So, why is Leonardo DRS, Inc. (DRS) stock soaring? It's the classic recipe: serve up quarterly results that are better than everyone expected, sprinkle in some optimistic talk about the future, and watch the market dig in. The defense contractor did just that on Tuesday, reporting fourth-quarter numbers that topped estimates and sending its shares sharply higher.
Let's break down the numbers. Revenue for the quarter came in at $1.06 billion, an 8% increase from the $981 million reported a year ago. For the full year, revenue hit $3.65 billion, up 13%. On the bottom line, net earnings for Q4 were $102 million, or 38 cents per share, compared to $89 million, or 33 cents per share, last year. Full-year net earnings totaled $278 million, or $1.03 per share.
But the real story for investors is often in the "adjusted" figures, which try to strip out one-time items. On that basis, fourth-quarter net earnings were $114 million, or 42 cents per share. That was up from 38 cents a year ago and, importantly, beat the analyst estimate of 37 cents. The quarterly sales figure of $1.060 billion also handily beat the estimate of $1.003 billion.
"Our 2025 results exemplify another year of exceptional customer demand and double-digit revenue growth. We are investing, innovating, and delivering mission-critical capabilities at speed for our customers," said John Baylouny, President and CEO of Leonardo DRS. Looking ahead, he added, "We will leverage our platform-agnostic approach, differentiated technology portfolio, and innovation to drive continued, sustainable growth."
A Tale of Two Segments
The company's performance wasn't uniform across its business units, which tells us a lot about where the growth is—and isn't—coming from.
The Advanced Sensing and Computing (ASC) segment was the star of the show. Fourth-quarter revenue here rose 9% to $722 million. More impressively, operating earnings jumped to $133 million from $82 million a year ago. That pushed the operating margin up to a robust 18.4% from 12.4%. The company said bookings in this segment were driven by demand for its advanced infrared sensing, tactical radars, lasers, and ground network computing tech.
On the other side, the Integrated Mission Systems (IMS) segment had a tougher quarter. Revenue did increase 5% to $343 million, but operating earnings were wiped out, compared to a $40 million profit in the prior year. Management attributed the IMS revenue growth to electric power and propulsion programs, but said it was offset by the conclusion of a legacy foreign ground surveillance program.
Cash, Bookings, and the Backlog
Beyond the profit and loss statement, the company's financial health looks solid. Operating cash flow was $425 million for the quarter and $366 million for the year. Free cash flow—the money left over after capital expenditures—was a healthy $376 million in Q4. The company ended the year with $647 million in cash and $191 million in outstanding borrowings.
Perhaps most encouraging for future revenue is the bookings and backlog picture. Fourth-quarter bookings were $1.09 billion, and full-year bookings hit $4.25 billion. That produced a book-to-bill ratio of 1.2x for 2025, meaning the company booked $1.20 in new orders for every $1.00 of revenue it recognized—a sign of future growth. The total backlog now stands at $8.73 billion, up from $8.51 billion, with $4.6 billion of that already funded.
The Board also declared a cash dividend of 9 cents per common share, payable on March 24, 2026, to shareholders of record on March 10, 2026.
One-Time Items and Looking Ahead to 2026
The results included two notable non-routine items. On the positive side, a 10-year laser intellectual property license agreement added $100 million (with a net present value of $73 million) to revenue and adjusted EBITDA. On the negative side, the conclusion of that legacy foreign surveillance program we mentioned earlier reduced full-year revenue by $67 million and adjusted EBITDA by $65 million.
Finally, the company gave investors a map for the year ahead. For 2026, Leonardo DRS expects revenue in the range of $3.85 billion to $3.95 billion. The midpoint of that range is above the analyst estimate of $3.822 billion. It forecasts adjusted EBITDA between $505 million and $525 million and adjusted diluted earnings per share of $1.20 to $1.26. That EPS guidance range meets the current Wall Street estimate of $1.26.
Put it all together—better-than-expected quarterly results, strong cash flow, a growing backlog, and guidance that suggests more growth is coming—and you get a stock that's moving. Leonardo DRS shares were up over 13% following the announcement.
