You should read this discussion together with our Consolidated Financial Statements and related notes thereto included elsewhere in this Quarterly Report. This discussion and other parts of this Quarterly Report include forward-looking statements such as those relating to our plans, objectives, expectations and beliefs, which involve risks, uncertainties and assumptions. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties discussed under “Special Note Regarding Forward-Looking Statements and Information” in this Quarterly Report and under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025. Actual results may differ materially from those contained in any forward-looking statements. Business Overview and Considerations General DRS is an innovative and agile provider of advanced defense technology to U.S. national security customers and allies around the world. We specialize in the design, development and manufacture of advanced sensing, network computing, force protection, and electric power and propulsion technologies and solutions. The strength of our market positioning in these technology areas has created a foundational and diverse base of programs across the DoW and its allies. We believe these technologies will not only support our customers in today’s mission but will also underpin their strategy to migrate towards more autonomous, dynamic, interconnected, and multi-domain capabilities needed to address evolving and emerging threats. We view more advanced capabilities in sensing, computing, self-protection and power as necessary to enable these strategic priorities. Our overall strategy is to be a balanced and diversified company, less vulnerable to any one budgetary platform or service decision with a specific focus on establishing strong technical and market positions in areas of priority for the DoW. The U.S. government, primarily with the DoW, is our largest customer and, for the six months ended June 30, 2026, accounted for approximately 82% of our business as an end-user, with revenues principally derived directly or indirectly from contracts with the U.S. Navy and U.S. Army, which represented 37% and 33%, respectively, of our total revenues for such period, which is consistent with historic trends. Our operations and reporting are structured into the following two technology-driven segments based on the capabilities and solutions offered to our customers: Advanced Sensing and Computing Our Advanced Sensing and Computing (“ASC”) segment designs, develops and manufactures sensing and network computing technology that enables real-time situational awareness required for enhanced operational decision making and execution by our customers across increasingly complex and contested operating environments. Our sensing capabilities span numerous applications, including missions requiring advanced detection, precision targeting and surveillance sensing, long range electro-optic/infrared (“EO/IR”), signals intelligence (“SIGINT”) and other intelligence systems, electronic warfare (“EW”), ground vehicle sensing, next generation active electronically scanned array tactical radars, dismounted soldier sensing and space sensing. Across our offerings, we are focused on advancing sensor range and enhancing the precision, clarity, definition, spectral depth and effectiveness of our sensors to deliver actionable information in time-sensitive mission scenarios in combination with artificial intelligence (“AI”), enabled by our advanced edge processing solutions. We also seek to leverage the knowledge and expertise built through our decades of experience to optimize size, weight, power and cost for our customers’ specific mission requirements and 19 to support integration onto a wide range of tactical platforms, including mobile and power-constrained systems. Our sensing capabilities are complemented by our rugged, trusted and cyber resilient network edge computing products that support data processing, fusion, and dissemination at the tactical edge. Our network computing offerings are utilized across a broad range of mission applications including platform computing on ground and shipboard (both surface ship and submarine) for advanced battle management, combat systems, radar, command and control, tactical networks, tactical computing and communications. These products help support the DoW’s need for greater situational understanding and faster decision-making at the tactical edge by leveraging AI and AI-optimized open architecture software, SAGEcore™, to rapidly share, synthesize and transmit data securely between command centers and forward-positioned defense assets and personnel, while supporting reduced latency, operational continuity, and interoperability through modular, open-system architectures. Within ASC, we are increasingly combining sensing, computing, and software to support applications such as counter-unmanned aircraft systems (“C-UAS”), electronic warfare, and networked sensing, where performance depends on the ability to detect, process, and act on data in real time. These integrated capabilities are designed to support evolving operational concepts that emphasize distributed operations, resilient communications, and decision advantage at the tactical edge. Integrated Mission Systems Our Integrated Mission Systems (“IMS”) segment designs, develops, manufactures and integrates power conversion, control and distribution systems, ship propulsion systems, motors and variable frequency drives, force protection systems, and transportation and logistics systems for the U.S. military and allied defense customers. DRS is a leading provider of next-generation electrical propulsion systems for the U.S. Navy. We provide power conversion, control, distribution and propulsion systems for the U.S. Navy’s top priority shipbuilding programs, including the Columbia Class ballistic missile submarine, the first modern U.S. electric drive submarine. We believe DRS is well positioned to meet the needs of an increasingly electrified and power-intensive fleet through high-efficiency, power-dense permanent magnet motors, energy storage systems, and associated