Elbit Systems has more orders on its books than at any point in its history, and the money is increasingly coming from outside Israel.
The Israeli defense contractor reported an order backlog of $32 billion at the end of the second quarter, up from $28 billion at the close of 2025. Second-quarter revenue rose 16% to $2.29 billion, and non-GAAP net profit climbed 32% to $199 million, producing adjusted earnings of $4.14 a share against a consensus estimate of $3.68. GAAP net income was $173.6 million, or $3.61 a share, on a 7.6% margin, with GAAP operating income of $218.8 million.
A backlog is contracted work not yet delivered, which makes it the closest thing a defense company has to a forward revenue statement. Elbit says 73% of the $32 billion originates outside Israel, with international orders — mainly European — driving the quarterly increase, and about 42% is scheduled for performance during the remainder of 2026 and 2027, with the rest set for 2028 and beyond.
The geographic split shows how far the customer base has shifted. Israel accounted for 37% of quarterly sales following inventory replenishment after the conflict with Iran ended at the start of April, Europe supplied 25%, North America 20% and Asia-Pacific 14%.
Segment results were uneven. C4I and cyber revenue rose 11% year over year, ISTAR and electronic warfare 22%, land systems 32%, and Elbit Systems of America 17%. Aerospace fell 8%, which the company attributed to an unfavorable project mix and weaker training and simulation sales in Europe.
Cash generation improved sharply. Operating cash flow reached $237 million for the quarter, up from $120 million a year earlier, with free cash flow of $150 million versus $71 million and cash conversion of 86%. First-half operating cash flow totaled $517.8 million against $304.0 million a year ago.
The company is spending to convert that pipeline. Management is raising capital expenditure to roughly $300 million from $220 million to add production capacity. Elbit said its increased investment in production infrastructure reflects a disciplined approach to scaling and to delivering at volume. Backlog only becomes revenue when factories can build the hardware, and $32 billion of commitments is a manufacturing problem before it is a financial one.
Recent orders keep arriving. The company cited a tank-upgrade contract worth about $350 million and more than $370 million from U.S. Customs and Border Protection, and declared a dividend of $1.00 a share payable Oct. 26. Elbit also unveiled an airborne high-power laser system under development for helicopters and fighter aircraft, part of a push into directed-energy weapons. Demand from Israel’s Ministry of Defense remains materially higher and could generate additional orders.
Two items cut the other way. The effective tax rate jumped to 16.4% from 5.6%, driven by OECD Pillar II rules, and the company reported operational disruptions tied to Middle East conflicts, supply chain issues and attacks on facilities.
Investors were not impressed. Shares traded lower in U.S. premarket despite the earnings and revenue beat. In Tel Aviv trading the stock fell 5.2%, leaving Elbit with a market value of NIS 121 billion — still up 41% year to date and 240% over three years, though down 16% from its March peak.
That reaction is the recurring pattern in defense stocks this cycle: expectations have already priced in the order flow, so beating estimates is no longer the event. CFO Yaacov Kagan told analysts the quarter delivered double-digit growth across revenue, backlog, operating profit and earnings per share, and said the company expects backlog to keep growing while it focuses on converting it into revenue, profit and cash flow. Execution, not order intake, is now the number the market is watching.
JBizNews Desk | Haifa
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