1. Company Overview & Business Segments

1.1. Corporate Profile & Strategic Vision

Elbit Systems Ltd. is an international high-technology company headquartered in Haifa, Israel, engaged in a wide range of defense, homeland security, and commercial programs across the globe.¹ As a publicly-traded entity on both the NASDAQ and Tel Aviv Stock Exchange (TASE), the company has expanded to approximately 20,000 employees and achieved a market capitalization of roughly $22.6 billion as of October 2025.³

The company’s stated vision is “To be a world-leading source of innovative, technology-based systems for diverse defense and civilian applications”.² This vision is executed through four strategic pillars: leveraging its highly skilled workforce, maintaining a strong worldwide presence, using innovation as a primary competitive advantage, and offering a broad and innovative product portfolio.³ A cornerstone of its identity is its role as a primary technology and systems supplier to the Israel Defense Forces (IDF). This deep-rooted relationship provides a critical feedback loop for developing and refining “battle-proven” solutions, which in turn helps maintain Israel’s qualitative military edge.¹

1.2. Business Segment Breakdown & Performance

Elbit Systems’ operations are diversified across five principal business segments. The revenue contribution for the full fiscal year 2024 provides a clear picture of this diversification:

• Aerospace (27% of revenue): With revenues of $2,036 million, this segment is the company’s largest. It develops and supplies a broad portfolio of airborne systems, including military aircraft and helicopter systems, unmanned aircraft systems (UAS), advanced electro-optics, and precision-guided munitions (PGM).³
• Land (23% of revenue): Generating $1,679 million, the Land segment focuses on armored vehicle modernization, artillery systems like the PULS launcher, weapon stations, mortars, and a wide array of munitions.³
• Elbit Systems of America (ESA) (21% of revenue): With revenues of $1,586 million, ESA functions as an integral part of the U.S. defense industrial base. It specializes in high-demand areas such as night vision systems, maritime sensor systems, and medical instrumentation, providing a crucial foothold in the world’s largest defense market.³
• ISTAR & EW (18% of revenue): This segment, with $1,318 million in revenue, provides Intelligence, Surveillance, Target Acquisition, and Reconnaissance (ISTAR) and Electronic Warfare (EW) solutions. Key products include sophisticated countermeasures and electro-optic systems designed to provide battlefield awareness and survivability.³
• C4I & Cyber (11% of revenue): The smallest segment at $800 million, C4I & Cyber delivers Command, Control, Communications, Computers, Intelligence (C4I) and Cyber solutions. This includes tactical radio and command & control systems that form the backbone of modern networked warfare.³

Analyst Note on Data Consistency: An investor presentation from March 2025 lists 2024 segment revenues that sum to approximately $7.4 billion.³ However, the official fourth quarter and full-year 2024 earnings release and financial highlights in the same presentation state total 2024 revenues of $6.8 billion.³ This discrepancy is noted; this analysis will rely on the reported percentage breakdowns as they are likely more representative of the business mix.

The interconnectedness of these segments is a strategic advantage. The company’s value proposition often lies not in selling individual products but in delivering integrated, multi-domain solutions. A single major contract, such as the $1.635 billion award from a European nation announced in August 2025, draws upon multiple segments, combining artillery-rocket systems (Land), unmanned systems (Aerospace), and comprehensive C4ISR solutions (C4I & Cyber, ISTAR & EW).¹¹ This “system of systems” approach creates durable customer relationships, erects high barriers to entry for competitors offering only point solutions, and generates significant cross-selling opportunities across the portfolio.¹

1.3. Geographic Revenue Distribution

Elbit maintains a geographically balanced client base, which management asserts is a key strategy to mitigate risks associated with defense budget fluctuations in any single country.²

Region	FY 2023 Revenue (%)	FY 2024 Revenue (%)	Q2 2025 Revenue (%)
Israel	20%	29%	34%
North America	24%	22%	21%
Europe	30%	27%	29%
Asia-Pacific	21%	17%	13%
LATAM & Other	5%	5%	Not specified

The data in the table above reveals a fundamental and rapid re-weighting of Elbit’s geographic revenue mix. The “Swords of Iron” war, which began on October 7, 2023, has acted as a powerful catalyst. Company filings explicitly state that since that date, Elbit has experienced a “material increase in the demand for its products and solutions from the Israel Ministry of Defense (IMOD)”.¹⁴ This is evidenced by Israel’s share of revenue climbing from 20% in 2023 to 34% by the second quarter of 2025.

This surge provides a significant near-term tailwind, driving robust growth in revenue and backlog while validating the performance of Elbit’s systems in high-intensity conflict. However, it concurrently introduces a heightened concentration risk. The company’s increased dependency on a single customer—the IMOD—means that a future normalization of Israeli defense spending, or a shift in procurement priorities, could create a material revenue headwind. This concentration risk is a critical factor for investors to monitor beyond the current positive backlog growth narrative.

1.4. Key Products & Services

Elbit’s extensive portfolio provides advanced technological solutions across airborne, land, and naval domains. Key product and service categories include:

• Unmanned Systems: A comprehensive range of Unmanned Aircraft Systems (UAS) from man-portable mini-UAS for tactical reconnaissance to Medium Altitude Long Endurance (MALE) platforms like the Hermes™ 900, which are used for persistent surveillance and strike missions.¹⁶
• Avionics: A core area of expertise, including advanced flight management systems (FMS), helmet-mounted displays (HMD), and complete cockpit solutions for both military and commercial aircraft. The company has expanded its commercial avionics footprint through acquisitions like Universal Avionics.¹⁰
• C4ISR: Integrated systems for command, control, communications, computers, intelligence, surveillance, and reconnaissance. These systems form the digital backbone of networked warfare, enabling information superiority.²
• Cyber & Intelligence: Advanced solutions for intelligence gathering, cybersecurity, and information warfare tailored for government agencies, military forces, and critical infrastructure entities.²²
• Land Systems: A broad offering of artillery systems, precision munitions, and modernization solutions for armored vehicles, including active protection systems that defeat incoming threats.¹⁰
• Electro-Optics: A suite of sensor technologies including thermal imaging systems, night vision devices, and laser designators for targeting and observation.¹⁰

2. Competitive Positioning

2.1. Market Standing & Peer Group

Elbit Systems is a formidable player in the global defense market, ranking 22nd in the 2024 Defense News Global 100 list.³ This positions the company in a tier below the largest global prime contractors but establishes it as a technology leader in its specific domains.