rugged and compact power conversion, electrical actuation, and advanced thermal management technologies. These capabilities support higher onboard power demands, improved efficiency, and enhanced platform performance across next-generation naval systems. DRS has a long history of providing a number of other critical products to the U.S. Navy with a significant installed base on submarines, aircraft carriers and other surface ships including motor controllers, instrumentation and control equipment, electrical actuation systems, and thermal management systems for electronics and ship stores refrigeration. DRS is also an integrator of complex systems in ground vehicles for short-range air defense, C-UAS, and vehicle survivability and protection. Our short-range air defense systems integrate advanced active electronically scanned array radars, EW equipment, reconnaissance and surveillance systems, mission command capabilities, modular combat vehicle turrets, and stabilized sensor suites, as well as kinetic and directed energy countermeasures to protect against evolving threats. Our force protection systems, including solutions for C-UAS, help protect personnel and defense assets from enemy combatants. Focus on Customer and Execution DRS and its employees focus on our end-customers – the men and women of the armed forces in the U.S. and its allies. We seek to provide high-quality equipment and services to support their mission success. We strive for excellence in everything we do, in every job in our Company, in order to satisfy our customers’ needs embedded in our contractual commitments. We seek to ensure that we learn from 20 every lesson experienced in our Company and insist that these lessons affect all elements of our business. This approach permeates through the Company with a focus on continuous improvement at every level. Part of this learning has resulted in institutionalizing our continuous improvement process through our Business Excellence initiative called the Always Performing for Excellence (“APEX”) program. The APEX program’s goal is to strive for continuous improvement through unification of all of our business practices, tools and metrics, ongoing employee training and innovation. We believe that excellence is not a destination, but by constantly challenging ourselves to be better, we will improve, and ultimately approach excellence. We challenge ourselves to exceed our customers’ expectations and we partner with them to work to ensure that our execution meets their needs. Continuous improvement through the APEX program also allows us to improve our efficiency, which we believe contributes to increased margins, helps us to remain competitive and allows us to make strategic investments, all while maintaining our focus on customer satisfaction. In these elements, our goals are aligned with those of our customers. We are humbled by the dedication and sacrifice that our ultimate customers have made to serve and we work to perform for them with excellence in everything we do. We continue to align our investment strategy with the evolving priorities of the DoW, with a particular focus on increasing internal research and development to accelerate innovation in advanced sensing, networked systems, force protection and naval power & propulsion. In parallel, we are selectively investing in capacity, engineering resources and supply chain readiness to enhance our ability to deliver critical capabilities at the speed required by our service members. Global Events and Business Impacts Global Conflicts The U.S. and its allies continue to face a global security environment marked by heightened tensions and instability, including threats from state and non-state actors—particularly major powers—as well as terrorist organizations, and diverse regional security challenges and political instability. Demand for defense products, services, and solutions worldwide is driven by these complex and evolving security conditions, considered in the broader context of political and socioeconomic circumstances and priorities. These events, including periods of global unrest, can affect our operations and financial performance and influence demand for our products and services. The ongoing conflict in Ukraine, continued instability in parts of Latin America, and increasing risks across the Middle East and the Western Pacific have heightened global tensions and underscored evolving security requirements in Europe, the Middle East, Indo-Pacific, Latin America and within the U.S. In particular, the conflict involving Iran and associated regional escalation, including heightened maritime security risks and disruptions affecting commercial shipping and energy markets, has further amplified geopolitical uncertainty and the need for enhanced deterrence, integrated air and missile defense, cyber resilience, intelligence, surveillance, and reconnaissance, EW and secure communications. These developments have resulted in, and may continue to result in, increased demand for defense products and services. We believe the current global security environment continues to underscore the need for strong deterrence and robust defense capabilities. We are actively evaluating both opportunities and risks associated with these conditions. Business Environment Revenues derived directly, as a prime contractor, or indirectly, as a subcontractor, from contracts with the U.S. government represented 82% and 80% of our total revenues for the six months ended June 30, 2026 and 2025, respectively. Our U.S. government sales are highly concentrated within our DoW 21 customers, which made up the overwhelming majority of our U.S. government revenue for the periods presented and are principally derived directly or indirectly from contracts with the U.S. Navy and U.S. Army, which represented 37% and 33%, respectively, of our total revenues for the six months ended June 30, 2026. Therefore, our revenue is highly correlated to changes in U.S. government spending levels, especially within the DoW. The DoW budget is the largest defense budget in the world. Given the reliance on the U.S. government, funding