margins before primes recoup R&D'', ''Integration complexity limits deployment speed: High dependency on multi-vendor systems and AI-based decision-making delays field effectiveness.'' | Elbit plans to 'continue to recruit additional people' in the U.S. as part of its strategy to expand its position in this important market. |
Earnings ResultsWhile full-year 2025 revenue growth of 16.3% exceeded the 15% rerating trigger, the Q4 2025 revenue growth of 11.3% did not meet the specific Q4 target of excee
| Metric | Prior Quarter | Rerating Trigger | Actual Reported | Hit Target? | Notes |
|---|---|---|---|---|---|
| Total Revenue | 12% | Total Revenue growth needs to exceed 15% year-over-year for Q4 2025, significantly beating current analyst consensus estimates of approximately 8.5-9.9%. Additionally, strong forward guidance for fiscal year 2026 revenue growth in the mid-to-high teens (e.g., 15-20% year-over-year) would be crucial, potentially aligning with the 18.1% growth projected by some analysts due to increased defense funding. This would demonstrate accelerating growth, particularly driven by international contracts and a rebound in the Aerospace segment [cite: Ticker_EarningsTranscriptSummary, 16, 43]. | $2.15 billion (11.3% y/y growth for Q4 2025); $7.94 billion (16.3% y/y growth for Full Year 2025) | Partially | While full-year 2025 revenue growth of 16.3% exceeded the 15% rerating trigger, the Q4 2025 revenue growth of 11.3% did not meet the specific Q4 target of exceeding 15% year-over-year. However, the company's overall strong financial results and positive sentiment, including record backlog and significant EPS growth, led to a stock surge of over 6% following the announcement. The CEO highlighted excellent financial results and significant investments in R&D and capacity, indicating a positive outlook for future growth. |
| Order Backlog | 14% | For Elbit Systems Ltd. (ESLT) to rerate higher, its order backlog metric needs to demonstrate a significant acceleration beyond its current 14% year-over-year growth. Specifically, the company would likely need to report a quarterly order backlog increase exceeding $1.5 billion, with international orders continuing to contribute over 70% of this increase. This would translate to a year-over-year backlog growth rate of 20% or more, signaling sustained and accelerating demand for its defense solutions, particularly in Europe and other international markets, and significantly surpassing the existing bullish signal of quarterly backlog growth exceeding $1 billion. [cite: Ticker_KeyFactors, Ticker_KeyReportedMetrics] | $28.1 billion (24.3% y/y growth) | Yes | Elbit Systems significantly exceeded its order backlog rerating trigger. The backlog reached a record $28.1 billion as of December 31, 2025, representing a $5.5 billion increase from $22.6 billion in 2024, which translates to approximately 24.3% year-over-year growth. This growth is well above the 20% target and the previous 14% growth. Furthermore, approximately 72% of the current backlog is from international orders, surpassing the 'over 70%' requirement. This strong performance in backlog was a key driver for the positive investor reaction. |
| Non-GAAP Operating Income | 33% | For Elbit Systems (ESLT) to rerate higher, its Non-GAAP Operating Income percentage needs to consistently exceed 10%, ideally demonstrating a clear trajectory towards the mid-teens (12-15%) in the near to medium term. This would represent a significant expansion from its Q3 2025 Non-GAAP operating income of 9.7% and place it more competitively among higher-margin peers in the Aerospace & Defense sector, where the industry median is 7.58%. Achieving this would signal sustained profitability improvement, surpassing current investor expectations and justifying a premium valuation. | 9.8% of revenues (Q4 2025); 9.3% of revenues (Full Year 2025) | No | The Non-GAAP Operating Income percentage for Q4 2025 was 9.8% and for the full year 2025 was 9.3%. Both figures fell short of the rerating trigger's requirement to consistently exceed 10% and demonstrate a clear trajectory towards the mid-teens (12-15%). While there was an expansion from Q3 2025's 9.7% in Q4, it did not meet the overall threshold. Despite missing this specific margin target, the company's overall strong performance in other areas, particularly backlog and EPS, overshadowed this miss, leading to a positive stock reaction. |
Notes
| Date | Comment | Comment Type | Comment Sentiment | Link | IS CHANGE | Price Reaction |
|---|---|---|---|---|---|---|
