This article first appeared on GuruFocus .
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Orders:Approximately 16 billion, up 40% compared to the first half of 2025.
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Revenue:Up 10% year-over-year, excluding the negative impact of dollar translation.
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EBITDA:0.73 billion, up around 30% compared to the previous year.
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Return on Sales (ROS):Increased to 7.6%, up 110 basis points from 6.5%.
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Adjusted Net Income:Increased by 74%.
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Free Operating Cash Flow:Improved by 45% year-over-year, though still negative in the first half.
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Net Debt:3.2 billion, including the IVECO acquisition; approximately 1 billion excluding the share of cash in MBDA and joint ventures.
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Backlog:Total backlog including IVECO is around 59 billion.
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Book-to-Bill Ratio:1.6, compared to 1.3 in 2025.
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Helicopter Deliveries:Increased from 72 to 81 units.
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Aerostructures Revenue:Up 44% due to increased B7A7 production rates.
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Cyber Revenue:Up 17%.
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Space Revenue:Growing strongly in payload robotics and service activities.
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Guidance (Updated):New orders increased to 28.2 billion; EBITDA upgraded to 2.21 billion; free operating cash flow guidance raised to 1.37 billion; net debt reduced to 2.2 billion.
Release Date: July 31, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Orders surged 40% year-over-year in H1 2026, driven by strong demand across all divisions, including major contracts like the UK NMH helicopter order and M346 jets for Austria and Italy.
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Profitability improved significantly, with return on sales up 110 basis points to 7.6% and adjusted net income rising 74%, leading to an upgraded EBITDA guidance of 2.21 billion, achieving double-digit ROS a year ahead of plan.
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Free operating cash flow improved 45% year-over-year despite one-off cash outflows for NH90 litigation and higher taxes, reflecting better working capital management and operational efficiency.
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The acquisition of IVECO Defense Vehicles is performing well, contributing 6 billion to backlog and 0.4 billion in revenues in Q2, with integration on track and a strong order pipeline for the year.
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Strategic initiatives are advancing, including the GCAP program with Canada joining as an observer, the Michelangelo air defense project with a demo planned by year-end, and the finalization of the Leonardo Bikar JV for land systems.
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Aerostructures is showing significant improvement, with revenues up 44% and losses reduced by 50 million, driven by higher production rates on the B7A7 program, moving closer to breakeven.
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The company raised its full-year guidance for orders to 28.2 billion and free operating cash flow to 1.37 billion, reflecting strong commercial momentum and confidence in execution.
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Cyber and Space divisions are growing strongly, with cyber revenues up 17% and space up 6%, benefiting from positive program mix and operational efficiency.
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The balance sheet remains solid, with net debt of 3.2 billion (excluding JV cash) fully compatible with leverage targets, and the DRS acquisition is within the planned capital allocation.
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The CEO expressed optimism about the structural long-term defense spending trend, positioning Leonardo to benefit from its diversified portfolio across platforms, electronics, and new domains like cyber and space.
Negative Points
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Aerostructures remains a loss-making business, with an additional 20 million loss expected in H2 2026, and breakeven is not expected before 2028, despite progress on production rates.
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The order intake in H2 2026 is expected to slow significantly compared to H1, as the first half benefited from several jumbo orders, and the guidance implies a more moderate pace ahead.
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The Gulf region's geopolitical situation has led to lower activities in the aeronautics division, reducing Q2 revenues, though the impact is described as not material for the full year.
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The potential divestment of IVECO's truck business to Rheinmetall remains uncertain, with only a 'gentleman's agreement' and no binding commitment, leaving strategic options open.
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The Bromo space JV faces antitrust complexities, with the filing process expected to be lengthy and potentially delayed by external factors, despite efforts to accelerate it.
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The GCAP program faces pressure to bring forward the entry into service date, which could be challenging and may require modulating requirements, with the window for adding new partners closing.
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The company is incurring higher taxes as it has fully utilized past tax losses, leading to a 100 million increase in tax payments in H1 2026, which could pressure future cash flows.
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Non-recurring costs in H1 2026 include M&A-related expenses and non-cash write-offs, with full-year costs expected around 100 million, potentially impacting profitability.
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The helicopter division's growth is moderating to 4% in 2026 after strong growth in prior years, and profitability improvements are expected to be gradual, not immediate.
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The US market for the M346 trainer jet remains highly competitive, with only one other competitor, but the outcome is uncertain and the path to securing orders is still challenging.
Q & A Highlights
Q: Can you comment on the strong order intake in H1 2026, the outlook for the second half, and where you see the most demand, particularly regarding the Michelangelo air defense dome and the potential for Italian land platform contracts under the SAFE funding mechanism? A: CEO Lorenzo Mariani stated the outlook for orders is positive across all divisions, with the biggest opportunities in electronics and the armament business (including Oto Melara) due to increased defense spending. He noted that while the Middle East is a key region for growth, the timing of "jumbo orders" is uncertain. On Michelangelo, he confirmed acceleration on the "dead zone protection" demo for Ukraine by year-end, adding MBDA's missile capabilities and the Guardian constellation to the program. Regarding SAFE, he clarified it is an alternative funding source, not necessarily additional money, and that major programs are already covered by the existing defense budget. He is optimistic that contracts for the A2CS and the new main battle tank (Panther) will be signed in the coming months, with or without SAFE coverage.
