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L3Harris

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Financials

XBRL · SEC EDGAR

2008–2025(18yr)

Revenue

Net Income

Free CF

Metric	FY 2008	FY 2009	FY 2010	FY 2011	FY 2012	FY 2013	FY 2014	FY 2015	FY 2016	FY 2017	FY 2018	FY 2019	FY 2020	FY 2021	FY 2021	FY 2022	FY 2023	FY 2025Latest	YoY
Revenue	$4.6B	$5.0B	$102.4M	$189.2M	$374.3M	$420.3M	$5.0B	$5.1B	$6.0B	$5.9B	$6.2B	$6.8B	$12.9B	$18.2B	$17.8B	$17.1B	$19.4B	$21.3B	+9.8%
Gross Profit	$1.5B	$1.6B	$1.9B	-$3.6B	-$3.2B	-$3.0B	$1.7B	$1.7B	$860.0M	$2.1B	$2.3B	$2.3B	$3.8B	$5.3B	$5.4B	$4.9B	$5.1B	$5.5B	+8.0%
Gross Margin	31.6%	31.7%	1827.8%	-1914.0%	-853.6%	-705.4%	33.9%	33.9%	14.4%	35.4%	36.4%	34.3%	29.3%	29.2%	30.2%	28.9%	26.3%	25.9%	-0.4pp
Operating Income	—	—	—	—	—	—	—	—	$1.1B	$1.1B	$1.1B	$1.4B	—	$2.7B	$3.3B	$1.8B	$1.4B	$1.9B	+34.5%
Operating Margin	—	—	—	—	—	—	—	—	17.6%	18.2%	18.1%	21.3%	—	14.8%	18.8%	10.7%	7.3%	9.0%	+1.7pp
Net Income	$444.2M	$37.9M	$561.6M	$588.0M	$30.6M	$113.0M	$534.8M	$334.0M	$324.0M	$553.0M	$718.0M	$949.0M	$1.3B	$1.1B	$1.8B	$1.1B	$1.2B	$1.5B	+22.4%
Net Margin	9.7%	0.8%	548.4%	310.8%	8.2%	26.9%	10.7%	6.6%	5.4%	9.4%	11.6%	14.0%	10.4%	6.2%	10.4%	6.2%	6.3%	7.0%	+0.7pp
Free Cash Flow	$426.2M	$557.9M	$612.8M	$521.8M	$643.0M	$668.2M	$639.9M	$706.0M	$772.0M	$450.0M	$615.0M	$1.0B	—	$2.4B	$2.3B	$1.9B	$1.6B	$2.2B	+30.6%
FCF Margin	9.3%	11.1%	598.4%	275.8%	171.8%	159.0%	12.8%	13.9%	12.9%	7.6%	9.9%	15.1%	—	13.3%	13.2%	11.2%	8.5%	10.1%	+1.6pp
EPS (Diluted)	$3.24	$0.28	$4.28	$4.60	$0.26	$1.01	$4.95	$3.11	$2.59	$4.44	$5.92	$7.86	$7.89	$5.19	$9.09	$5.49	$6.44	$7.87	+22.2%

Total Debt$10.4B

Cash & Equiv.$1.1B

Net Debt$9.4B

4 min read

1. THE BIG PICTURE

L3Harris is caught in a transition between being a traditional hardware manufacturer and a modern software-and-AI integrator. While its "Trusted Disruptor" strategy has successfully captured market share and driven revenue growth that outpaces most peers, this expansion is being financed by a heavy debt load and executed through a contract structure that places nearly all financial risk on L3Harris rather than the customer.

