HII grew Q2 2026 revenue 10.9% to $3.42B and EPS 36.5% to $5.27 on higher carrier, submarine and amphibious-ship volume, and raised shipbuilding revenue guidance; free cash flow was -$150M as billings lagged, leaving a large second-half cash target.
Revenue
$3.4B
+10.9% YoY
Net income
$208M
+36.8% YoY
Diluted EPS
$5.27
+36.5% YoY
Operating margin
6.1%
Overview
HII (Huntington Ingalls Industries), America's largest naval shipbuilder, grew second-quarter 2026 revenue 10.9% to $3,418 million and lifted net earnings 36.8% to $208 million ($5.27 per diluted share, up from $3.86). The growth came from its two shipyards: more work on aircraft carriers and submarines at Newport News (Virginia) and on amphibious assault ships at Ingalls (Mississippi). Management raised its full-year shipbuilding revenue guidance by $500 million.
The weak spot is cash. The company used $31 million in operating cash in the quarter, and free cash flow was negative $150 million, against positive $730 million a year earlier. HII attributes this to the timing of billings, not to lower profits, and kept its full-year free-cash-flow target unchanged. That means the second half has to bring in a lot of cash.
Key metrics
Metric
Q2 2026
Q2 2025
YoY Change
Revenue
$3,418M
$3,082M
+10.9%
Operating income
$210M
$163M
+28.8%
Operating margin
6.1%
5.3%
+0.8 pts
Segment operating margin (non-GAAP)
6.6%
5.6%
+1.0 pts
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Operating margin is the share of revenue left after paying to run the business, before interest and tax. "Segment operating margin" is HII's own measure: it strips out a pension accounting difference and some non-cash state taxes that don't reflect how the ships are being built.
Segment performance
Segment
Q2 2026 revenue
Q2 2025 revenue
YoY
Q2 2026 op. margin
Q2 2025 op. margin
Ingalls Shipbuilding
$845M
$724M
+16.7%
6.9%
7.5%
Newport News Shipbuilding
$1,849M
$1,603M
+15.3%
6.0%
5.1%
Mission Technologies
$760M
$791M
–3.9%
7.2%
4.6%
Newport News (nuclear carriers and submarines) drove most of the growth: revenue rose $246 million on "higher volumes in aircraft carriers and submarines," and segment operating income rose from $82 million to $111 million. Much of that profit gain came from contract adjustments and incentive fees on carriers, not from better day-to-day productivity. The 10-Q says the gain was "partially offset by lower performance in aircraft carriers," and the carrier adjustments cut both ways. A $28 million favorable adjustment on the mid-life refueling overhaul of USS John C. Stennis was more than offset by a $48 million unfavorable adjustment on the overhaul of USS George Washington. Newport News still ended the quarter with net adjustments of +$8 million, compared with –$17 million a year earlier, when it took a $42 million charge on the Enterprise/Doris Miller carrier contract. Much of the 0.9-point margin gain comes from that swing.
Ingalls (non-nuclear ships: amphibious ships and destroyers) grew revenue 16.7% on amphibious assault ship volume, but its margin slipped from 7.5% to 6.9%. That is a timing effect: Q2 2025 included a $32 million favorable adjustment on the 2018 Arleigh Burke-class destroyer contract, and this quarter had net adjustments of –$2 million. During the quarter Ingalls began fabricating destroyer John F. Lehman (DDG 137) and won a lead-yard support contract for the Navy's new frigate class (FF(X)).
Mission Technologies (defense IT, cyber, unmanned vehicles) shrank 3.9%, mainly because of lower All-Domain Operations volume. The earnings release says that was "largely related to the impact of a favorable non-recurring settlement" in Q2 2025, so the decline is partly a tough prior-year comparison. Operating income still rose from $36 million to $55 million. The main reason was higher equity income from nuclear and environmental joint ventures, meaning HII's share of profits from partly-owned ventures, not higher contract margins. Amortization of intangibles from past acquisitions also fell to about $17 million from about $23 million.
What a "cumulative catch-up adjustment" means here
HII books revenue on multi-year ship contracts as work progresses, based on its current estimate of total cost. When that estimate changes, the whole contract's profit to date is re-marked in the current quarter. That re-marking is the "cumulative catch-up." In Q2 2026, gross favorable adjustments were $168 million and gross unfavorable ones were $158 million, for a net of +$10 million. A year earlier the net was –$10 million. The net number is small, but the gross numbers show that more than $300 million of estimate changes, in both directions, sit under the headline. The George Washington overhaul charge is the one to watch. It shows that cost estimates on the carrier work are still moving against the company.
