Leonardo SpA Earnings Call Signals Cash-Backed Growth

Leonardo SpA ((FINMY)) has held its Q4 earnings call. Read on for the main highlights of the call.

Leonardo SpA’s latest earnings call delivered a distinctly upbeat message, with management emphasizing a powerful combination of double‑digit growth, record cash generation, and a sharply lower debt load. Executives framed 2025 as a turning point in profitability and balance sheet strength, while acknowledging lingering pressure in Aerostructures and some technical headwinds from currency and joint ventures.

Orders Surge Underpin a Record Backlog

Leonardo reported 2025 orders of EUR 23.8 billion, up about 14% year on year and comfortably ahead of guidance, driving a book‑to‑bill ratio of roughly 1.2. The backlog has swelled to EUR 47 billion, and over three years orders have climbed about 38%, giving the group strong multi‑year revenue visibility.

Revenues Beat Guidance With Broad-Based Growth

Revenues reached EUR 19.5 billion in 2025, rising around 11% from EUR 17.6 billion and beating the updated guidance of EUR 18.6 billion. Over a three‑year horizon, Leonardo has lifted its top line by roughly 33%, underscoring momentum across its key defense, aerospace, and security markets.

EBITA Expansion and Margin Uplift Outperform Targets

EBITA climbed to EUR 1.75 billion, an 18% year‑on‑year increase versus EUR 1.48 billion and ahead of the EUR 1.66 billion target. Return on sales improved by about 60 basis points to nearly 9.0%, reflecting better mix, efficiency gains, and disciplined execution across major programs.

Record Cash Flow Drives Rapid Deleveraging

Free operating cash flow surpassed the EUR 1 billion mark for the first time, nearly doubling over three years from about EUR 0.5 billion. This record cash generation helped cut net debt by 44% in a year to roughly EUR 1.0 billion, a drop of around 67% since EUR 3.0 billion three years ago.

Divisional Execution Underpins Top-Line Strength

Key divisions all contributed to growth, with Defense Electronics & Security and Helicopters delivering double‑digit revenue increases and helicopters up 11% with 182 deliveries. Aeronautics showed solid program performance and export success, including a notable support order from Kuwait, while Space added roughly EUR 1.0 billion in revenues and orders.

Cybersecurity and Space Become New Growth Engines

Cybersecurity has scaled quickly, with orders now around EUR 1.0 billion and revenues jumping about 63% year on year, signaling growing demand for digital defense capabilities. Space revenues surged roughly 90%, and as a new standalone division it is showing improving profitability as TAS losses shrink from about EUR 50 million to EUR 23 million.

Strategic Portfolio Shift and Heavy Digital & AI Spend

Management highlighted portfolio rationalization and new partnerships, including work on drones and the GCAP/Edgewing fighter program. R&D spending rose about 20% year on year to roughly 15% of revenues, while digital and AI investments include doubling computing power via the daVinci‑2 supercomputer, over 2,000 staff using AI tools, and hundreds of capacity‑boost pilot projects.

Talent Expansion and Enhanced Shareholder Returns

Leonardo’s workforce has grown from about 50,000 to 73,000 in three years, adding around 17,000 net hires with a strong STEM and under‑30 profile and rising female representation. At the same time, the board has raised the dividend per share from roughly EUR 0.14 to EUR 0.52, and management signaled an intention to grow payouts further, subject to profits.

M&A and Industrial Expansion: Iveco and Aerostructures

The acquisition of Iveco’s defense activities is expected to close by March, with management pointing to a solid order backlog and truck margins in the low‑teens. In Aerostructures, Leonardo is working toward a 50/50 joint venture that could create a larger global player and start contributing positively from 2026 once finalized.

Aerostructures Losses Still a Drag on Group Results

Despite progress, the Aerostructures unit posted an EBITA loss of about EUR 130 million in 2025 and negative free operating cash flow estimated around EUR 0.2 billion. Fourth‑quarter breakeven benefited from contingency releases, and management cautioned that the business will remain loss‑making into 2026 while investments and turnaround actions continue.

FX and JV Contributions Temper Bottom Line

Leonardo DRS showed underlying growth but its reported contribution was hit by U.S. dollar translation, softening the year‑on‑year comparison. MBDA’s net contribution fell by about EUR 20 million due to higher taxes in France, while remaining losses in TAS also weighed on the overall profitability of the Space segment.

Cash Seasonality and Working Capital Still Volatile

Management acknowledged that free operating cash flow remains heavily weighted to the fourth quarter, with working capital slightly negative overall in 2025. Efforts are underway to smooth revenue and cash patterns across the year, but investors should still expect quarter‑to‑quarter lumpiness in reported cash generation.

Forward Guidance and Outlook

Leonardo’s 2025 results exceeded all major guidance metrics, setting a higher base ahead of formal 2026 guidance to be presented in March. With a EUR 47 billion backlog, stronger margins, over EUR 1 billion in free cash flow, and a much lighter debt load, management outlined a roadmap focused on executing the Iveco and Aerostructures deals, scaling Cyber and Space, and continuing to improve returns.

The earnings call painted a picture of a company transitioning from balance sheet repair to active growth and portfolio reshaping. While Aerostructures and JV‑related headwinds remain watch points, the combination of rising orders, better margins, robust cash generation, and a richer dividend profile positions Leonardo as an increasingly compelling name for investors tracking European defense and aerospace stocks.