Mercury Systems Q2 Earnings Beat Estimates, Revenues Rise Y/Y

Mercury Systems MRCY reported adjusted earnings of 16 cents per share for the second quarter of fiscal 2026, which beat the Zacks Consensus Estimate by 128.6%. The bottom line increased significantly year over year from 7 cents per share in the prior year quarter.

In the fiscal second quarter, MRCY reported revenues of $232.87 million, reflecting a 4.4% year-over-year increase and surpassing the Zacks Consensus Estimate by 12.29%.

Mercury Systems Inc Price, Consensus and EPS Surprise

Mercury Systems Inc price-consensus-eps-surprise-chart | Mercury Systems Inc Quote

MRCY's Q2 Details

Total bookings for the second quarter of fiscal 2026 were $288 million, yielding a book-to-bill ratio of 1.23 for the quarter. As a defense technology company focused on mission-critical processing systems, Mercury Systems operates primarily as a single-segment business serving aerospace and defense markets.

MRCY achieved a record backlog of $1.5 billion, up 8.8% year over year.

MRCY's Q2 Operating Details

Second-quarter fiscal 2026 adjusted EBITDA was $30 million compared to $22 million for the second quarter of fiscal 2025, representing a 36.3% year-over-year increase. The adjusted EBITDA margin was 12.9%, representing an improvement year over year. GAAP net loss and diluted loss per share for the second quarter of fiscal 2026 were $15.1 million and 26 cents, respectively, compared to GAAP net loss and loss per share of $17.6 million and 30 cents, respectively, for the second quarter of fiscal 2025.

Balance Sheet & Cash Flow

As of Dec. 26, 2025, cash and cash equivalents totaled $335 million, which increased from $304.7 million as of Sept. 26, 2025. Long-term debt was $591.5 million, unchanged from the prior quarter. In the reported quarter, cash flow from operations was $51.6 million compared with $2.2 million in the prior quarter. In the second quarter of fiscal 2026, free cash flow was $45.7 million compared to negative $4.4 million for the first quarter of fiscal 2026.

MRCY Maintains Fiscal 2026 Outlook

Mercury maintains its full-year fiscal 2026 outlook, expecting low single-digit annual revenue growth and adjusted EBITDA margin approaching mid-teens. The company continues to anticipate positive free cash flow for the year. The company expects fiscal third-quarter revenues to be down year over year, excluding any additional accelerations, followed by a ramp in the fiscal fourth quarter. Third quarter adjusted EBITDA margin is expected to approach double digits as the company converts low-margin backlog, while fourth quarter adjusted EBITDA margin is expected to be the highest of the fiscal year.

Zacks Rank & Stocks to Consider

MRCY currently carries a Zacks Rank #4 (Sell).

CAE CAE, Innovative Solution ISSC and Bae Systems BAESY are some better-ranked stocks that investors can consider in the broader Aerospace sector.

While Innovative Solution sports a Zacks Rank #1 (Strong Buy), CAE and Bae Systems carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

CAE and Innovation Solutions are set to report their upcoming results on Feb. 12. Bae Systems is slated to report its upcoming results on Feb. 18.

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This article originally published on Zacks Investment Research (zacks.com).

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