for our programs is subject to a variety of factors that can affect our business, including: the President’s budget requests and procurement priorities and policies; the annual congressional budget authorization and appropriations process; and other U.S. government domestic and international priorities. U.S. government spending levels, particularly defense spending and the timing of funding, can affect our financial performance over the short and long term. Fiscal year (“FY”) 2026 defense funding has been enacted through a combination of authorizations and full-year appropriations. The President’s FY2026 budget request (June 2025) proposed $848 billion in base (discretionary) funding and $113 billion in reconciliation (mandatory) funding. The One Big Beautiful Bill Act, signed July 4, 2025, provided more than $150 billion in mandatory national defense funding (including the $113 billion reconciliation amount) available through September 30, 2029. The FY2026 National Defense Authorization Act (“NDAA”) was signed on December 18, 2025, authorizing approximately $901 billion for defense. Following a continuing resolution signed November 12, 2025 (through January 30, 2026), Congress completed full-year FY2026 appropriations via the Consolidated Appropriations Act, 2026 (signed February 3, 2026), which included the Department of Defense Appropriations Act and provided approximately $839 billion for the DoW. Together, these actions established the FY2026 budget baseline and related multi-year mandatory resources supporting national defense priorities. For FY2027, the Administration released topline details of the President’s budget request on April 3, 2026, proposing a significantly higher level of national defense resources, including approximately $1.15 trillion in base (discretionary) funding for the national defense function and an additional $350 billion in proposed reconciliation (mandatory) funding, subject to congressional action. The FY2027 budget is proceeding through the standard congressional authorization and appropriations process, though progress has been uneven and the outcome remains uncertain. Congress is not expected to complete all FY2027 appropriations before the fiscal year begins on October 1, 2026, making one or more continuing resolutions likely and leaving some risk of a government shutdown. The timing and outcome of FY2027 enactment will continue to depend on congressional negotiations, including the resolution of topline disputes and the potential use of continuing resolutions. Operating Performance Assessment and Reporting For the majority of our contracts, revenues are recognized using the over time, percentage of completion cost-to-cost method of accounting, with revenue recognized based on the ratio of cumulative costs incurred to date to estimated total contract costs at completion. For contracts accounted for in this way, our reported revenues may contain amounts which we have not billed to customers if we have incurred costs, and recognized related profits, in excess of billed progress or performance-based payments. Under U.S. GAAP, contract costs are charged to work in progress inventory and are expensed as revenues are recognized. The Federal Acquisition Regulation (“FAR”) and the Defense Federal Acquisition Regulation Supplement (“DFARS”), incorporated by reference in U.S. government contracts, provide that internal research and development costs are allowable general and administrative expenses. Unallowable costs, pursuant to the FAR, are excluded from costs accumulated on U.S. government contracts. Our defense contracts and subcontracts that require the submission of cost or pricing data are subject to audit, various profit and cost controls, and standard provisions for termination at the convenience of the customer. The Defense Contract Audit Agency (“DCAA”) performs these audits on 22 behalf of the U.S. government. The DCAA has the right to perform audits on our incurred costs on cost-type or price redeterminable-type contracts on a yearly basis. Approval of an incurred cost submission can take from one to three years from the date of the submission of the contract cost. U.S. government contracts are, by their terms, generally subject to termination by the U.S. government for either convenience or default by the contractor. Fixed-price contracts provide for payment upon termination for items delivered to and accepted by the U.S. government and, if the termination is for convenience, for payment of fair compensation of work performed plus the costs of settling and paying claims by terminated subcontractors, other settlement expenses and a reasonable profit on the costs incurred. Cost-plus contracts provide that, upon termination, the contractor is entitled to reimbursement of its allowable costs and, if the termination is for convenience, a total fee proportionate to the percentage of the work completed under the contract. If a contract termination is for default, however, the contractor is paid an amount agreed upon for completed and partially completed products and services accepted by the U.S. government. In these circumstances, the U.S. government is not liable for excess costs incurred by us in procuring undelivered items from another source. In addition to the right of the U.S. government to terminate U.S. government contracts, such contracts are conditioned upon the continuing availability of Congressional appropriations. Congress usually appropriates funds for a given program on a September 30 fiscal year basis, even though contract performance may take many years. Consequently, at the outset of a major program, the contract is typically only partially funded, and additional funds normally are committed to the contract by the procuring agency only as appropriations are made by Congress for future fiscal years. Components of Operations Revenue For the six months ended June 30, 2026, 86% of our revenue was derived from fixed-price contracts. This was consistent with the six months ended June 30, 2025. Under flexibly priced contracts, we are reimbursed for allowable or otherwise defined total costs (defined