• Tier-1 Competitors: On large-scale, integrated programs, Elbit competes with industry giants such as RTX, Northrop Grumman, General Dynamics, BAE Systems, and Leonardo.²³ These competitors possess vastly greater scale and resources. For instance, in fiscal year 2024, RTX reported revenues of $80.7 billion, General Dynamics $47.7 billion, and Northrop Grumman $41.0 billion, figures that dwarf Elbit’s $6.8 billion for the same period.⁷
• Specialized Competitors: In its niche technology areas, Elbit faces more direct competition from firms like Thales in C4ISR and avionics, Safran in avionics, and a growing number of agile startups in unmanned systems and artificial intelligence, such as Anduril and Shield AI.¹⁸

Despite its smaller size relative to the primes, Elbit has carved out a leadership position, being recognized as a top-three global player in multiple high-tech markets, including Directed Infrared Countermeasures (DIRCM), C4ISR, and various categories of unmanned systems.²

2.2. Key Competitive Advantages & Differentiators

Elbit’s competitive strength is built on several key pillars that allow it to compete effectively against larger rivals:

• Technological Innovation and Agility: Elbit consistently invests approximately 7-8% of its sales into research and development, fostering a culture of innovation to maintain a competitive edge in advanced technologies like artificial intelligence, autonomous systems, and electronic warfare.² Its unique, symbiotic relationship with the IDF allows for a rapid development and feedback cycle, enabling it to field and refine “battle-proven” technologies more quickly than larger, more bureaucratic competitors.¹
• “Glocal” (Global/Local) Strategy: A core element of Elbit’s international strategy is the establishment of local subsidiaries and partnerships in key markets, including the United States, United Kingdom, Germany, and Australia.¹ This “Glocal” approach is a sophisticated strategy to secure contracts by meeting local industrial content requirements, strengthening regional supply chains, and building deep, trusted relationships with national defense forces.¹ These local entities, such as Elbit Systems of America, are positioned as integral parts of their respective national defense industrial bases, creating a “firewall” that makes contracts more politically palatable and insulates parts of the business from country-specific political fallout. This is a deliberate and necessary countermeasure to the company’s primary geopolitical vulnerabilities.
• Broad and Integrated Portfolio: As detailed previously, Elbit’s ability to offer integrated, multi-domain “system of systems” solutions is a key differentiator. This allows the company to act as a prime contractor on complex projects and provide comprehensive, cost-effective upgrades to existing military platforms, which is particularly attractive to customers with limited budgets.¹

2.3. Competitive Vulnerabilities & Threats

Despite its strengths, Elbit faces significant challenges and threats:

• Scale and Resource Disadvantage: The company’s most apparent vulnerability is its smaller scale compared to Tier-1 prime contractors. With a market capitalization of approximately $23 billion, it is dwarfed by competitors like RTX ($211 billion), Lockheed Martin ($116 billion), and General Dynamics ($89 billion).⁵ This disparity can limit its ability to compete for the largest multi-billion-dollar platform-centric programs and reduces its capacity to absorb major financial shocks or program setbacks.
• Geopolitical and Reputational Risk: As Israel’s largest defense contractor, Elbit is uniquely exposed to geopolitical risks that manifest in several ways:

• Contract Cancellations and Delays: Political pressure related to the Israeli-Palestinian conflict has led to tangible business consequences, including contract delays in Brazil and reported cancellations in Spain.³⁴ In a high-profile case, the UK Ministry of Defence scrapped the £2.1 billion Watchkeeper drone program, a decision where sustained disruption by activists at the manufacturing site was cited as a significant contributing factor.³⁶
• Divestment Campaigns: The company is a prominent target for ethical and ESG-related divestment campaigns. Several major institutional investors, including Norway’s sovereign wealth fund, HSBC, and AXA, have divested their holdings in Elbit, citing concerns over its role in the conflict and the production of certain munitions.³⁸ This can negatively impact the company’s stock valuation and access to capital.
• Export Restrictions: Elbit’s operations are subject to the export control regime of the Government of Israel, which can restrict sales to certain countries and impact the company’s ability to fulfill its backlog.⁴⁰
• Technological Disruption: While a leader in many areas, Elbit faces a growing threat from agile, venture-backed startups specializing in disruptive technologies like AI and autonomy, such as Anduril and Epirus. These firms may be able to innovate more rapidly in specific niche areas without the overhead of a large, diversified conglomerate.¹⁰

A fundamental tension exists at the core of Elbit’s business model. The company’s “battle-proven” marketing advantage is derived directly from the use of its systems by the IDF in active conflicts.¹ This provides a powerful selling point for international customers seeking reliable, field-tested equipment. However, this very same fact is the primary catalyst for the protests, divestment campaigns, and political scrutiny that create material business risks.³⁶ This paradox, where a key sales driver is also a primary source of risk, is a dynamic not faced by most of its Western competitors to the same degree.

