Mercury Systems reported first‑quarter 2026 results that surpassed analyst expectations, with revenue reaching $225.2 million—an increase of 10.2% from the $204.4 million earned in the same quarter last year. Adjusted earnings per share climbed to $0.26, beating the consensus estimate of $0.08 by $0.18, a 225% over‑performance that reflects disciplined cost management and a favorable product mix.
The revenue lift was driven by robust demand for the company’s Common Processing Architecture programs and a higher proportion of high‑margin contracts. Bookings for the quarter totaled $250 million, giving a book‑to‑bill ratio of 1.11 and supporting a record backlog of $1.4 billion, up 6.5% year‑over‑year. These dynamics illustrate the company’s ability to convert demand into pipeline while maintaining pricing power.
Margin expansion was a key theme, as adjusted EBITDA rose to $35.6 million—an increase of 66% from $21.5 million in Q1 FY2025—boosting the adjusted EBITDA margin to 15.8% from 10.2% the prior year. The lift stems from a higher mix of high‑margin programs, operational leverage from a streamlined operating structure, and effective cost control, all of which improved free cash flow and reduced net working capital requirements.
Management reaffirmed its full‑year outlook, projecting low single‑digit revenue growth for FY2026 and a flat first half with volume growth in the second half. The company also maintained its guidance for adjusted EBITDA margins approaching the mid‑teens and announced a new $200 million share‑buyback authorization, signaling confidence in its long‑term value creation.
CEO Bill Ballhaus highlighted accelerated deliveries on high‑priority programs and the addition of over 50,000 square feet of factory space in Q3 FY2026 as catalysts for the strong results. He emphasized the company’s focus on four priority areas—execution across its portfolio, streamlined operations, margin expansion, and free‑cash‑flow improvement—as the foundation for sustained growth.
Investors reacted cautiously, weighing the company’s solid earnings and guidance against valuation concerns and ongoing supply‑chain constraints. Despite the positive financial performance, the market’s tempered response underscores the importance of continued execution and operational resilience in the defense electronics sector.
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