as cost of revenues plus allowable general and administrative expenses) incurred, plus a fee. The contracts may also include incentives for various performance criteria, including quality, timeliness, cost-effectiveness or other factors. For the six months ended June 30, 2026 and 2025, flexibly priced contracts represented 14% of our total revenues. Refer to Note 2: Revenue from Contracts with Customers to the Consolidated Financial Statements for additional information. Cost of Revenues Cost of revenues includes materials, labor and overhead costs incurred in the manufacturing, design, and provision of products and services sold in the period as well as warranty costs. Material costs include raw materials, purchased components and sub-assemblies and outside processing and inbound freight. Labor and overhead costs consist of direct and indirect manufacturing costs, including wages and fringe benefits, operating supplies, depreciation and amortization, occupancy costs, and purchasing, receiving, inspection costs, and inbound freight costs. General and Administrative Expenses General and administrative (“G&A”) expenses include G&A expenses not included within cost of revenues such as salaries, wages and fringe benefits, facility costs and other costs related to these indirect functions. Additionally, G&A expenses include company-funded independent research and development (“IR&D”) costs as well as expenditures related to bid and proposal (“B&P”) efforts. 23 Results of Operations The following discussion of operating results is intended to help the reader understand the results of operations and financial condition of the Company for the three and six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025. Given the nature of our business, we believe revenue and operating earnings are most relevant to an understanding of our performance at an enterprise and segment level. Our operating cycle is longer term in nature and involves various types of production contracts and varying delivery schedules. Accordingly, operating results in a particular period may not be indicative of future operating results. 24 Three Months Ended June 30, Change (Dollars in millions, except per share amounts) 2026 2025 $ % Total revenues $ 913 $ 829 $ 84 10.1 % Total cost of revenues (676) (632) (44) 7.0 % Gross profit $ 237 $ 197 $ 40 20.3 % Gross margin 26.0 % 23.8 % 220 bps 9.2 % General and administrative expenses (129) (121) (8) 6.6 % Amortization of acquired intangible assets (6) (6) — — % Operating earnings $ 102 $ 70 $ 32 45.7 % Interest income (expense), net 2 (2) 4 200.0 % Other, net (4) (1) (3) 300.0 % Earnings before taxes $ 100 $ 67 $ 33 49.3 % Income tax provision (14) (13) (1) 7.7 % Net earnings $ 86 $ 54 $ 32 59.3 % Basic EPS $ 0.33 $ 0.20 $ 0.13 65.0 % Diluted EPS $ 0.32 $ 0.20 $ 0.12 60.0 % Backlog $ 8,787 $ 8,366 $ 421 5.0 % Bookings $ 1,085 $ 853 $ 232 27.2 % Six Months Ended June 30, Change (Dollars in millions, except per share amounts) 2026 2025 $ % Total revenues $ 1,759 $ 1,628 $ 131 8.0 % Total cost of revenues (1,310) (1,250) (60) 4.8 % Gross profit $ 449 $ 378 $ 71 18.8 % Gross margin 25.5 % 23.2 % 230 bps General and administrative expenses (259) (238) (21) 8.8 % Amortization of acquired intangible assets (11) (11) — — % Operating earnings $ 179 $ 129 $ 50 38.8 % Interest income (expense), net 2 (3) 5 166.7 % Other, net (4) (1) (3) 300.0 % Earnings before taxes $ 177 $ 125 $ 52 41.6 % Income tax provision (29) (21) (8) 38.1 % Net earnings $ 148 $ 104 $ 44 42.3 % Basic EPS $ 0.56 $ 0.39 $ 0.17 43.6 % Diluted EPS $ 0.55 $ 0.39 $ 0.16 41.0 % Backlog $ 8,787 $ 8,366 $ 421 5.0 % Bookings $ 1,970 $ 1,844 $ 126 6.8 % Revenue Our revenue generation of $913 million for the three months ended June 30, 2026 represents an increase of $84 million, or 10.1%, as compared to the three months ended June 30, 2025. The revenue increase is primarily attributed to the conversion of our funded backlog along with higher demand across each of our operating segments. This is highlighted by increased output within our electric power and propulsion and force protection program activities. 25 Our revenue generation of $1,759 million for the six months ended June 30, 2026 represents an increase of $131 million, or 8.0%, as compared to the six months ended June 30, 2025. The revenue increase is primarily attributed to conversion of our funded backlog along with higher demand across each of our operating segments. This is highlighted by our efforts within advanced sensing, electric power and propulsion and force protection activities. See “—Review of Operating Segments” below for more detail. Cost of Revenues Cost of revenues increased by $44 million, or 7.0%, to $676 million for the three months ended June 30, 2026, as compared to $632 million for the three months ended June 30, 2025. The cost of revenues increase was due to the increased revenue contribution realized during the period. This increase was offset in part by improved program performance and favorable program mix across both of our operating segments. Cost of revenues increased by $60 million, or 4.8%, to $1,310 million for the six months ended June 30, 2026, as compared to $1,250 million for the six months ended June 30, 2025. The cost of revenues increase was due to the increased revenue contribution realized during the period. This increase was offset in part by improved program performance and favorable program mix across both of our operating segments. Gross Profit Gross profit increased by $40 million, or 20.3%, to $237 million for the three months ended June 30, 2026 and increased by $71 million, or 18.8%, to $449 million for the six months ended June 30, 2026, as compared to the same periods in the prior year, resulting from the revenue and cost of revenues trends noted above. The gross profit increases, favorable mix and overall program performance drove an expansion of 220 basis points and 230 basis points in our gross margin for the three and six months ended June 30, 2026, respectively. General and Administrative Expenses G&A expenses increased by $8 million, or 6.6%, for the three months ended June 30, 