| 2026-05-26 | Elbit Systems reported strong Q1 2026 results with non-GAAP EPS of $3.87 and revenue of $2.19 billion, both exceeding estimates. The record $30.2 billion backlog and expanded 10.1% operating margin fueled an over 11% stock surge (t+2 days). This positive market reaction validates Elbit's growth trajectory and sustained demand for its defense solutions. | Earnings Transcript | Neutral | False | N/A |
Upcoming Events
| Catalyst ID | Estimated Timing | Estimated Date Start | Estimated Date End | Catalyst | Why It Matters | Ticker Or Theme Specific | Transcript Date | Source Type |
|---|---|---|---|---|---|---|---|---|
| ESLT_ca6881ad | for the future | 2025-10-01 | 2027-09-30 | Elbit Systems' ability to achieve targeted growth in European backlog and maintain a flattish domestic (Israel) backlog. | Success in growing European backlog is crucial for overall company growth and revenue diversification, especially if domestic demand slows post-ceasefire. Failure to achieve this could negatively impact revenue and investor sentiment. | Ticker | 2025-11-18 | earnings_transcript |
| ESLT_d85d365e | continue to see growth | 2025-10-01 | 2026-09-30 | Elbit Systems' Aerospace segment achieving single-digit revenue growth. | The Aerospace segment is a significant part of the business. Achieving this growth is important for overall revenue targets and demonstrates the company's ability to capitalize on U.S. defense spending and UAV demand. | Ticker | 2025-11-18 | earnings_transcript |
| ESLT_a6aff2ab | next year, we'll see many more orders here in Israel for ground high-power lasers. | 2026-01-01 | 2026-12-31 | Receipt of 'many more orders' in Israel for ground high-power lasers following the IRON BEAM deployment. | Significant follow-on orders would confirm market acceptance and revenue potential for Elbit's directed energy solutions, impacting future revenue and backlog. | Ticker | 2025-11-18 | earnings_transcript |
| ESLT_90bf902e | continue to improve | 2025-10-01 | 2026-09-30 | Elbit Systems' ability to continue improving its profitability (margins) and cash conversion. | Continued margin expansion and strong cash conversion are key indicators of operational efficiency and financial health, directly impacting EPS and valuation. | Ticker | 2025-11-18 | earnings_transcript |
| ESLT_83b27d68 | certainly look for opportunities, for acquisitions in the U.S., we are exploring the market. | 2025-10-01 | 2027-09-30 | Elbit Systems pursuing and completing M&A transactions in the U.S. | Successful M&A could expand Elbit's U.S. market presence, product portfolio, and revenue streams, leveraging the U.S. DoD budget and potentially impacting valuation. | Ticker | 2025-11-18 | earnings_transcript |
| ESLT_26ff2cb6 | planning to pursue it | 2025-10-01 | 2026-09-30 | Elbit Systems securing new contracts for border protection systems in the U.S. | Winning new border protection contracts would diversify revenue, capitalize on existing capabilities, and contribute to backlog growth. | Ticker | 2025-11-18 | earnings_transcript |
| ESLT_208db52c | this year, we believe that we will start delivering equipment from the Ramat Beka facility. Actually, it should happen quite soon. | 2026-04-01 | 2026-12-31 | Elbit Systems expects to begin delivering equipment from its expanded Ramat Beka facility in Israel. | This event is crucial for addressing growing global capacity constraints and meeting elevated demand, potentially enabling higher revenue generation and backlog conversion. | Ticker | 2026-03-17 | earnings_transcript |
| ESLT_eafb3de0 | we hope to get the contract soon | 2026-04-01 | 2026-09-30 | Elbit Systems anticipates securing a significant contract from the Hellenic Armed Forces for its PULS rocket artillery system, following parliamentary approval and ongoing commercial negotiations. | This large contract, potentially worth $750 million, would add to Elbit's record backlog, further strengthening its position in the European defense market and providing future revenue visibility. | Ticker | 2026-03-17 | earnings_transcript |
| ESLT_a7a918ed | The parliamentary window expected in the second half of 2026 will determine the contractual arrangements and initial deliveries. | 2026-07-01 | 2027-03-20 | Germany is expected to finalize a major procurement framework agreement for up to 500 EuroPULS rocket artillery systems, with contractual arrangements and initial deliveries determined during a parliamentary window. | This substantial contract, potentially worth €6 billion, would establish Germany as a key EuroPULS production hub and significantly boost Elbit's revenue and market share in Europe. | Ticker | 2026-03-17 | earnings_transcript |