Earnings Recap — Q2 FY2026
CY Q3 2026 · Reported July 30, 2026 · Beat 5 of last 7 quarters
The Buildout is a website built on agentic AI tools, currently in beta, and could have factual errors.
HII's strong shipbuilding growth and raised guidance reflect accelerating U.S. Navy demand for carriers, submarines, and surface combatants, which underpins the broader maritime industrial base buildout. The $76.6 billion submarine contract awards provide multi-year visibility and stability for the supply chain, supporting increased throughput and capacity investments. The company's expansion of distributed shipbuilding and autonomous systems (MUSV, UUVs) signals continued investment in next-generation naval capabilities, which could drive further demand for AI and autonomy technologies.
HII reported Q2 revenue of $3.4 billion, up 10.9% YoY, with shipbuilding revenue up 15.7% to $2.7 billion. Ingalls revenue grew 16.7% to $845 million, driven by higher amphibious assault ship volumes, while Newport News revenue grew 15.3% to $1.8 billion on higher carrier and submarine volumes. Mission Technologies revenue declined 3.9% to $760 million, but grew modestly organically excluding a $45 million non-recurring contract resolution in the prior year. Segment operating income rose to $224 million (6.6% margin), with Newport News at 6.0% margin and Ingalls at 6.9%. The company reached agreement on VCS Block VI and Columbia submarine contracts, with approximately $25 billion of the $76.6 billion going to Newport News. Cash used in operations was $31 million in the quarter, with free cash flow below forecast due to timing, but full-year guidance was unchanged.
Management raised FY2026 shipbuilding revenue guidance to $10.2-$10.4 billion (from $10.0-$10.2 billion) and narrowed shipbuilding operating margin guidance to 6.0%-6.5% (from 5.8%-6.5%). They reiterated Mission Technologies revenue guidance of $3.0-$3.2 billion and ~5% margin, and maintained free cash flow guidance of $500-$600 million, with significant Q4 cash generation expected from contract advances, incentives, and tax benefits. The company expects to deliver 5 ships over the next 12 months (3 at Ingalls, 2 at Newport News), with LPD-30 Harrisburg and SSN-800 Arkansas deliveries later this year. Management highlighted the recent $76.6 billion submarine contract awards as critical demand signals and stability for the workforce and supply chain, and sees new battleship and frigate programs as meaningful upside opportunities to the medium-term outlook. They also expect to increase distributed shipbuilding by 30% this year and continue evaluating additional shipyard capacity.
“These contracts represent critical demand signals and stability not just for our workforce, but for the thousands of suppliers across the country that provide parts for these submarines.”
on Submarine contract awards
“We have made real good progress. Right? We had 14% last year in throughput. We expect 15% this year. Newport News has had a great start of the year over the first 2 quarters relative to throughput, primarily on the submarine programs, Ingalls had a bit of a slow start this year.”
on Throughput improvement
“We are delivering 5 ships over the next 12 months. I said that in my script as well. 3 of those in Ingalls, so critical we get through those on schedule to get those ships to the Navy, but also critical to rotate those crews to the next ships in the production line.”
on Ship delivery cadence
Obviously, a great kind of margin quarter. You raised shipbuilding and you are tracking in line with the full year guidance. I was hoping you could shed some light on how to think about shipbuilding margins through the remainder of the year, just by quarter? And at the same time, it would be helpful to step through any of the remaining just to calibrate everybody's expectations on timing.
Chris Kastner noted Q3 margin guidance of 6.3% and highlighted key milestones: LPD-30 delivery towards year-end, CVN-79 trials in coming weeks, SSN-800 delivery later this year, and keel laying of CVN-81 in the back half. He said he does not anticipate a lot of margin related to the keel laying. He also mentioned Ingalls had a slow start due to labor agreement timing but expects improvement in the second half.
The updated guidance implies the back half Q3 and Q4 combined are kind of flat year over year. Can you help us out with why it would be flat in the back half versus the double digit growth in the first half? And specifically, I think it implies Q3 is up about 6% and Q4 is down about 6%. What drives Q4 down? And on the shipbuilding margin, forecasting it kind of flattish sequentially, could you talk a little bit more about the moving pieces there?
Tom Stiehle explained that Q4 2025 was a big material quarter, especially at Ingalls, and there is some conservatism in the guide. He noted the company has had four consecutive quarters of double-digit shipbuilding growth and is ahead of its medium-term 6% growth target. On margins, he said Q2 included some incentives from the submarine contracts, and additional incentives will be booked in Q3 as the awards are incorporated, but it takes time to meet milestones and criteria to book them.
I was curious just was there anything about the terms when once it was finalized that surprised you or made you think the 9% to 10% eventual goal at shipbuilding is not consistent with the terms of the submarine contracts that were agreed to last night?
Chris Kastner said there was nothing different or special about the terms, noting the contracts are consistent with expectations for profitability and the long-term margin profile. He mentioned the contracts incorporate lessons learned from COVID and the economic environment, and he expects them to perform better than prior contracts.