2026, as compared to the three months ended June 30, 2025, primarily due to increased IR&D expenditures and costs related to bid and proposal efforts for new contractual pursuits. G&A expenses increased by $21 million, or 8.8%, for the six months ended June 30, 2026, as compared to the six months ended June 30, 2025, primarily due to increased IR&D expenditures and costs related to bid and proposal efforts for new contractual pursuits. Amortization of Acquired Intangible Assets Amortization of acquired intangible assets was consistent for the three and six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025. Operating Earnings Operating earnings increased by $32 million to $102 million for the three months ended June 30, 2026 and increased by $50 million to $179 million for the six months ended June 30, 2026, as compared to the same periods in the prior year. The increases were driven by the higher gross profit offset in part by the G&A expense increases both noted above. Interest Income (Expense), Net Net interest income was $2 million for the three and six months ended June 30, 2026, compared to net interest expense of $2 million and $3 million for the three and six months ended June 30, 2025, respectively. The change is attributed to increased interest income as a result of higher cash balances 26 and reduced interest expense with the repayment and termination of the 2022 Term Loan A in January 2026. Other, Net Other, net increased $3 million for the three and six months ended June 30, 2026, as compared to the same periods in the prior year primarily due to foreign exchange rate impacts. Earnings Before Taxes Earnings before taxes increased by $33 million to $100 million for the three months ended June 30, 2026 and increased by $52 million to $177 million for the six months ended June 30, 2026, as compared to the same periods in the prior year. This was primarily due to the increase in operating earnings and change in net interest income (expense) as noted above. Income Tax Provision Income tax provision increased by $1 million and $8 million for the three and six months ended June 30, 2026, respectively, as compared to the same periods in the prior year. This was primarily attributable to an increase in earnings before taxes and changes in our effective tax rate for the period. For the three month period ended June 30, 2026, the income tax provision increase was largely offset by a reduction in our overall effective tax rate for the period. For the six month period ended June 30, 2026 our effective tax rate was largely in line with prior year levels. Our effective tax rate was 14.0% and 16.4% for the three and six months ended June 30, 2026, respectively, compared to 19.4% and 16.8% for the three and six months ended June 30, 2025, respectively. Net Earnings Net earnings increased by $32 million to $86 million for the three months ended June 30, 2026 and increased by $44 million to $148 million for the six months ended June 30, 2026, as compared to the same periods in the prior year. This was driven by an increase in earnings before taxes coupled with the changes in our effective tax rate as noted above. Backlog and Bookings Total backlog includes the following components: (1)Funded - Funded backlog represents the revenue value of orders for products and services under existing contracts for which funding is appropriated or otherwise authorized less revenue previously recognized on these contracts. (2)Unfunded - Unfunded backlog represents the revenue value of firm orders for products and services under existing contracts for which funding has not yet been appropriated less funding previously recognized on these contracts. The following table summarizes the value of our backlog, incorporating both funded and unfunded components: (Dollars in millions) June 30, 2026 June 30, 2025 Funded $ 5,092 $ 4,355 Unfunded 3,695 4,011 Total backlog $ 8,787 $ 8,366 27 Backlog increased by $421 million to $8,787 million as of June 30, 2026, from $8,366 million as of June 30, 2025. The backlog increase was driven primarily by the receipt of new awards within our IMS segment which realized bookings in excess of revenue for the period. We define bookings as the total value of contract awards received from the U.S. government for which it has appropriated funds and legally obligated such funds to the Company through a contract or purchase order, plus the funded value of contract awards and orders received from customers other than the U.S. government. Bookings for the three months ended June 30, 2026 increased to $1,085 million, as compared to $853 million for the three months ended June 30, 2025. Bookings for the six months ended June 30, 2026 increased to $1,970 million, as compared to $1,844 million for the six months ended June 30, 2025. The increase in new orders for the six months ended June 30, 2026 was driven within our IMS segment and offset in part by a reduction in new orders within our ASC segment. See “—Review of Operating Segments” below for more detail. Factors Impacting Our Performance U.S. Government Spending and Federal Budget Uncertainty Changes in the volume and relative mix of U.S. and allied government spending as well as areas of spending growth, including due to the evolution of warfare, could impact our business and results of operations. In particular, our results can be affected by shifts in strategies and priorities on homeland security, intelligence, defense-related programs, infrastructure and urbanization and continued increased spending on technology and innovation, including cybersecurity with respect to our and third parties’ information networks and related systems, AI, connected communities and physical infrastructure (for example, the potential impacts of the Russia / Ukraine conflict and conflicts involving the Middle East region, including Israel). Cost-cutting and efficiency initiatives, increasing nationalization efforts, current and future budget restrictions, spending cuts and other efforts to reduce government spending and shifts in overall priorities could cause our government customers to reduce or delay funding or