Q: Given the strong H1 performance, you have raised EBITDA and free cash flow guidance but not revenue. What is driving this higher margin, and can you comment on the non-recurring costs in the first half and your expectations for the full year? A: CFO Giuseppe Aurilio attributed the margin improvement to operational efficiency from increased scale and, most importantly, the very solid performance and execution of programs across all business divisions. On non-recurring costs, he stated the H1 amount includes M&A-related costs and non-cash write-offs from a portfolio review. He expects total M&A-related costs for the full year to be around EUR100 million.
Q: Regarding the GCAP program, what is your view on the window for bringing in another partner like Germany, and is it industrially realistic to bring the entry into service date forward from 2035? A: CEO Lorenzo Mariani agreed with BAE Systems' Charles Woodburn that the window for a new partner is closing, as confidence in timescales would otherwise be lost. On accelerating the entry into service, he confirmed there is a strong push to bring it forward by a couple of years. He stated this is feasible by making the initial entry into service more gradual, modulating the requirements of the initial version and progressively meeting the final requirements, as has been the case in other complex programs.
Q: Can you provide an update on the IDV (IVECO Defense Vehicles) sales mix between armored vehicles and trucks, and the status of the potential divestment of the trucks business to Rheinmetall? A: CFO Giuseppe Aurilio explained that for the full year, the revenue split is expected to be around 50-55% trucks and the rest armored, but the Q2 mix was more heavily weighted toward the higher-margin armored business. On the Rheinmetall divestment, he clarified that the "gentleman's agreement" is not formally binding and is just one of several options. He noted the truck business is growing and profitable, and they are now in a better position to evaluate alternatives and decide on the most convenient option.
Q: The aerostructures division is showing significant improvement. Should we interpret this as a more positive view on the business, and could the break-even point be reached sooner than the 2028 target? A: CEO Lorenzo Mariani stated the plan remains unchanged: to find an agreement with a partner to build a JV and deconsolidate the business. While the Middle East conflict has slowed detailed negotiations, the improved performance strengthens their position. CFO Giuseppe Aurilio confirmed the budget for the division, expecting around EUR20 million of additional losses in H2. He emphasized that while the B7A7 rate increase is key, the restructuring plan is much wider, and they remain fully engaged in the plan to return to breakeven, not earlier than the stated target.
Q: Can you comment on the performance of the M346 and the competitive landscape for the U.S. Navy's UJTS program? A: CEO Lorenzo Mariani agreed that the M346 is having a fantastic moment, driven by past decisions on the armored version, light fighter, and new cockpit. On the UJTS program, he acknowledged the U.S. market is very challenging and that they are competing against one other competitor. He stated they are pursuing the competition very seriously and believe they have a chance, but the way is still ahead.
Q: Regarding the "Bromo" space JV with Thales and Airbus, can you comment on the antitrust concerns and the status of the filing? A: CEO Lorenzo Mariani clarified that his comments on antitrust were taken out of context. He stated the filing with the EU is a complex process for a business as complex as space, and other actors may not see the opportunity in Bromo. He emphasized that all three parties are working transparently and in good faith with the EU to accelerate the process.
Q: What is your priority list for accelerating the industrial plan, and where do you stand on the EUR1.8 billion cost-cutting plan? A: CEO Lorenzo Mariani stated that all initiativescost cutting, capacity build-up, M&A, and partnershipsare being treated as priorities simultaneously. Some, like the JVs with Rheinmetall and Bicar, are fully in their hands, while others, like Bromo, depend on external factors. CFO Giuseppe Aurilio added that the EUR1.8 billion cost-cutting plan is proceeding in line with expectations and is slightly ahead of schedule, though it will be reviewed as part of the new industrial plan.
Q: Do you have any update on your stake in Hensoldt, and what are your plans for the proceeds if you decide to sell? A: CEO Lorenzo Mariani stated he is not in a hurry to dispose of the stake. He cited two reasons: the defense market is dynamic and the value is currently much higher than the purchase price, and more importantly, the opportunities for collaboration on the Eurofighter and sixth-generation (GCAP) programs make it prudent to wait. He is confident they will not lose value and wants to maintain a presence in the German market.
Q: Can you quantify the impact of the delays in the Gulf area on the aeronautics division in Q2, and has the Eurofighter order from Turkey been booked? A: CFO Giuseppe Aurilio stated the impact from the Gulf area delays is not a big number and will be recovered in the second half. On the Turkey Eurofighter order, he confirmed it has not been booked yet as Leonardo is not the prime contractor, but it is included in their estimates for the full year
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