Below the operating line
More than a quarter of pre-tax profit came from outside ship and systems operations. The non-operating retirement benefit (pension accounting income) was $53 million, up from $47 million. "Other, net" was $18 million, up from $6 million, "primarily driven by an increase in unrealized gains on investments", which are paper gains on securities HII holds. Together these made up $71 million of the $254 million pre-tax earnings. The effective tax rate fell to 18.1% from 19.1% because of tax benefits tied to stock-award settlements. Net earnings therefore grew faster (+36.8%) than operating income (+28.8%), partly for reasons that won't necessarily repeat.
Cash flow and backlog
Cash flow
Q2 2026
Q2 2025
H1 2026
H1 2025
Operating cash flow
–$31M
$823M
–$421M
$428M
Capital expenditures (net of grants)
$119M
$93M
$190M
$160M
Free cash flow
–$150M
$730M
–$611M
$268M
Free cash flow is operating cash minus investment in facilities. In the first half, trade working capital, the cash tied up between doing the work and getting paid, consumed $956 million, compared with a $29 million inflow a year earlier. The 10-Q attributes this to "the timing of billings across programs." Capital spending is also rising on purpose. The company expects 2026 capex of 4%–5% of sales and says spending "is expected to increase due to investments to expand our shipbuilding capacity." HII repurchased no shares in the first half and paid $109 million in dividends.
Orders are strong. Q2 contract awards were $6.7 billion, about twice the quarter's revenue, and first-half awards were $10.7 billion. Total backlog reached $57.3 billion, up from $53.1 billion at year-end. By segment it is $32.5 billion at Newport News, $19.4 billion at Ingalls and $5.5 billion at Mission Technologies. $34.6 billion of the total is funded, meaning Congress has actually appropriated the money.
Takeaway: HII's shipyards are doing more work: shipbuilding revenue grew about 16% and guidance went up $500 million. But profit per dollar of work is still thin at 6%–7%, and the carrier-overhaul estimates are still moving against the company (a $48 million charge on George Washington). The number that matters for the second half is cash. After –$611 million of free cash flow in the first half, reaching the unchanged $500–$600 million full-year target requires roughly $1.1–$1.2 billion in the next six months.
Guidance and outlook
Management's updated FY2026 outlook, from the July 30 earnings release:
Item
Prior outlook
Current outlook
Shipbuilding revenue
$9.7B–$9.9B
$10.2B–$10.4B
Shipbuilding operating margin
5.5%–6.5%
6.0%–6.5%
Mission Technologies revenue
$3.0B–$3.2B
$3.0B–$3.2B
Mission Technologies segment op. margin
~5%
~5%
Free cash flow
$500M–$600M
$500M–$600M
Capital expenditures
4%–5% of sales
4%–5% of sales
CEO Chris Kastner said the company has "plans in place to achieve our shipbuilding throughput improvement goal of 15%". Throughput is how much ship-building work the yards complete in a given time. First-half shipbuilding revenue of $5,084 million (Ingalls plus Newport News) was up 17% year over year, which fits that goal. The combined shipbuilding margin was about 6.0% for the half and about 6.3% in Q2, so HII is at the bottom of its newly narrowed 6.0%–6.5% range. Reaching the middle of that range would take better second-half execution or more favorable adjustments. Mission Technologies' ~5% full-year margin guide sits below its 6.0% first half, so management is not counting on the joint-venture income boost continuing.
On funding, the fiscal 2027 budget request includes $65.8 billion for shipbuilding procurement. That covers one Columbia-class and two Virginia-class submarines, a destroyer, an LPD, an LHA, the first FF(X) frigate, and continued carrier and refueling funding. HII builds or co-builds most of these, and Ingalls holds the FF(X) lead-yard support contract. Congress has not finished the budget, and the 10-Q says HII cannot predict whether a short-term funding measure will be needed if appropriations are not done by October 1. Such stopgap measures generally hold funding at prior-year levels, which can delay new contract awards. They do not reduce the $34.6 billion already funded.
The full-year free-cash-flow and second-half figures above are our arithmetic from the company's reported numbers and guidance, not company statements.