Tel Aviv: Israel Aerospace Industries (IAI) has delivered the best financial performance in its history, posting a 40% surge in net income for the first half of 2026 alongside a record-breaking order backlog that now stands at $35 billion – enough to sustain 4.7 years of operations at current sales volumes.
The state-owned defence giant reported net income of $449 million for H1 2026, up from $320 million in the same period last year. The momentum accelerated in the second quarter, with net income climbing 47% year-on-year to $229 million. Revenue for the half rose 32% to $4.275 billion, up from $3.228 billion, with growth spread across all of the company’s business groups, led by the Systems, Missiles & Space Group and the ELTA Group.
Profitability metrics improved across the board. EBITDA grew 39% to $650 million, representing 15% of sales, while operating income rose 53% to $483 million. Gross profit reached $806 million, holding steady at 19% of sales. The company’s Military Groups division was the primary engine of growth, with sales up 33% to $3.744 billion, while the Aviation Group also expanded, with sales rising to $872 million from $721 million.
Exports continued to make up the bulk of IAI’s business, accounting for 66% of H1 sales, or $2.813 billion, compared with $2.110 billion a year earlier. IAI also reported free cash flow of $4 billion, though operating cash flow for the half was more modest at $137 million, reflecting a sharp negative swing of $795 million in the second quarter alone, versus positive cash flow of $170 million in Q2 2025.
The order backlog rose from $29 billion at the end of 2025 to $35 billion by June 30, 2026, with 70% of that total destined for foreign customers across a broad range of geographies.
Boaz Levy, Chairman of IAI’s Board, attributed the results to sustained growth momentum and pointed to the reaffirmation of the company’s +AAA credit rating during the quarter as validation of its financial stability. He also highlighted the recent successful test of the Arrow air defence system, which he said underscores Israel’s ability to counter ballistic missile threats from Iran and its proxies. Levy noted that IAI’s long-planned initial public offering is “closer than ever,” framing it as an opportunity for Israeli citizens to invest directly in the company’s success while supporting national security and the broader economy.
Guy Bar Lev, IAI’s Acting President and CEO, said the results reflect growing international confidence in Israeli defence technology and close coordination with Israel’s defence establishment and global partners. He said the company has increased R&D investment to address both current operational demands and emerging threats; while also working to safeguard supply chain continuity so customers retain access to its most advanced systems.
In-house R&D spending rose to $140 million in H1, up from $118 million a year earlier, while net tax expenses increased to $126 million from $92 million. As a wholly government-owned company, IAI pays Israel’s standard 23% corporate tax rate and does not qualify for investment incentives available to private firms – a status that would change once any stake in the company is sold to a non-government entity, a step tied to the planned IPO.
With record profitability, an expanding backlog, and rising exports, IAI’s latest results reinforce its position as one of the world’s leading defence contractors at a time of heightened global demand for advanced missile defence and aerospace technology.
