10-Q · May 5, 2026
Mercury Systems reported a strong Q3 FY26 with revenues of $235.8 million, surpassing estimates by 12.5% and up 11.5% year-over-year. The company achieved an adjusted EPS of $0.27 compared to expectations of $0.04,…
Earnings analysis · 10-K
MRCY earnings analysis
Filed August 18, 2026 · Our reading of the company's report
The latest report
Mercury Systems delivered a substantial operating recovery in fiscal 2026: revenue rose 7.9% to $983.6 million, gross margin expanded to 28.6%, operating results reached breakeven, and adjusted EBITDA increased to…
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Mercury Systems delivered a substantial operating recovery in fiscal 2026: revenue rose 7.9% to $983.6 million, gross margin expanded to 28.6%, operating results reached breakeven, and adjusted EBITDA increased to $150.2 million. Growth was concentrated in sensor and effector applications and Land, Naval and Space platforms, while Airborne revenue declined $38.1 million. The trajectory is constructive, supported by positive free cash flow and a $150.0 million debt repayment, but GAAP EPS remained negative at $(0.50), free cash flow fell to $68.1 million, and production-scaling, AI/cybersecurity and litigation risks could constrain execution.
Gross and operating margin
How much of each revenue dollar the business keeps.
One point per quarterly or annual filing. Both margins are shares of that report's revenue.
From revenue to operating profit
Where each $100 of revenue went in this report.
Cost of sales, operating expenses, and what remained. Figures are rounded to whole dollars.
Where revenue came from
The business segments reported by the company.
Shares of the segments disclosed in this filing, largest first.
How we read each report
Our analysis across the last few reports.
Our model's reading of each filing, not the share price or the market's reaction. Annual and quarterly reports each occupy one position.
Reported figures
- Earnings per share
- $-0.5
What stood out
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Revenue and profitability materially recovered
Fiscal 2026 revenue increased 7.9% to $983.6 million from $912.0 million in fiscal 2025 and $835.3 million in fiscal 2024. Gross margin improved to 28.6% from 27.9% and 23.5%, respectively, while operating results improved to breakeven from a $19.6 million loss and a $147.8 million loss.
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Adjusted earnings show strong turnaround
Adjusted EBITDA increased to $150.2 million in fiscal 2026 from $119.4 million in fiscal 2025 and $9.4 million in fiscal 2024; adjusted EPS rose to $1.06 from $0.64 and negative $0.69. GAAP diluted EPS remained negative at $(0.50), but improved from $(0.65) and $(2.38).
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Land, naval and sensor demand led growth
Growth was led by Other Sensor and Effector, up $46.9 million year over year, Radar, up $19.1 million, and Electronic Warfare, up $16.4 million. Land, Naval and Space platforms increased $53.7 million, $23.7 million and $22.0 million, respectively, partly offset by Airborne declining $38.1 million.
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Differentiated processing platform and AI roadmap
The company describes its Mercury Processing Platform as an end-to-end ecosystem spanning silicon to systems and RF front ends to effectors. Its roadmap emphasizes commercial silicon, open standards, proprietary processing IP and emerging AI processing at the edge.
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Cash generation stayed positive
Free cash flow was $68.1 million in fiscal 2026, compared with $119.0 million in fiscal 2025 and $26.1 million in fiscal 2024. Operating cash flow remained positive at $102.4 million, while capital expenditures increased to $34.3 million from $19.8 million.
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Debt reduction supports financial flexibility
Capital allocation strengthened the balance sheet: the company repaid $150.0 million on its Revolver, reducing borrowings to $441.5 million from $591.5 million, while extending facility maturity to November 4, 2030. It also completed a specialized manufacturing-process acquisition for $1.4 million of cash consideration.
What to watch
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Execution risk while scaling production
The filing newly emphasizes the risk that demand may outpace manufacturing capacity, requiring additional shifts, workforce planning, supplier support and higher throughput. The company has $269.2 million of non-cancelable purchase commitments, and rapid scaling could cause delivery delays, quality issues, penalties, margin pressure and inventory obsolescence.
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New AI, cyber and compliance exposure
Artificial intelligence is identified as a distinct risk area: the company increasingly relies on third-party AI tools for engineering, software development, supply-chain planning, quality assurance and cybersecurity monitoring, while its products may host customer AI algorithms. Errors, cyberattacks or evolving Department of War requirements could cause redesign, compliance costs, bid disqualification or contract termination; the company states it does not develop proprietary AI models.
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Ongoing Starboard litigation and activism
A materially changed legal risk is the June 2026 Starboard lawsuit alleging claims related to the settled federal securities action and a prior standstill agreement. The company says it may incur substantial legal fees and liabilities that may not be covered by insurance; the federal class-action settlement was $32.5 million and five Starboard-associated funds represented approximately 14% of the class.
Management's outlook
The 10-K does not provide quantitative fiscal 2027 revenue or EPS guidance. Management states that existing cash, the available Revolver, operating cash flow and financing capabilities should be sufficient for anticipated cash requirements for at least the next twelve months.
Earlier filings 4
10-K · August 11, 2025
Mercury Systems reported fiscal 2025 revenue of $912.0 million and materially narrowed its GAAP loss to $(37.9) million (diluted loss per share $(0.65)), while delivering adjusted EPS of $0.64 and adjusted EBITDA of…
10-Q · February 4, 2025
Mercury Systems delivered a stronger quarter: revenue rose to $223.125M (up $25.662M or 13.0% YoY), gross margin expanded to $60.826M (27.3% of revenue) and operating loss narrowed to $(12.415)M (-5.6% margin) vs…
10-Q · November 5, 2024
Mercury Systems reported Q1 net revenues of $204,431 (up $23,440 vs. prior-year Q1 $180,991) and narrower losses — net loss of $(17,525) vs. $(36,708) a year ago, diluted loss per share improved to $(0.30) from $(0.64).…
This is our reading of a public filing, not the filing itself. Analysis can contain errors; check the source document for full context.