2. WHERE THE RISKS HIT HARDEST

L3Harris’s primary competitive strength—its ability to "fuse hardware, software and artificial intelligence" (10-K Item 1)—is directly threatened by its contract mix. Because 75% of fiscal 2025 revenue is tied to fixed-price contracts, any "unforeseen technological difficulties" in integrating these complex AI systems must be paid for out of L3Harris's pocket, directly eroding profit margins (10-K Item 1A). Furthermore, L3Harris’s reliance on "strategic partnerships" with firms like Palantir and Anduril to drive innovation creates a secondary vulnerability: L3Harris is increasingly dependent on a "limited number of certified microelectronics component suppliers," where any geopolitical disruption could trigger contractual penalties and delivery delays that its fixed-price model cannot easily absorb (10-K Item 1, 1A).

3. WHAT THE NUMBERS SAY TOGETHER

The financial data reveals a company growing quickly but efficiently lagging its peers. L3Harris’s 9.8% revenue growth ranks second among its peer group, yet its Free Cash Flow (FCFFCFFree Cash Flow — cash left after paying for operations and capital investments; what the company can actually spend, save, or return to shareholders) margin of 7.3% ranks fifth, trailing significantly behind leaders like Honeywell at 13.4% (XBRL). This suggests that while L3Harris is winning contracts, it is not yet converting that scale into superior cash generation.

The growth trajectory showed a notable divergence in the most recent quarter; while TTMTTMTrailing Twelve Months — the most recent full year of financial data, updated on a rolling basis each quarter growth was nearly 10%, fourth-quarter revenue grew only 2% (8-K). This slowdown was not structural but largely mechanical, caused by the federal government shutdown on October 1, 2025, which delayed contract awards and payments, particularly in the Space & Airborne Systems segment (10-Q). Management’s "record backlog" suggests this is a timing issue rather than a loss of momentum (8-K). However, with net debt at $11.4 billion and a net leverage ratio of 7.2x, L3Harris has little room for further operational delays (XBRL).

4. IS IT WORTH IT AT THIS PRICE?

At a forward P/EP/EPrice-to-Earnings ratio — share price divided by annual earnings per share; how much investors pay per dollar of profit. Higher P/E = higher growth expectations of 26.7x, L3Harris trades at a 9% premium to the peer median of 24.5x. The market is currently pricing in approximately 4.1% long-term growth (CAPM analysis). This valuation appears in line with peers given that L3Harris is growing revenue at 9.8%, nearly double the rate of Lockheed Martin (+5.6%) and far ahead of Northrop Grumman (+2.2%).

However, this premium is fragile. L3Harris’s 7.9% net margin is only middle-of-the-pack, and its high indebtedness limits the financial flexibility needed to sustain its 1.8% buyback yield (XBRL). If long-term growth were to slow to a GDP-pace of 2.5%, the justified multiple would drop to 18.8x, representing significant downside (CAPM analysis). The current price is only "right" if L3Harris can maintain its "disruptor" growth rates while successfully navigating the margin-killing potential of its fixed-price contract heavy mix.

5. WHAT WOULD CHANGE THIS VIEW?

Constructive if the FCFFCFFree Cash Flow — cash left after paying for operations and capital investments; what the company can actually spend, save, or return to shareholders margin moves toward the 10% range, signaling that the Aerojet Rocketdyne integration and "Trusted Disruptor" programs are reaching high-volume, high-efficiency production.
Cautious if there is a repeat of the $1.59 diluted EPSEPSEarnings Per Share — the company's net profit divided by its share count; the most common per-share profitability metric performance seen in Q4 2025 (down from $2.37 YoYYoYYear over Year — comparing this period to the same period 12 months earlier), which would suggest that fixed-price cost overruns or interest expenses are permanently impairing earnings power (8-K).

6. BOTTOM LINE

Structural Advantage: Cross-domain integration of mission-critical hardware with AI through a unique "Trusted Disruptor" partnership model.

Bottom Line: L3Harris is a high-growth defense player priced for perfection, but its heavy debt and fixed-price contract risks make it a volatile bet on government spending efficiency.