3. Industry Dynamics & Tailwinds

3.1. Surging Global Defense Spending

The global defense and aerospace industry is experiencing a period of unprecedented growth, often described as a defense “supercycle.” Global military expenditure reached a record $2.7 trillion in 2024, marking a 9.4% increase in real terms from 2023. This was the steepest year-on-year rise since the end of the Cold War, with spending increasing across all geographic regions.⁴¹ This surge is driven by a confluence of geopolitical factors creating a highly uncertain security environment:

• Russia-Ukraine War: The conflict in Ukraine has been a primary catalyst, compelling European nations to overhaul their defense postures. European military spending rose by 17% in 2024, with 18 of the 32 NATO members now meeting or exceeding the alliance’s 2% of GDP spending target.⁴¹ Countries on NATO’s eastern flank have led the increases, with Germany’s spending growing 28% and Poland’s by 31% in 2024.⁴¹
• Middle East Tensions: The “Swords of Iron” war, which began in October 2023, and broader regional instability involving Iran and its proxies have led to a sharp increase in defense procurement by Israel and other regional actors.¹⁵
• Indo-Pacific Competition: Strategic competition with China and tensions over Taiwan are fueling a regional arms race. This has prompted significant budget increases in countries like Japan, which saw its largest annual military spending increase since 1952, as well as in Australia and South Korea.⁴¹ The United States is also channeling significant funding toward its Pacific Deterrence Initiative to counter China’s influence.⁴⁶

This trend of elevated spending is widely expected to be sustained for the foreseeable future as nations seek to recapitalize their militaries and prepare for potential high-intensity conflicts.⁴¹

3.2. Demand Drivers for Key Technologies

The current modernization cycle is not simply about buying more equipment, but about investing in specific high-technology capabilities where Elbit Systems is particularly well-positioned:

• Unmanned and Autonomous Systems: The demonstrated effectiveness of drones in recent conflicts for intelligence, surveillance, and reconnaissance (ISR), as well as for direct combat and logistics, has created immense demand. These systems offer the ability to project force and gather intelligence while reducing risk to military personnel.⁴⁸ The global military drone market is projected to grow from approximately $15.8 billion in 2025 to $22.8 billion by 2030.⁴⁸
• C4ISR and Networked Warfare: Modern warfare is predicated on information dominance. The demand for enhanced situational awareness, real-time data sharing, and secure communications is driving massive investment in C4ISR systems. The global C4ISR market was estimated at roughly $125 billion in 2022 and is projected to reach approximately $160 billion by 2028.²¹
• Advanced Avionics and Modernization: Air forces are focused on upgrading existing fleets with digital cockpits, AI-enabled flight management systems, and open architecture systems that allow for rapid and cost-effective capability enhancements.¹⁸

The nature of modern conflicts, which are increasingly asymmetric and reliant on drones, electronic warfare, and precision munitions, aligns almost perfectly with Elbit’s core technological strengths. While a prime contractor benefits from an order for a new fighter jet, Elbit benefits from orders for the advanced sensors, displays, communication systems, and electronic warfare suites inside that jet, as well as the unmanned systems and precision munitions that support it. This technology-specific tailwind may allow Elbit to grow at a faster rate than the broader defense market.

3.3. Growth in Emerging Technologies

The defense industry is rapidly integrating next-generation commercial technologies to gain a strategic advantage:

• Artificial Intelligence (AI) and Autonomy: AI is viewed as essential for future military dominance, with critical applications in analyzing vast amounts of ISR data, enabling predictive maintenance, enhancing command and control, and powering autonomous weapon systems.⁵⁴ The U.S. Department of Defense alone allocated $1.8 billion in fiscal year 2024 for AI in autonomous systems.⁵⁷ Elbit is actively developing AI-driven platforms, such as its “Frontier” surveillance system and its Robotic Autonomous Suites (RAS).⁵⁸
• Modular Open Systems Approach (MOSA): Defense customers, particularly the U.S. DoD, are increasingly mandating open architecture standards to ensure interoperability and reduce vendor lock-in.²¹ This trend presents both an opportunity and a threat. It provides an opportunity by allowing Elbit to more easily integrate its best-in-class subsystems into platforms built by larger prime contractors. However, it also represents a threat by making it easier for customers to swap out an Elbit component for a competitor’s in the future, potentially eroding the “stickiness” of its integrated solutions.

4. Recent Performance & Major Changes (Past 2 Years)

4.1. Financial Performance Metrics

Elbit Systems has demonstrated a significant acceleration in financial performance over the past two years, driven by strong demand and improved operational execution.

• Revenue Growth: The company has posted a consistent trend of accelerating, double-digit revenue growth. Full-year 2023 revenues grew 8% to $6.0 billion, followed by a 14% increase in 2024 to $6.8 billion.⁷ This momentum continued into 2025, with year-over-year revenue growth of 22% in the first quarter and 21% in the second quarter.¹³
• Operating Margins: After a period of pressure, operating margins have shown steady improvement. The non-GAAP operating margin expanded from 7.5% in FY 2023 to 8.1% in FY 2024, reaching 8.9% in the second quarter of 2025.³ This reflects operational leverage from higher sales volumes and the benefits of an operational transformation plan.
• Free Cash Flow (FCF): The company has executed a dramatic turnaround in cash generation. After reporting a negative free cash flow of $(73) million in 2023, driven by investments in inventory and working capital to support growth, FCF swung to a positive $320 million in 2024.³ This positive trend continued into the first half of 2025, with operating cash flow reaching $304 million, compared to just $26 million in the first half of 2024.¹³ This inflection is a critical indicator that the company is successfully managing its rapid growth and converting its expanding backlog into cash.
• Earnings Growth: Earnings per share have grown robustly. Non-GAAP diluted EPS increased by 31% in 2024 to $8.76, and in Q2 2025, it surged by 55% year-over-year to $3.23.³

4.2. Backlog and Order Book Trends

The company’s order backlog has expanded at an exceptional rate, reaching record levels and providing strong visibility into future revenues.