invest appropriated funds on a less consistent basis or not at all, and demand for our solutions or services could diminish. Existing contracts could also be canceled due to changes in need and prioritization. Furthermore, any disruption in the functioning of government agencies, including as a result of government closures and shutdowns, could have a negative impact on our operations and cause us to lose revenue or incur additional costs due to, among other things, our inability to maintain access and schedules for government testing or deploy our staff to customer locations or facilities as a result of such disruptions. There is also uncertainty around the timing, extent, nature and effect of Congressional and other U.S. government actions to address budgetary constraints, caps on certain discretionary budgets, and the ability of Congress to determine how to allocate the available budget authority and pass appropriations bills to fund U.S. government departments and agencies. Additionally, budget deficits and the growing U.S. national debt may increase pressure on the U.S. government to reduce federal spending across all federal agencies, with uncertainty about the size and timing of those reductions. Furthermore, delays in the completion of future U.S. government budgets could in the future delay procurement of the federal government services we provide. A reduction in the amount of, or reductions, delays, or cancellations of funding for, services that we are contracted to provide to the U.S. government as a result of any of these impacts or related initiatives, legislation or otherwise could have a material adverse effect on our business and results of operations. See Part I, Item 1A, “Risk Factors—Risks Related to Our Business—Significant delays or reductions in appropriations for our programs and changes in U.S. government priorities and spending levels more broadly may negatively impact our business and could have a material adverse impact on our business, financial condition and results of operations” and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Overview and Considerations—Business Environment” in our Annual Report on Form 10-K for the year ended December 31, 2025, and Part I, Item 2, “Management’s Discussion and Analysis of Financial 28 Condition and Results of Operations—Business Overview and Considerations—Business Environment” in this Quarterly Report for further details on U.S. government spending’s impact on our business. Operational Performance on Contracts The Company recognizes revenue for each separately identifiable performance obligation in a contract representing an obligation to transfer a distinct good or service to a customer. In most cases, goods and services provided under the Company’s contracts are accounted for as single performance obligations due to the complex and integrated nature of our products and services. These contracts generally require significant integration of a group of goods and/or services to deliver a combined output. In some contracts, the Company provides multiple distinct goods or services to a customer. In those cases, the Company accounts for the distinct contract deliverables as separate performance obligations and allocates the transaction price to each performance obligation based on its relative standalone selling price, which is generally estimated using cost plus a reasonable margin. While the Company provides warranties on certain contracts, we typically do not provide for services beyond standard assurances and therefore do not consider warranties to be separate performance obligations. Typically, we enter into three types of contracts: fixed-price contracts, cost-plus contracts and time-and-materials (“T&M”) contracts. The majority of our total revenues are derived from fixed-price contracts; refer to the revenue disaggregation disclosures in Note 2: Revenue from Contracts with Customers to the Consolidated Financial Statements. For fixed-price contracts, customers agree to pay a fixed amount, negotiated in advance for a specified scope of work. For cost-plus contracts, typically we are reimbursed for allowable or otherwise defined total costs (defined as cost of revenues plus allowable general and administrative expenses) incurred, plus a fee. The contracts may also include incentives for various performance criteria, including quality, timeliness and cost-effectiveness. In addition, costs are generally subject to review by clients and regulatory audit agencies, and such reviews could result in costs being disputed as non-reimbursable under the terms of the contract. T&M contracts provide for reimbursement of labor hours expended at a contractual fixed labor rate per hour, plus the actual costs of material and other direct non-labor costs. The fixed labor rates on T&M contracts include amounts for the cost of direct labor, indirect contract costs and profit. Revenue from contracts with customers is recognized when the performance obligations are satisfied through the transfer of control over the good or service to the customer, which may occur either over time or at a point in time. Revenues for the majority of our contracts are measured using the over time, percentage of completion cost-to-cost method of accounting to calculate percentage of completion. We believe this is an appropriate measure of progress toward satisfaction of performance obligations as this measure most accurately depicts the progress of our work and transfer of control to our customers. Due to the long-term nature of many of our contracts, developing the estimated transaction price and total cost at completion often requires judgment. The estimated transaction price may include variable consideration such as performance incentives, requests for equitable adjustment (“REAs”) and claims. Variable consideration is included in the estimated transaction price only to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Factors that must be considered in estimating the cost of the work to be completed include the nature and complexity of the work to be performed, subcontractor performance and the risk and impact