Source: Synthesis · LLM Analysis

4 min read

1. Top 5 Material Risks

Fixed-Price Contract Exposure: With 75% of fiscal 2025 revenue tied to fixed-price contracts, L3Harris assumes the full cost burden for development and production. Unforeseen technological difficulties, inflation, or supply chain issues can lead to losses that directly erode profit margins.
U.S. Government Funding Uncertainty: A significant portion of revenue depends on defense-related programs. Because Congress appropriates funds on a fiscal year basis, L3Harris faces risks from budget delays, continuing resolutions, or shifts in spending priorities that can cause contract terminations or delays.
Supply Chain and Material Availability: L3Harris relies on subcontractors and sole-source suppliers for critical components like microelectronics. Disruptions—exacerbated by geopolitical tensions and trade restrictions—can lead to contractual penalties, delivery delays, and increased costs.
Cybersecurity and IT Infrastructure: As a government contractor handling sensitive national security information, L3Harris is a target for sophisticated cyber-attacks. A breach could result in contract termination, loss of proprietary data, and significant remediation costs that may exceed insurance coverage.
Indebtedness: L3Harris carries $10.9 billion in aggregate principal amount of fixed-rate debt. This leverage restricts L3Harris’s ability to fund capital expenditures or share repurchases and could trigger defaults if L3Harris cannot generate sufficient cash flow to service or refinance these obligations.

2. Company-Specific Risks

Energetic Materials Handling: L3Harris operations involve the production and storage of explosive materials used in rocket propulsion, creating risks of accidental ignition or explosion that could cause facility shutdowns, production delays, and significant liability.
Digital Transformation Technical Debt: L3Harris is currently modernizing its IT infrastructure and migrating to the cloud. Until this transformation is complete, L3Harris remains reliant on manual processes that increase the risk of internal control failures and operational errors.
Missile Solutions IPO: The planned initial public offering of the Missile Solutions business introduces execution risks, including the potential for management distraction, difficulty in separating IT systems, and the risk that the transaction fails to achieve intended tax benefits.
Geographic Concentration: A significant portion of business operations is headquartered in Florida, making L3Harris’s physical infrastructure and continuity of operations vulnerable to major hurricanes and extreme weather events.

3. Regulatory/Legal Risks

Government Audit Adjustments: U.S. Government contracts are subject to oversight audits. Negative findings can lead to the forfeiture of profits, suspension of payments, or the requirement to refund previously reimbursed costs, which would necessitate a material reduction in reported revenue or profit.
Export Control Compliance: L3Harris must obtain licenses under ITAR and EAR to conduct international business. Failure to secure these, or an administrative finding regarding L3Harris’s responsibility as a contractor, could result in debarment from government contracting or the loss of export privileges.
Environmental Remediation: L3Harris is subject to extensive environmental laws regarding the disposal of hazardous waste. Reserves for future environmental obligations may prove insufficient, and violations could lead to L3Harris being listed as an excluded party in the System for Award Management, rendering it ineligible for federal contracts.
Intellectual Property Disputes: L3Harris relies on proprietary technology and data rights assertions. Disputes with government customers over data rights or infringement claims from third parties could result in costly litigation, royalty payments, or injunctions against specific product capabilities.

4. Financial Impact Map

Fixed-Price Contract Overruns → Results of Operations → 75% of fiscal 2025 revenue is subject to cost-burden risk.
U.S. Government Budget/Appropriations → Cash Flows and Equity → Partial funding of programs creates uncertainty in forecasting revenue and resource needs.
Supply Chain Disruptions → Results of Operations → Potential for contractual penalties, damages, and loss of future business opportunities.
Cybersecurity Breach → Results of Operations → Costs may exceed insurance coverage and indemnification arrangements.
Indebtedness ($10.9 billion) → Capital Expenditures and Dividends → High debt levels may force reductions in cash dividends, share repurchases, or working capital financing.

Source: 10-K Item 1A · LLM Analysis

Recent Filings

Form	Filed	Period
10-K	Feb 2026	Jan 2026
8-K	Jan 2026	—
10-Q	Oct 2025	Oct 2025
14A	Mar 2025	—