• The backlog grew from $15.1 billion at the end of 2022 to $17.8 billion at the end of 2023.⁹
• Growth accelerated dramatically in 2025, with the backlog reaching $23.1 billion at the end of the first quarter and further increasing to $23.8 billion as of June 30, 2025.¹³
• This represents a 34% increase from the end of 2023. As of mid-2025, approximately 46% of the backlog was scheduled for delivery through the end of 2026, and the backlog-to-LTM revenue ratio stood at over 3.1, indicating a strong pipeline.¹³

4.3. Major Contract Wins

The growing backlog has been fueled by a series of significant contract awards, particularly in 2025:

• August 2025: A landmark $1.635 billion contract from an undisclosed European country for a comprehensive suite of solutions, including PULS rocket launchers, unmanned aerial systems, and C4ISR technologies, to be executed over five years.¹¹
• August 2025: Two contracts from the Israeli Ministry of Defense totaling approximately $260 million for the supply of advanced airborne munitions.¹⁴
• July 2025: A contract worth approximately $260 million from Airbus Defence and Space to supply J-MUSIC™ Directed Infrared Counter Measures (DIRCM) self-protection systems for Germany’s A400M aircraft fleet.¹⁴
• September 2025: A $120 million contract for Hermes 900™ UAS from an international customer.⁶⁶

4.4. Significant Strategic Initiatives

In May 2025, Elbit completed a public offering of shares that raised gross proceeds of approximately $588.8 million.¹⁴ This capital infusion provides additional resources for growth initiatives and strengthens the balance sheet. Notably, major merger and acquisition (M&A) activity has been minimal in the 2023-2025 period, with net acquisitions/divestitures amounting to only $7 million in 2024 and negative $(10) million in 2023.⁶⁷ This recent quiet period on the M&A front, combined with a large capital raise, may suggest that management is conserving resources and evaluating opportunities for a more significant strategic acquisition, a departure from its historical cadence of smaller, “bolt-on” deals.

5. Headwinds & Challenges (Past 2 Years)

5.1. Supply Chain & Manufacturing Constraints

The rapid increase in demand has strained Elbit’s operational capabilities. The company has explicitly acknowledged disruptions from “supply chain and operational constraints,” particularly following the start of the “Swords of Iron” war.¹⁵ Specific challenges cited in company reports include increased transportation costs, shipping delays in the Red Sea due to Houthi attacks, and shortages of certain materials and electronic components.¹⁵ In response, management has stated it is actively investing in increasing production capacity and optimizing its supply chains.¹⁵

5.2. Geopolitical & Regulatory Risks

Elbit’s status as a prominent Israeli defense contractor has exposed it to a unique set of geopolitical and regulatory headwinds that have had a material impact on its business:

• Contract Delays and Cancellations:

• Philippines: The Israeli government’s decision to prioritize domestic needs during the war led to delays in deliveries to the Philippines, creating diplomatic friction with a key international customer.⁶⁸
• Brazil: A $210 million contract for howitzers was delayed by the Brazilian government in 2024 due to political opposition to Israel’s military operations in Gaza.³⁵
• United Kingdom: In November 2024, the UK Ministry of Defence cancelled the £2.1 billion Watchkeeper drone program. While the official reason was the decommissioning of aging equipment, persistent and disruptive protests by activists at the manufacturing facility, which caused significant production delays, have been widely cited as a contributing factor.³⁶
• Spain and Italy: Reports emerged in 2024 of contract cancellations for missile and guidance systems, with Elbit’s portion valued at approximately €140 million, as part of broader European political pressure on Israel.³⁴
• Product Vulnerabilities: A contract with Denmark for artillery systems faced potential delays of up to four years and additional costs after vulnerabilities were identified in the civilian-grade GPS systems, which were deemed susceptible to jamming in a contested electronic warfare environment.⁶⁹

This pattern of contract challenges reveals a systemic risk where Elbit’s technical and commercial proposals can be overridden by external factors such as political sentiment, activist pressure, or concerns about operational sovereignty. This introduces a material uncertainty in the company’s ability to convert its backlog into revenue.

5.3. Operational Challenges & Margin Pressures

• Labor and Inflation: The company’s 2022 financial results were negatively impacted by “labor cost inflation”.⁷⁰ A more acute challenge arose after October 2023 with the mobilization of a significant portion of its Israeli workforce for military reserve duty. At its peak, approximately 15% of the Israeli workforce was called up, disrupting production and R&D activities.⁷¹ This represents a unique and recurring operational risk that could constrain the company’s ability to scale production to meet the demand reflected in its backlog.
• One-Time Expenses: GAAP profitability has been periodically affected by one-time charges. These include a ~$34 million write-off for an uncollectible balance on a discontinued project and ~$17 million in expenses related to a subsidiary restructuring in Q4 2023.⁹
• Higher Interest Rates: In line with global trends, the company’s financial expenses have increased due to higher interest rates on debt used to finance working capital and expansion.⁶¹

5.4. Cybersecurity Risks & Incidents

As a high-profile defense technology company, Elbit is a prime target for cyber-attacks. A data breach was reported on October 13, 2025, attributed to a threat actor group named “Handala,” although the scope and impact of the breach remain unknown.⁷³ The company’s official filings acknowledge cyber-attacks as a material risk to its business.⁷⁴

6. Growth Opportunities

6.1. Near-Term Growth Drivers

• Backlog Execution: The most significant and immediate growth driver is the conversion of the company’s record $23.8 billion order backlog into revenue. With management targeting mid-teens revenue growth for 2025, successful execution on this backlog is the primary focus.¹³
• European Modernization: Europe remains a key growth engine. Elbit’s sales to the region grew by 106% between 2021 and 2024, and the trend is expected to continue as NATO members increase their defense spending.³² There is particularly strong demand for Elbit’s artillery systems (PULS), unmanned aircraft (Hermes), and electronic warfare suites.³²
• New Product Cycles: The recent introduction of new, technologically advanced products creates fresh revenue streams. Key examples include the AI-based “Frontier” border surveillance system, launched in September 2025, and the “Iron Beam” high-energy laser weapon system, the development of which was recently completed in partnership with the IMOD.⁵⁸
• Sustained Israeli Demand: The ongoing security situation in the Middle East ensures that demand from the IMOD will remain elevated, likely generating substantial additional orders for munitions, surveillance systems, and other critical capabilities.¹⁴

