Leonardo DRS Inc (NASDAQ:DRS), a prominent provider of advanced defense technologies, reported fourth-quarter and full-year 2025 financial results that surpassed analyst expectations, leading to a notable positive reaction in pre-market trading.
Earnings and Revenue Beat
The company's performance for the quarter ended December 31, 2025, exceeded market forecasts on both the top and bottom lines. This marks another period of strong execution for the defense contractor.
- Revenue: Q4 sales reached $1.06 billion, an 8.1% increase year-over-year. This figure came in ahead of the analyst consensus estimate of approximately $1.01 billion.
- Earnings Per Share (Non-GAAP): Adjusted diluted EPS was $0.42, a 15% increase from the $0.38 reported in Q4 2024. This result solidly beat the analyst estimate of $0.37 per share.
For the full year 2025, the company reported revenue of $3.65 billion, a 13% increase, and adjusted diluted EPS of $1.15, up 24% from the prior year.
Market Reaction
The market responded favorably to the earnings beat and the company's forward guidance. In pre-market trading following the release, Leonardo DRS shares were up approximately 4.2%. This positive momentum contrasts with the stock's performance over the past month, which had seen a decline of nearly 7%. The immediate price action suggests investors were encouraged by the results and the company's trajectory.
Key Highlights from the Report
Beyond the headline numbers, the earnings release detailed several important operational and financial developments.
Strong Demand and Backlog: The company highlighted "exceptional customer demand" across its portfolio, particularly in areas like electric power and propulsion, advanced infrared sensing, and tactical radars. Full-year 2025 bookings totaled $4.25 billion, resulting in a book-to-bill ratio of 1.2x. This sustained demand drove total backlog to a robust $8.73 billion at year-end, providing significant visibility into future revenue.
Segment Performance with Non-Routine Impacts: Results were significantly influenced by two non-routine items that largely offset each other at the corporate level:
- A $73 million benefit from a 10-year intellectual property license agreement for quantum laser technology within the Advanced Sensing and Computing (ASC) segment.
- A $67 million revenue headwind from the conclusion of a legacy foreign ground surveillance program within the Integrated Mission Systems (IMS) segment.
Excluding these items, organic growth remained strong, driven by core defense programs.
Healthy Balance Sheet and Capital Return: The company generated substantial cash flow, with full-year free cash flow of $227 million. It ended the year with $647 million in cash and minimal debt. Leonardo DRS continued its commitment to returning capital to shareholders, paying $96 million in dividends and repurchasing $35 million worth of its stock during 2025. A quarterly dividend of $0.09 per share was declared for March 2026.
2026 Guidance Versus Analyst Estimates
Management provided initial financial guidance for 2026, which appears optimistic compared to current street expectations.
- Revenue Guidance: The company expects revenue between $3.85 billion and $3.95 billion. The midpoint of this range, $3.9 billion, is approximately 2% above the current analyst consensus estimate of $3.86 billion for the full year.
- EPS Guidance: Adjusted diluted EPS is forecast to be in the range of $1.20 to $1.26. The midpoint of $1.23 represents a 7% increase over the 2025 result of $1.15 and sets a positive tone for the coming year.
Conclusion
Leonardo DRS closed its 2025 fiscal year with a strong quarter, beating earnings estimates and demonstrating robust demand in the defense sector. The company's ability to exceed expectations, coupled with a healthy backlog and a balance sheet that supports both growth investments and shareholder returns, underpinned the positive market reaction. The initial 2026 guidance, which outpaces analyst projections, suggests management is confident in its ability to sustain momentum. Investors will now watch for the company's execution against these targets in a dynamic global defense landscape.
For a detailed look at historical earnings, future estimates, and analyst projections for Leonardo DRS, visit the earnings and estimates page.
Disclaimer: This article is for informational purposes only and does not constitute financial advice, an endorsement, or a recommendation to buy, sell, or hold any security. Investing carries risks, including the potential loss of principal.