of delayed performance. After establishing the estimated total cost at completion, we follow a standard Estimate at Completion (“EAC”) process in which we review the progress and performance on our ongoing contracts. The 29 following represents the net impact that changes in our estimates, particularly those regarding our fixed-price programs, have had on our revenues for the periods presented: Three Months Ended June 30, Six Months Ended June 30, (Dollars in millions) 2026 2025 2026 2025 Revenue $ 21 $ — $ 25 $ (9) Total % of revenue 2 % — % 1 % (1) % Additionally, the timing of our cash flows is impacted by the timing of achievement of billable milestones on contracts. Historically, this has resulted and could continue to result in fluctuations in working capital levels and quarterly cash provided by (used in) operating activities results. As a result of such quarterly fluctuations in cash flow results, we believe that quarter-to-quarter comparisons of our results of operations may not necessarily be meaningful and should not be relied upon as indicators of future performance. Regulations Increased audit, review, investigation and general scrutiny by U.S. government agencies of performance under government contracts and compliance with the terms of those contracts and applicable laws, including executive orders, could affect our operating results. Negative publicity and increased scrutiny of government contractors in general, including us, relating to government expenditures for contractor services and incidents involving the mishandling of sensitive or classified information as well as the increasingly complex requirements of the DoW and the U.S. intelligence community, including those related to cybersecurity, could impact our ability to perform in the markets we serve. International Sales International revenue, including foreign military sales, foreign military financing, and direct commercial sales, accounted for approximately 12% and 8% of our revenue for the six months ended June 30, 2026 and 2025, respectively. The increase in international sales is due in part to the global demand for our tactical radars used in counter drone and short-range air defense applications. We remain subject to the spending levels, pace and priorities of the U.S. government as well as international governments and commercial customers, and to general economic conditions that could adversely affect us, our customers and our suppliers. Additionally, some international sales may expose us to foreign exchange fluctuations and changing dynamics of foreign competitiveness based on variations in the value of the U.S. dollar relative to other currencies. The impact of those fluctuations is reflected throughout our Consolidated Financial Statements, but in the aggregate, did not have a material impact on our results of operations for the six months ended June 30, 2026. Acquisitions We consider the acquisition of businesses and investments that we believe will expand or complement our current portfolio and allow access to new customers or technologies. We also may explore the divestiture of businesses that no longer meet our needs or strategy or that could perform better outside of our organization. Review of Operating Segments The following is a discussion of operating results for each of our operating segments. We have elected to use revenue, operating earnings, operating margin, and bookings to provide detailed 30 information on our segment performance. Additional information regarding our segments can be found in Note 14: Segment Information to the Consolidated Financial Statements. Three Months Ended June 30, Change (Dollars in millions) 2026 2025 $ % Revenues: ASC $ 587 $ 542 $ 45 8.3 % IMS 333 290 43 14.8 % Corporate & Eliminations (7) (3) (4) 133.3 % Total revenues $ 913 $ 829 $ 84 10.1 % Operating earnings: ASC $ 49 $ 37 $ 12 32.4 % IMS 53 33 20 60.6 % Total operating earnings $ 102 $ 70 $ 32 45.7 % Operating margin: ASC 8.3 % 6.8 % IMS 15.9 % 11.4 % Bookings: ASC $ 691 $ 559 $ 132 23.6 % IMS 394 294 100 34.0 % Total bookings $ 1,085 $ 853 $ 232 27.2 % Six Months Ended June 30, Change (Dollars in millions) 2026 2025 $ % Revenues: ASC $ 1,146 $ 1,053 $ 93 8.8 % IMS 628 581 47 8.1 % Corporate & Eliminations (15) (6) (9) 150.0 % Total revenues $ 1,759 $ 1,628 $ 131 8.0 % Operating earnings: ASC $ 89 $ 62 $ 27 43.5 % IMS 90 67 23 34.3 % Total operating earnings $ 179 $ 129 $ 50 38.8 % Operating margin: ASC 7.8 % 5.9 % IMS 14.3 % 11.5 % Bookings: ASC $ 1,120 $ 1,228 $ (108) (8.8) % IMS 850 616 234 38.0 % Total bookings $ 1,970 $ 1,844 $ 126 6.8 % ASC Revenue The ASC segment reported revenue of $587 million for the three months ended June 30, 2026, an increase of 8.3%, or $45 million, from the three months ended June 30, 2025. The revenue increase is attributed to our advanced sensing and tactical radars used in space based, force protection and counter 31 drone applications, reflecting execution of our backlog programs coupled with increased customer demand driven by the elevated global threat environment. The ASC segment reported revenue of $1,146 million for the six months ended June 30, 2026, an increase of 8.8%, or $93 million, from the six months ended June 30, 2025. The revenue increase is attributed to our advanced sensing and tactical radars used in space based, force protection and counter drone applications, reflecting execution of our backlog programs coupled with increased customer demand driven by the elevated global threat environment. Operating Earnings and Operating Margin For the three months ended June 30, 2026, operating earnings increased by $12 million, or 32.4%, to $49 million for the three months ended June 30, 2026, from $37 million for the three months ended June 30, 2025. The increase was driven by increased revenue contribution, favorable program mix and better program execution. The net of these impacts drove operating margin to 8.3% for the three months ended June 30, 2026, compared to the 6.8% realized during the three months ended June 30, 2025. For the six months ended June 30, 2026, operating earnings increased by $27 million, or 43.5%, to $89 million for the six months ended June 30, 2026, from $62 million for the six months ended June 30, 2025. The increase was driven by increased revenue contribution, favorable program mix and better program execution. The net of these impacts drove operating margin to 7.8% for the six months ended June 30, 2026, compared to the 5.9% realized during the six months ended June 30, 2025. Bookings For the three months ended June 30, 2026, bookings increased $132 million, or 23.6%, from the three months ended June 30, 2025 to $691 million. The increase in new awards is largely attributed to increased orders for our tactical radar and infrared sensing programs. This was offset in part by a reduction in naval computing awards realized during the period. For the six months ended June 30, 2026, bookings decreased $108 million, or 8.8%, from the six months ended June 30, 2025 to $1,120 million. The decrease in new awards is largely attributed to a large multi-year award received in the prior year for next generation ground vehicle sensing. This reduction was offset in part by demand for our tactical radar sensor programs. IMS Revenue IMS segment revenue increased by $43 million, or 14.8%, to $333 million for the three months ended June 30, 2026, from $290 million for the three months ended June 30, 2025, which is attributed to increased revenue generated from our naval power and force protection related programs during the period. IMS segment revenue increased by $47 million, or 8.1%, to $628 million for the six months ended June 30, 2026, from $581 million for the six months ended June 30, 2025, which is attributed to increased revenue generated from our naval power programs. Operating Earnings and Operating Margin For the three months ended June 30, 2026, operating earnings increased by $20 million, or 60.6%, to $53 million for the three months ended June 30, 2026, from $33 million for the three months ended June 30, 2025. The increase for the period is attributed to continued program improvement within both land and naval programs coupled with the benefits of operational leverage generated from the increased volume noted above, resulting in a net operating margin increase to 15.9%, compared to the 11.4% realized during the three months ended June 30, 2025. 32 For the six months ended June 30, 2026, operating earnings increased by $23 million, or 34.3%, to $90 million for the six months ended June 30, 2026, from $67 million for the six months ended June 30, 2025. The increase for the period is attributed to improved performance on both land and naval programs coupled with the benefits of operational leverage generated from the increased volume noted above, resulting in a net operating margin increase to 14.3%, compared to the 11.5% realized during the six months ended June 30, 2025. Bookings For the three months ended June 30, 2026, bookings increased by $100 million, or 34.0%, from the three months ended June 30, 2025 to $394 million. The increase for the three months ended June 30, 2026 is largely attributed to increased demand for our force protection efforts as well as funding received for our naval power and propulsion efforts. For the six months ended June 30, 2026, bookings increased by $234 million, or 38.0%, from the six months ended June 30, 2025 to $850 million. The increase for the six months ended June 30, 2026 is largely attributed to funding received for our naval power and propulsion efforts as well as increased demand for our force protection efforts. Liquidity and Capital Resources We endeavor to ensure the most efficient conversion of operating earnings into cash for deployment in our business and to maximize stockholder value through cash deployment activities. In addition to our cash position, we use various financial measures to assist in capital deployment decision-making, including cash provided by (used in) operating activities. We believe that the combination of our existing cash, access to credit facilities as described in Note 10: Debt to the Consolidated Financial Statements, and future cash that we expect to generate from our operations will be sufficient to meet our short and long-term liquidity needs. There can be no assurance, however, that our business will continue to generate cash flow at current levels or that anticipated operational improvements will be achieved. We may also pursue acquisitions or other strategic priorities that will require additional liquidity beyond the liquidity we generate through our operations. Our cash balance as of June 30, 2026, was $270 million compared to $647 million as of December 31, 2025. The following table summarizes our cash flows for the periods presented: Six Months Ended June 30, (Dollars in millions) 2026 2025 Net cash used in operating activities $ (31) $ (166) Net cash used in investing activities (58) (60) Net cash used in financing activities (288) (94) Effect of exchange rate changes on cash and cash equivalents — — Net decrease in cash and cash equivalents $ (377) $ (320) Operating Activities Cash usage related to operating activities decreased by $135 million to $31 million for the six months ended June 30, 2026, from $166 million for the six months ended June 30, 2025. This was primarily due 33 to increased earnings and lower cash used to fund working capital for the six months ended June 30, 2026 when compared to the six months ended June 30, 2025. Investing Activities Net cash used in investing activities decreased by $2 million for the six months ended June 30, 2026 when compared to the six months ended June 30, 2025, primarily due to slightly lower capital expenditures. Financing Activities Net cash used in financing activities for the six months ended June 30, 2026 was $288 million, compared to $94 million for the six months ended June 30, 2025. The change was primarily due to the repayment and termination of the 2022 Term Loan A in January 2026. Critical Accounting Policies and Estimates There have been no material changes to our critical accounting policies and estimates from those discussed in our Annual Report on Form 10-K for the year ended December 31, 2025.