Backlog is huge, execution must catch up
- Elbit ended 2025 with a record $28.1B backlog, up 24% from the prior year.
- Revenue grew 16.3% in 2025, so orders are still running ahead of sales.
- Land is now the largest segment by external revenue, helped by ammunition and munitions demand in Israel and Europe.
- Margins are improving, but the company must spend heavily to turn backlog into deliveries.
- The stock story is solid, but valuation is not cheap enough to ignore execution risk.
Orders are the prize
Elbit has the kind of demand most industrial companies want. Backlog reached $28.1B at the end of 2025, about $5.5B higher than a year earlier. That backlog is more than three times 2025 revenue, which gives the company strong sales visibility if it can build and ship on time.
The bull case is simple: defense budgets are rising, Europe wants more local supply, Israel is buying more local systems, and Elbit owns products that fit current wars. These include munitions, drones, counter-drone systems, active protection for vehicles, rocket artillery, and high-power lasers. Margin progress also matters. Non-GAAP operating margin reached 9.8% in Q4 2025, helped by operating leverage and more automated production.
The bear case is not about demand. It is about execution. Management has said production capacity is the main bottleneck for turning backlog into revenue and profit. Elbit plans about $300M of CapEx in 2026, while it ramps Ramat Beka, keeps a legacy central facility running in parallel, and adds vertical integration for key parts.
Finn's view is balanced. The business has better visibility and better margins than it did a year ago. But the price already gives Elbit credit for a lot of that improvement, so missed deliveries, cost overruns, or supply problems would matter.
From projects to repeat products
Elbit makes money by designing, building, integrating, and supporting defense systems. Most customers are governments or large defense prime contractors. Many contracts are long term and fixed price, which means Elbit must estimate costs well before all the work is done.
The company is trying to shift from a project-heavy model to a more product-oriented model. That matters because repeat products can be easier to plan, easier to manufacture, and more profitable than one-off custom projects. PULS rocket artillery, Iron Fist active protection, ReDrone counter-drone systems, and munitions are examples of product lines that can repeat across customers.
Cash flow can still swing. Elbit often receives advances from customers, but it also has to buy materials, build inventory, and fund factories before final delivery. In 2025, operating cash flow was helped by customer advances, while inventories, receivables, and contract assets also rose.
The model breaks if Elbit cannot staff plants, source parts, pass export approvals, or meet local production rules in customer countries. Those are normal defense contractor risks, but they are larger when backlog grows this fast.
Weapons, sensors, and lasers
Land munitions and ammunition
This is the fastest-growing area. Land revenue rose 38% in 2025, mainly from ammunition and munitions sales in Israel and Europe.
PULS rocket artillery
PULS is a major export product and has surpassed $2B in backlog. Formal EuroPULS awards in Greece and Germany are key items to watch.
Iron Fist active protection
Iron Fist protects armored vehicles by detecting and intercepting threats. Recent demand includes a U.S. Army Bradley IFV contract.
High-power lasers
Elbit is the military-grade laser provider for Israel's Iron Beam program and has an IMOD contract for airborne laser pods and helicopter solutions. This could become a larger business if deployment milestones hold.
UAVs and loitering munitions
Elbit sells unmanned aircraft and loitering weapons used for surveillance and strike missions. A new UAV assembly site in Israel opened in 2024 and is already operational.
ReDrone counter-drone systems
ReDrone is built to detect and defeat hostile drones. Counter-drone demand is rising as cheap drones become common on modern battlefields.
Helmet-mounted displays and avionics
Elbit has a long history in cockpit electronics and helmet display systems. These products support the Aerospace segment and give the company a durable defense electronics base.
Land leads the mix
Segment shares use external customer revenue for fiscal 2025 from Elbit's 2025 Form 20-F. The geographic mix is also concentrated: Israel was 32.2% of 2025 revenue and Europe was 27.0%.
What could break the story
Factory ramp misses backlog demand
High impact · Medium oddsElbit's backlog is huge, but backlog does not become cash until systems are built, accepted, and paid for. Management has pointed to production capacity as the main bottleneck. Ramat Beka and the legacy central facility are supposed to run in parallel, which helps, but it also adds coordination risk.
Single-source supplier strain
High impact · Medium oddsThe 2025 Form 20-F says procurement and shipping costs have risen and that dependency on single sources has increased for some materials. Elbit is bringing more key parts in-house, including proprietary diodes and detectors, but vertical integration takes time. A shortage in one part can slow a whole program.
Fixed-price contract cost overruns
Medium impact · Medium oddsMany defense contracts are fixed price, so Elbit can lose margin if labor, materials, or engineering work cost more than planned. This risk grows when plants are full and input costs are volatile. Better backlog quality and automation help, but they do not remove the risk.
Israel conflict disrupts operations
High impact · Medium oddsRegional conflict drives demand, especially from the IMOD, but it can also disrupt labor, shipping, and plant operations. Reserve duty, missile threats, and transport limits can all slow production. The same conflict that boosts orders can make delivery harder.
Europe local production rules tighten
Medium impact · Medium oddsEurope is a major growth engine, but many European buyers want local work, local supply chains, or industrial participation. Elbit has opened facilities in Sweden and Germany and uses partnerships to meet this need. If local rules get stricter, contract wins could require more investment or lower margins.
Valuation leaves less room for mistakes
Medium impact · Medium oddsThe business has improved, but the stock already reflects much of the stronger backlog and margin story. That makes small misses more important. A delay in Ramat Beka, weaker cash flow, or slower Europe awards could pressure sentiment.
In one breath
What does Elbit Systems do?
Elbit Systems builds defense systems for governments and defense contractors. Its products include drones, munitions, rocket artillery, vehicle protection, command systems, electronic warfare, cockpit displays, and laser defense technology.
Why is Elbit's backlog important?
Backlog is signed work that has not yet turned into revenue. Elbit's backlog reached $28.1B at the end of 2025, which gives strong visibility, but only if the company can produce and deliver on time.
Is Elbit mostly an Israel defense stock?
Israel is a major customer base, with 32.2% of 2025 revenue. But the company is global, with Europe at 27.0%, North America at 20.9%, and Asia-Pacific at 15.7% of 2025 revenue.
What is the main risk for ESLT investors?
The main risk is execution. Demand is strong, but Elbit must expand capacity, manage suppliers, and deliver a record backlog without margin damage.