Earnings call transcript: Mercury Systems posts Q4 2026 revenue beat, shares sink

Mercury Systems reported a record $289.8 million in fourth-quarter fiscal 2026 revenue, surpassing Wall Street estimates, but adjusted earnings of $0.37 per share fell short of expectations. Despite strong bookings and backlog, the stock fell significantly, down 7.4% in regular trading and another 10.6% after hours. Investors were concerned about margin pressure and the earnings miss.

The company delivered a strong finish to fiscal 2026 with record revenue, bookings, and the largest backlog in its history, driven by demand across its defense electronics portfolio. Domestic revenue, representing 85.8% of sales, grew 13% organically, while international sales declined about 15% due to the shift of manufacturing to a contract manufacturer.

For the full year, revenue reached a record $984 million, up 7.9% organically. Adjusted EPS rose to $1.06, showing progress in profitability despite a quarterly shortfall. The mixed results suggest investors weighed a modest profit miss against solid revenue growth. The company expects revenue to reach nearly $1.1 billion in fiscal 2027 and maintain a high single-digit organic growth rate, with a target adjusted EBITDA margin in the low to mid-20s and free cash flow conversion at 50%.

Management remains focused on improving margins and converting lower-margin backlog into stronger profitability.