Record Shipbuilding Growth and Margin Expansion Highlight HII’s Third Quarter 2025 Performance
Revenue Surges 16.1%—Newport News and Ingalls Shipbuilding Drive Top-Line Strength
HII (NYSE:HII) delivered a standout third quarter in 2025, reporting record revenues of $3.19 billion, up 16.1% from a year ago. This growth was primarily fueled by robust results at both Newport News Shipbuilding and Ingalls Shipbuilding. Segment revenue increases were bolstered by higher volumes in submarines, aircraft carriers, and surface combatants.
New contract awards reached $2.0 billion for the quarter, boosting HII’s total backlog to a formidable $55.7 billion as of September 30, 2025. This backlog provides a significant runway for future revenue, reflecting continued strong demand in core military shipbuilding and emerging mission technologies.
Operating Margins Climb to Multi-Year Highs
Margin improvements were a key highlight this quarter. Operating income doubled to $161 million from $82 million in Q3 2024, with the operating margin rising to 5.0% from 3.0%. Segment operating margin hit 5.6%, up from 3.5%, demonstrating efficiency gains and stronger execution across core businesses.
| Metric | Q3 2025 | Q3 2024 | Change | % Change |
|---|---|---|---|---|
| Revenue ($M) | 3,192 | 2,749 | 443 | 16.1% |
| Operating Income ($M) | 161 | 82 | 79 | 96.3% |
| Operating Margin (%) | 5.0 | 3.0 | 2.0 pts | - |
| Net Earnings ($M) | 145 | 101 | 44 | 43.6% |
| Diluted EPS ($) | 3.68 | 2.56 | 1.12 | 43.8% |
Shipbuilding Segments Show Accelerating Profitability
Ingalls Shipbuilding: Revenues soared by 24.7% year-over-year to $828 million, driven by higher production of surface combatants. Segment operating margin climbed to 7.9%, up from 7.4% last year. The quarter included the completion of builder’s sea trials for the Ted Stevens (DDG 128) guided missile destroyer.
Newport News Shipbuilding: Revenue advanced 14.5% to $1.62 billion, with a major increase in operating margin to 4.9%—a significant jump from just 1.1% in Q3 2024. This was largely the result of overcoming prior-year contract adjustments in submarine and aircraft carrier programs. The business completed initial sea trials for the Virginia-Class Submarine Massachusetts (SSN 798) in early October.
| Segment | Q3 2025 Revenue ($M) | Q3 2024 Revenue ($M) | Operating Margin (Q3 2025) | Operating Margin (Q3 2024) |
|---|---|---|---|---|
| Ingalls Shipbuilding | 828 | 664 | 7.9% | 7.4% |
| Newport News Shipbuilding | 1,617 | 1,412 | 4.9% | 1.1% |
| Mission Technologies | 787 | 709 | 4.3% | 4.7% |
Mission Technologies Grows Revenue and Invests in AI-Driven Capabilities
Mission Technologies posted 11% revenue growth to $787 million in Q3, driven by expansion in cyber, C5ISR, and AI/ML-based solutions. While segment margin declined modestly to 4.3%, EBITDA margin held firm at 7.8%. Highlights included the unveiling of AI-enabled ROMULUS unmanned surface vessels, delivery of the 750th REMUS undersea vehicle to the German navy, and new investments in support of advanced Army and Navy programs.
Free Cash Flow Outlook Improves as Backlog Expands
Though Q3 free cash flow dropped to $16 million versus $136 million last year, management raised its full-year 2025 free cash flow guidance to $550–$650 million (up from $500–$600 million prior), reflecting expected contract timing and robust project pipelines. HII also targets cumulative free cash flow of $1.2 billion for 2025–2026, signaling healthy capital discipline.
| Metric | Prior FY25 Outlook | Current FY25 Outlook |
|---|---|---|
| Shipbuilding Revenue ($B) | 8.9 - 9.1 | 9.0 - 9.1 |
| Shipbuilding Operating Margin (%) | 5.5 - 6.5 | 5.5 - 6.5 |
| Mission Technologies Revenue ($B) | 2.9 - 3.1 | 3.0 - 3.1 |
| Mission Technologies Segment Margin (%) | 4.0 - 4.5 | ~4.5 |
| Free Cash Flow ($M) | 500 - 600 | 550 - 650 |
Key Takeaways: Momentum and Operational Focus Continue
HII’s strong third-quarter results underscore its leadership in shipbuilding and advancing mission-critical defense solutions. As operational investments take effect and high-value contracts build backlog, the company looks positioned for continued growth in revenue and margins through the end of the fiscal year and beyond. Investors and industry watchers should monitor further contract awards and innovation updates—especially as the Mission Technologies segment pushes deeper into AI-enabled defense systems and next-generation maritime capabilities.
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