Aerospace and defense company Leonardo DRS (NASDAQ: DRS) reported revenue ahead of Wall Street’s expectations in Q2 CY2026, with sales up 10.1% year on year to $913 million. The company expects the full year’s revenue to be around $3.94 billion, close to analysts’ estimates. Its non-GAAP profit of $0.35 per share was 27.6% above analysts’ consensus estimates.

Is now the time to buy DRS? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Leonardo DRS delivered double-digit revenue growth in the second quarter, but the market responded negatively, likely due to concerns over booking trends and backlog dynamics. Management credited robust demand for tactical radars, naval propulsion, and infrared sensing as key contributors, with CEO John A. Baylouny emphasizing the company’s “platform-agnostic” approach and success in modular, open-architecture solutions. The company’s operational execution, including disciplined program risk management, also drove margin expansion, according to CFO Michael Dippold.

Looking forward, Leonardo DRS is betting on continued investment in AI-driven mission software and multi-domain integration, highlighted by the pending acquisition of RAFT. Management believes that combining sensing, computing, and software will enhance decision-making speed and resilience for defense customers. Baylouny stated, “RAFT advances our approach and checks the boxes that matter to us most,” underscoring the strategic role of open architecture and data fusion. Management also signaled that ongoing elevated defense demand, particularly in air defense and naval modernization, will shape results for the remainder of the year.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to growth in counter-UAS solutions, strong program execution, and strategic investments in technology and capacity.

• Counter-UAS momentum: The proliferation of unmanned aerial threats led to increased adoption of counter-UAS (unmanned aerial systems) technology, with tactical radars serving as critical enablers. Management described order flow as “ahead of supply,” resulting in capacity expansion.
• AI and software integration: The announced acquisition of RAFT, a provider of mission software and AI-enabled data fusion, marks a shift toward integrating advanced software with DRS’s sensing and computing platforms. Baylouny highlighted the synergy, describing RAFT as filling the “thinking part” of battlefield solutions.
• Naval and propulsion demand: DRS saw continued strength in naval propulsion and power systems, including orders across multiple ship classes like Columbia and Virginia. Management discussed investments in Charleston facilities to support both current and future shipbuilding programs.
• Infrared sensing for munitions and drones: The company is expanding its presence in low-cost drone payloads and missile sensing, winning contracts for high-volume production of infrared camera cores. This segment is expected to outpace overall company growth, though it remains a smaller part of the portfolio.
• Increased R&D and capital investment: DRS raised internal research and development and capital expenditures to support growth initiatives, with a focus on infrared sensing, tactical radar, naval propulsion, and space-based interception technologies. Dippold noted these efforts are “aligned to our core competency” and position the company for long-term expansion.

Drivers of Future Performance

Leonardo DRS’s outlook is shaped by its push into AI-enabled solutions, a resilient defense spending environment, and a focus on modular, integrated technologies.

• AI-driven product expansion: Management expects the RAFT acquisition to accelerate growth in multi-domain data fusion and decision support, expanding DRS’s customer base with the Army, Air Force, Space Force, and intelligence community. The firm anticipates faster adoption of integrated hardware and software offerings.
• Defense spending trends: The company sees continued global demand for air defense, naval modernization, and resilient sensing architectures, fueled by lessons from recent conflicts and persistent budget priorities. Baylouny noted that customers are “prioritizing modernization and production-ready capabilities.”
• Execution and supply chain: While DRS reported improvements in supply chain management, including critical mineral sourcing, management remains watchful for material cost fluctuations and potential impacts from continued resolutions in U.S. defense appropriations. Capacity investments are intended to support rising production needs in core programs.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will monitor (1) the integration of RAFT and its impact on expanding AI-enabled solutions, (2) execution of capacity investments—particularly in naval propulsion and sensing technologies, and (3) trends in backlog and booking cadence amid ongoing U.S. defense budget deliberations. The pace of adoption for DRS’s modular, platform-agnostic offerings will also be a key signpost.

Leonardo DRS currently trades at $45.63, down from $46.54 just before the earnings. Is there an opportunity in the stock? Find out in our full research report (it’s free).

Now Could Be The Perfect Time To Invest In These Stocks

ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.

Find out which 5 stocks it’s flagging this month — FREE. Get Our Top 5 Growth Stocks for Free HERE.

Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.