6.2. Long-Term Structural Growth Opportunities

• Autonomous Systems and AI: The global military shift toward autonomous warfare represents a major structural tailwind. Elbit is strategically positioning itself in this domain with its Robotic and Autonomous Systems (RAS) architecture. This “platform-agnostic” system is designed to act as a central “operating system” for networked swarms of heterogeneous unmanned platforms across air, land, and sea.⁶⁰ By focusing on the command-and-control software that manages these assets, Elbit is aiming to provide the “brains” for other manufacturers’ hardware, a potentially high-margin and highly scalable business model for the future of warfare.
• “Glocal” Strategy and Industrial Partnerships: In a world of increasing defense industrial nationalism, Elbit’s strategy of establishing local subsidiaries and engaging in technology transfer is a key long-term advantage.¹ As emerging defense markets in Asia and Eastern Europe seek to build their own sovereign capabilities, they are more likely to partner with companies like Elbit that are willing to help them produce systems locally rather than just sell them finished products.³² This approach transforms the customer relationship from transactional to a long-term industrial partnership.
• Strategic M&A: Elbit has a long and successful track record of using “bolt-on” acquisitions to acquire key technologies and gain market access, such as the purchases of IMI Systems for land warfare capabilities and Sparton for undersea warfare.⁸¹ The company’s recently strengthened balance sheet and large capital raise could enable a more significant strategic acquisition to accelerate its entry into a new high-growth technology domain.

7. Capital Allocation & Financial Health

7.1. Balance Sheet Strength & Debt Profile

Elbit Systems maintains a strong and conservative balance sheet. As of the end of fiscal year 2024, the company held $265 million in cash and cash equivalents against approximately $821 million in total debt.⁸⁴ The company’s financial health has improved notably, with the Net Debt-to-EBITDA ratio declining from 1.6x in 2023 to a low 0.9x in 2024, indicating a strong capacity to manage its debt obligations.⁷⁷ This financial stability was further affirmed in June 2025 when S&P Global Ratings Maalot upgraded the company’s long-term credit rating to “ilAA+” with a stable outlook.¹⁴

7.2. Capital Deployment & Shareholder Returns

The company’s capital allocation framework clearly prioritizes reinvestment for organic growth over aggressive shareholder returns, a strategy appropriate for a technology-focused company in a capital-intensive industry.

• R&D Spending: Elbit sustains a high level of investment in innovation, with R&D expenses totaling $424.4 million (7.1% of revenue) in 2023 and increasing to $466.4 million (6.8% of revenue) in 2024.⁷ This is consistent with its strategy of maintaining a technological advantage.
• Capital Expenditures (CAPEX): Investments in property, plant, and equipment have risen to support increased production capacity, growing from $187 million in 2023 to $215 million in 2024.¹²
• Dividends: Elbit has a long history of paying a consistent quarterly dividend. After holding the dividend steady at $0.50 per share for several quarters, the company increased it to $0.60 per share in early 2025 and again to $0.75 per share for the third quarter of 2025.⁸⁶ These increases serve as a strong signal from management regarding their confidence in the sustainability of the company’s improved cash flow generation.
• Share Buybacks: The provided source materials do not indicate any significant share repurchase programs in the past two years.

7.3. Management Guidance & Credibility

Management has provided clear targets and has demonstrated a strong track record of execution in recent periods.

• Guidance: For the remainder of 2025, management is targeting mid-teens revenue growth, followed by double-digit growth in 2026.¹³ The company also has an internal goal of reaching over $7 billion in revenue by 2025 and achieving a non-GAAP operating margin of around 10% by 2026.⁸⁸
• Credibility: The management team’s credibility is high. The company has posted four consecutive quarters of double-digit growth in both revenue and earnings per share through the first quarter of 2025 and has consistently beaten analyst earnings estimates in recent quarters, reinforcing confidence in their ability to execute.¹⁵

8. Valuation Assessment

8.1. Historical and Comparative Multiples

An analysis of Elbit Systems’ valuation multiples indicates that the stock is trading at a significant premium to both its historical averages and its peer group.

• Price-to-Earnings (P/E) Ratio: As of October 2025, Elbit’s trailing twelve-month (TTM) P/E ratio is in the range of 49-57x.⁹¹ This is a substantial expansion from year-end 2023 (35.16x) and year-end 2024 (44.11x) and is well above its 10-year historical average of approximately 29x.⁹¹
• Price-to-Sales (P/S) Ratio: The current TTM P/S ratio stands at approximately 2.9-3.1x, more than double its average of 1.45x in 2024.⁹⁴
• Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: Based on TTM EBITDA of approximately $761 million as of June 2025 and an enterprise value of roughly $24.6 billion, the implied TTM EV/EBITDA multiple is approximately 32x.⁹⁷

The market is clearly valuing Elbit Systems more like a high-growth technology company than a traditional, cyclical defense contractor. This re-rating is a direct reflection of the company’s exceptional growth in revenue (>20%) and earnings (>50%) in the first half of 2025, which far outpaces its peers. However, this premium valuation creates a significant risk. Should the company’s growth decelerate to the industry average due to execution challenges, contract losses, or a normalization of geopolitical tensions, its valuation multiple would likely compress sharply toward the peer average, potentially leading to significant stock price underperformance even if the underlying business remains fundamentally sound.

