BAE Systems Plc (LSE:BA.) upgraded its full-year guidance for sales, underlying EBIT and underlying earnings per share after reporting first-half 2026 results that exceeded analyst expectations. The defence group also increased its free cash flow outlook following strong operational performance across its business.
The company delivered first-half sales of £15.77 billion on a constant-currency basis, up 9% from a year earlier and ahead of the analyst consensus estimate of £15.61 billion. The result was close to the upper end of the forecast range of £15.41 billion to £15.79 billion.
Earnings and Cash Flow Beat Market Expectations
Underlying EBIT increased 11% to £1.70 billion, exceeding the analyst average forecast of £1.66 billion and nearing the top end of the expected range. The improvement lifted the group’s return on sales to 10.8%, compared with 10.6% in the first half of 2025.
Underlying earnings per share rose 13% to 38.9 pence, outperforming the analyst consensus estimate of 37.3 pence and finishing just below the highest forecast within the expected range.
One of the strongest highlights of the period was free cash flow. BAE Systems generated a free cash inflow of £1.79 billion during the first half, significantly outperforming analyst expectations for a £38 million outflow. The result was driven by strong customer advance payments and marked a sharp improvement from the £368 million outflow recorded in the same period last year.
Higher Guidance Reflects Strong Momentum
Following the stronger-than-expected first-half performance, BAE Systems raised its guidance for full-year sales, underlying EBIT and underlying earnings per share.
The company also increased its forecast for full-year free cash flow to more than £2 billion and lifted its cumulative free cash flow target for the 2024–2026 period to more than £6.7 billion.
Management said the upgraded outlook reflects continued operational strength across the business and confidence in the group’s execution.
Order Book Reaches Record Level
Order intake totalled £16.4 billion during the first half, leaving BAE Systems with a record order backlog. The increase was supported by a £2.5 billion contract covering training, support equipment and services for Türkiye’s recently ordered Eurofighter Typhoon aircraft.
“Across the business, our outstanding teams have delivered another strong period of operational and financial performance, which gives us the confidence to upgrade our full year guidance,” chief executive Charles Woodburn said in a stateent.
The company ended June with cash of £4.20 billion and net debt, excluding lease liabilities, of £3.17 billion. During the first half, BAE Systems returned £933 million to shareholders through dividends, compared with £849 million in the corresponding period of 2025.
The board declared an interim dividend of 15.0 pence per share, payable on December 2 to shareholders on the register as of October 23.
Under IFRS reporting standards, revenue increased 8% to £14.62 billion, operating profit rose 13% to £1.50 billion and basic earnings per share climbed 6% to 34.1 pence.
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