Metric	Elbit Systems	Northrop Grumman	General Dynamics	RTX	BAE Systems	Leonardo	Thales
Market Cap ($B)	~$22.6 5	~$85.1 5	~$89.1 5	~$211.4 24	~$71.8 24	~$33.4 24	~$59.8 24
P/E (TTM)	~56.0x 93	~21.9x 99	~22.0x 100	~34.3x 101	~27.0x 102	~26.9x 103	~51.7x 104
EV/EBITDA (TTM)	~32.3x (Implied)	~15.7x 105	~16.7x 106	~17.9x 107	~16.3x 102	~13.4x 103	~21.3x 104
P/S (TTM)	~3.0x 95	~2.1x 105	~1.9x 106	~2.5x 108	~2.0x 109	~1.5x 103	~2.5x 104
Revenue Growth (LTM)	~21.5% (Implied)	~0.7% (decline) 26	~12.9% (FY24) 110	~15.4% 28	~17.1% (FY24) 111	~16.1% (FY24) 112	~8.1% (H1’25) 113
Op. Margin (LTM)	~7.7% 114	~10.6% (FY24) 115	~10.1% (FY24) 116	~9.5% (FY24) 117	~9.1% 102	~9.1% 103	~9.1% 104

Note: Data as of mid-October 2025. LTM figures are based on the most recent available data. Peer data is based on FY2024 or most recent TTM reports. Implied figures are calculated from available data.

8.2. Valuation Relative to Growth and Cash Flow

The premium valuation is predicated on Elbit’s superior growth profile. The company’s revenue and earnings growth significantly outpace those of its larger, more mature peers. The market appears to be pricing in the successful conversion of the massive backlog and continued margin expansion toward management’s 10% target.⁸⁸

From a cash flow perspective, the valuation appears stretched. Based on the fiscal year 2024 free cash flow of $320 million and a market capitalization of approximately $22.6 billion, the historical FCF yield is a low 1.4%.⁵ However, should the strong cash generation of the first half of 2025 continue, the forward-looking yield would become more attractive. An independent Discounted Cash Flow (DCF) analysis from one source suggests the stock may be “significantly overvalued” when judged against the present value of its long-term cash flow projections.¹¹⁸

9. Key Risks & Uncertainties

The investment thesis for Elbit Systems is subject to several material risks that are both specific to the company and inherent to the defense industry.

• Geopolitical and Regulatory Risks:

• Home Country and Customer Concentration: As an Israeli company, Elbit is inextricably linked to the political and security situation in the Middle East. The IMOD is its largest single customer, and any de-escalation of regional tensions could lead to a slowdown in domestic demand.¹⁵ More critically, negative international sentiment toward Israel’s military actions has directly resulted in contract cancellations, delays, and the threat of arms embargoes from other nations.³⁴
• Reputational Risk and Divestment: The company is a frequent target of the Boycott, Divestment, and Sanctions (BDS) movement, which has successfully pressured some institutional investors to sell their holdings, creating reputational headwinds.³⁸ Activist protests have also physically disrupted operations, contributing to production delays and contract losses.³⁶
• Execution and Operational Risks:

• Backlog Conversion and Supply Chain: The company faces the significant challenge of scaling its production to meet the demand represented by its record backlog. This effort is constrained by a complex global supply chain that has experienced disruptions, including component shortages and increased shipping costs and delays.¹⁵
• Labor Availability: A unique operational risk is the mobilization of key personnel for IDF reserve duty during periods of conflict. This unpredictable removal of skilled engineers and technicians can disrupt production schedules and R&D timelines, constraining the company’s ability to execute.⁶²
• The confluence of these factors creates a potential “perfect storm” scenario. A severe escalation of regional conflict could simultaneously disrupt Elbit’s ability to receive critical components from international suppliers (due to embargoes) and its ability to ship finished products from its Israeli facilities (due to physical or logistical blockades).
• Technology and Cybersecurity Risks:

• Technology Obsolescence: The defense technology sector is characterized by rapid innovation. Elbit must continue its high level of R&D investment to prevent its products from being surpassed by those of competitors, including agile startups.¹⁰
• Cybersecurity: As a high-profile defense firm, Elbit is a prime target for state-sponsored and other malicious cyber-attacks. A successful breach could result in the theft of sensitive intellectual property or the disruption of operations. A data breach was reported in October 2025.⁷³

10. Management & Governance

10.1. Management Team Quality & Track Record

Elbit’s executive team is characterized by deep industry experience and long tenure with the company.

• Bezhalel (Butzi) Machlis, President and CEO: Mr. Machlis has led the company since 2013 and has been an employee since 1991. He has held numerous senior leadership roles across key divisions and previously served as an artillery officer in the IDF, giving him profound domain expertise.¹²¹ His leadership has overseen a period of significant growth and the company’s recent strong performance.
• Executive Team: The broader leadership team is composed of seasoned executives with extensive experience within Elbit and the broader Israeli defense and technology ecosystem. Many are former high-ranking IDF officers, which reinforces the company’s deep military and technical expertise and fosters an intimate understanding of its primary customer’s needs.¹ This shared background is a core component of Elbit’s competitive advantage but could also contribute to an insular strategic culture, potentially creating blind spots regarding the priorities of international commercial customers.

10.2. Board of Directors & Composition

• David Federmann, Chairman: Mr. Federmann became Chairman in August 2023, having been a director since 2007.¹²¹ He is directly connected to the company’s controlling shareholder, Federmann Enterprises Ltd. (FEL), which holds approximately 42.3% of the company’s shares.¹²¹
• Board Composition: The board includes members with significant military, governmental, and technological experience, such as Ehud (Udi) Adam (former Director General of the Israeli Ministry of Defense) and Tzipi Livni (former Israeli Foreign Minister).¹²⁵ This composition provides strong domain expertise and high-level governmental and strategic connections. The company states that a majority of its board members meet applicable U.S. and Israeli independence criteria.¹²¹

10.3. Corporate Governance Concerns

• Controlling Shareholder: The most significant governance factor is the concentrated ownership by Federmann Enterprises Ltd. (FEL).¹²¹ This structure means that public minority shareholders have limited influence on major corporate decisions. While the Federmann family has presided over a period of substantial value creation, this concentration of control is a key consideration for investors.
• Ethical and ESG Concerns: The nature of Elbit’s business and its integral role in military conflicts create significant ESG-related challenges. The company has been divested from by numerous ESG-focused funds and is a target of international protest movements.³⁸ While Elbit maintains a stated commitment to ethical practices and corporate governance, its core business remains inherently controversial for a segment of the global investment community.²

Frequently Asked Questions

Earnings and Business Environment

• Are earnings at a cyclical high or cyclical low? Earnings are at a cyclical high. The company has posted accelerating, double-digit revenue growth over the past two years, with year-over-year revenue increasing 21% in the second quarter of 2025. Non-GAAP earnings per share (EPS) surged by 55% in the same quarter, marking a period of exceptionally strong financial performance driven by a global defense “supercycle”.  
• Are earnings driven primarily by the external environment or internal company actions? Earnings are driven by a combination of both, though the current surge is primarily catalyzed by the external environment. The significant increase in global defense spending due to geopolitical conflicts has created unprecedented demand for Elbit’s products. However, the company’s ability to capitalize on this demand is a result of internal actions, including a long-term strategy of technological investment, a successful operational transformation plan to increase capacity, and a “Glocal” strategy that builds strong partnerships in key markets.  
• Has the business environment changed recently? Yes, the business environment has changed dramatically. A sharp increase in global geopolitical instability, particularly the wars in Ukraine and the Middle East, has prompted nations worldwide to significantly increase their defense budgets. This shift has created a period of high demand for advanced defense technologies, leading to a record order backlog for Elbit, which stood at $23.8 billion as of June 30, 2025.  
• How stable are revenues? How much do they fluctuate with the economy? Revenues are highly stable and generally insulated from broader economic cycles. As a defense contractor, Elbit’s revenue is primarily driven by long-term government contracts and national defense budgets, which are influenced by geopolitical security concerns rather than economic fluctuations. The company’s record backlog of over $23.8 billion provides strong revenue visibility for several years, further enhancing this stability.  

Business Model and Competition

• Can this business be easily understood? The business is complex. Elbit operates as a high-technology company across five distinct business segments: Aerospace, Land, C4I & Cyber, ISTAR & EW, and a major US-based subsidiary. Its operations are global and subject to a wide range of international regulations, geopolitical risks, and complex, long-cycle government contracting processes. Understanding the business requires familiarity with advanced defense technologies and the intricacies of the global defense market.  
• Can this company be undermined by foreign, low-cost labor? This is highly unlikely. The aerospace and defense industry is driven by technological superiority, intellectual property, and deep, trusted relationships with government clients, not low-cost labor. Elbit’s competitive advantage lies in its advanced, “battle-proven” systems and continuous innovation. While the company engages in local production in foreign countries, this is a strategic requirement to win contracts, not a cost-saving measure.  
• Do brands matter in the business? Or is this a commodity producer? This is not a commodity business; brand and reputation are paramount. The “Elbit Systems” brand is synonymous with technologically advanced, “battle-proven” solutions, which is a critical differentiator and a key factor in securing contracts. Specific product brands, such as the Hermes™ line of drones, carry significant weight and are recognized globally for their performance and reliability.  
• How profitable is this industry? Are there a lot of competitors? What are the barriers to entry? The aerospace and defense industry is moderately profitable, with an average net profit margin of around 6.4%. The competitive landscape is dense, featuring large, Tier-1 prime contractors like Northrop Grumman and RTX, as well as numerous specialized technology firms. Barriers to entry are exceptionally high, requiring massive capital investment, decades of R&D, access to highly sensitive intellectual property, security clearances, and the ability to build long-term, trusted relationships with national governments.  
• What is the nature of competition? Do brand names matter? What are the customers switching costs? Competition is based on technological capability, system performance, reliability, and the strength of relationships with government customers. As noted, brand reputation is critical. Switching costs for customers are very high. Elbit’s systems are often deeply integrated into a military’s core platforms (aircraft, vehicles) and operational doctrines. Replacing these systems would require new procurement cycles, extensive testing, retraining of personnel, and overhauling logistical and support chains.

Financial Health & Capital Allocation

• How much free cash flow does the business generate? How does management use this free cash flow? What is their philosophy? The company has demonstrated a significant improvement in cash generation, reporting a positive free cash flow of $320 million in 2024, a dramatic turnaround from a negative $73 million in 2023. Management’s capital allocation philosophy is clearly defined and prioritizes reinvestment for growth. The framework consists of three pillars: investing in organic growth through R&D and capital expenditures, consistently returning cash to shareholders via dividends, and maintaining a strong balance sheet.  
• Is the company buying back shares? Paying dividends? The company pays a consistent quarterly dividend and has recently increased it twice, signaling confidence in its financial health. The latest declared dividend was $0.75 per share. There have been no significant share buyback programs announced or executed in the past two years.  
• How CapEx hungry is this business? What % of cash from operations must be spent on CapEx to sustain the business? The business is moderately capital-expenditure intensive, particularly during periods of growth. In 2024, capital expenditures were $215 million against $535 million in cash from operations, meaning approximately 40% of operating cash flow was reinvested into property, plant, and equipment to expand production capacity.  
• Is net income diverging from cash from operations? After a period of divergence in 2023 where cash flow was weaker due to investments in working capital, cash from operations is now trending stronger than net income. In the first half of 2025, cash from operations was $304 million, comfortably exceeding the net income of $232.8 million for the same period. This indicates healthy cash conversion.  
• How profitable is this business? What is the return on capital invested? Return on equity? The company’s profitability metrics have been improving. As of the most recent data, key metrics include:
  • Return on Equity (ROE): 11.56%
  • Return on Invested Capital (ROIC): 8.46% for 2024  
  • Operating Margin (TTM): 7.92%

Management & Governance

• What are the motivations of management? Do they own a lot of stock and options? Management’s motivation appears to be strongly aligned with shareholders, primarily through a significant ownership structure. The company’s controlling shareholder is Federmann Enterprises Ltd., a family-held entity that owns approximately 42.3% of the company’s shares. The Chairman of the Board, David Federmann, is a member of this family. Additionally, the company’s compensation policy uses a mix of salary, cash bonuses, and equity-based compensation to tie executive pay to long-term performance.  
• Does the company issue large amounts of new shares to insiders? Based on financial filings, stock-based compensation expense was approximately $2.4 million in 2024. Relative to the company’s 2024 net income of $321 million, this represents less than 1% and is not considered a large amount. Direct data on share issuance to specific insiders is not readily available as the company is a Foreign Private Issuer.  
• What is the compensation policy of directors and management? The compensation policy is designed to attract and retain talent while aligning executive interests with company performance. It includes a mix of fixed compensation (base salary and benefits) and variable compensation (cash bonuses and equity). Variable pay is capped at 85% of an executive’s total compensation package. The policy sets maximum base salary levels (e.g., 300,000 NIS per month for the CEO) and ties incentive pay to both short- and long-term performance goals.  

Operations & Strategy

• Has the company made any significant acquisitions recently? No. While Elbit has a history of growth through “bolt-on” acquisitions, there have been no significant M&A activities in the 2023–2025 period. Net acquisitions were minimal in 2024 and slightly negative in 2023.  
• Recent changes in the business, new markets, new production facilities, what’s changed recently? New management?
  • Business Changes: The company is rapidly scaling production to meet a historic surge in demand, reflected in its record backlog.  
  • New Facilities: A new munitions manufacturing plant is being built in Israel under a ten-year, $340 million deal with the Israeli Ministry of Defense.  
  • New Management: Key recent appointments include David Federmann as Chairman of the Board (August 2023), Luke Savoie as President and CEO of the U.S. subsidiary Elbit Systems of America (January 2024), and Sasson Meshar as an Executive Vice President (2025).  
• Outlook for the company’s products and services? How big will this market be? Is it growing? Domestic or international? The outlook is strong, with significant growth projected in key international markets.
  • Unmanned Systems: The global military drone market is projected to grow from approximately $15.8 billion in 2025 to $22.8 billion by 2030.  
  • C4ISR: The global C4ISR market was valued at over $125 billion in 2022 and is forecast to reach approximately $160 billion by 2028, with some estimates projecting it to exceed $216 billion by 2034.  

Risks & Stock Information

• What factors would cause the stock to decline? Are these factors controlled by the company or the external environment?
  • External Factors: A decline could be triggered by a de-escalation of global conflicts, leading to reduced defense spending; government arms embargoes due to political pressure related to Israel; or successful activist campaigns that cause reputational damage and contract cancellations.  
  • Internal Factors: Failure to execute on its massive backlog, significant program delays, or major supply chain disruptions could also cause the stock to decline.  
  • Valuation: The stock’s high valuation presents a risk, as any failure to meet high growth expectations could lead to a sharp price correction.  
• What is the risk of a catastrophic loss on this investment? What is the chance of a total loss? The chance of a total loss is extremely low. Elbit is a strategically vital defense contractor for Israel with a strong balance sheet and a multi-year backlog of orders from a diverse international customer base. A catastrophic loss, while also a low-probability event, is a plausible risk that could be triggered by a severe and sustained confluence of its key risks, such as a complete arms embargo from both the U.S. and Europe combined with an operational shutdown of its Israeli facilities due to regional conflict.
• Is the stock an ADR? What are the ADR fees? Is the stock an MLP? Is there a K1 issued to investors? Elbit’s shares traded on the NASDAQ (ESLT) are its ordinary shares, not American Depositary Receipts (ADRs). The company is an Israeli corporation, not a Master Limited Partnership (MLP), and therefore does not issue K-1 tax forms to investors.
• What are the recent news on the company? Recent news has been overwhelmingly positive, focusing on strong financial performance and business momentum. Key highlights from 2025 include:
  • Reporting record Q1 and Q2 earnings that significantly beat analyst estimates.  
  • Securing major contracts, including a landmark $1.635 billion deal in Europe.  
  • Launching new products like the “Frontier” AI-based surveillance system.  
  • Completing the development of the “Iron Beam” high-energy laser weapon system.  
  • Successfully raising approximately $588.8 million in a public share offering.  
• Does the company have assets that are not fully recognized in the balance sheet? Yes. While the company’s balance sheet reported $1.85 billion in “Goodwill and other intangible assets” at the end of 2024, this figure does not fully capture the value of its most critical intangible assets: its vast portfolio of proprietary intellectual property and its “battle-proven” brand reputation, which are significant drivers of its competitive advantage and future earnings.  
• How conservative is the company’s accounting? Are they over- or under- stating earnings? The company’s accounting appears to be reasonably conservative. Elbit reports financials according to U.S. Generally Accepted Accounting Principles (GAAP) and provides non-GAAP reconciliations to offer clarity on underlying performance. The company has taken one-time charges for items like project write-offs and restructuring, which suggests a practice of recognizing costs as they are incurred rather than deferring them.  
• Has the company recently changed accounting policies? The available financial reports indicate that the company prepares its consolidated financial statements in accordance with U.S. GAAP. There is no indication of any recent material changes to its accounting policies.  
• What off B/S liabilities does the company have? The company’s annual reports on Form 20-F do not disclose any significant off-balance sheet arrangements.  

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