BAE Systems reported a £2.16 billion year-over-year swing in free cash flow during the first half of 2026, moving from a £368 million outflow in the prior-year period to a £1.79 billion inflow.
The defense and aerospace company attributed the exceptionally strong cash performance to a high level of customer advances. BAE Systems received no material customer advances during the comparable period of 2025, meaning payment timing contributed significantly to the year-over-year improvement.
Net cash flow from operating activities increased by approximately £2.17 billion to £2.24 billion, compared with £74 million in the first half of 2025. This result also included movements in customer advances and the timing of other working-capital requirements.
The cash-flow performance prompted BAE Systems to raise its full-year 2026 free cash flow target from more than £1.3 billion to more than £2 billion. The company also increased its cumulative free cash flow target for 2024 through 2026 from more than £6 billion to more than £6.7 billion.
BAE Systems also reported broad-based operational growth during the period. Sales increased 9% to £15.77 billion, with all operating sectors contributing to the improvement. Underlying EBIT rose 11% to £1.70 billion, while underlying earnings per share increased 13% to 38.9 pence.
The company’s return on sales improved to 10.8% from 10.6%. Reported revenue increased 8% to £14.62 billion, and operating profit grew 13% to £1.50 billion. Reported basic earnings per share increased 6% to 34.1 pence, with higher finance costs and a higher effective tax rate limiting the increase relative to operating profit growth.
Order intake reached £16.4 billion, an increase of £3.2 billion from the previous year. BAE Systems ended June with a record order backlog of £84 billion, providing visibility across its long-term defense programs.
Major awards included a new £5.9 billion contract supporting the United Kingdom’s Dreadnought Class nuclear deterrent submarines and Global Combat Air Programme contracts with a combined value exceeding £5 billion.
The company also secured a $535 million award for M109A7 Paladin Self-Propelled Howitzer sets and contracts worth more than $200 million for ARCHER artillery systems and $180 million for TRIDON Mk2 anti-aircraft and counter-drone systems.
BAE Systems returned £933 million to shareholders through dividends and share repurchases during the first six months of 2026, representing a 10% increase from the prior-year period. Its board declared an interim dividend of 15 pence per share, up from 13.5 pence.
Along with the higher cash-flow target, BAE Systems raised its full-year guidance for sales, underlying EBIT and underlying earnings per share. The company now expects sales growth of 8% to 10%, underlying EBIT growth of 10% to 12% and underlying EPS growth of 11% to 13%.
KEY QUOTES:
“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.”
“Alongside our focus on meeting our customers’ needs today, we continue to invest in our business to accelerate innovation, drive efficiencies and boost capacity, so we can get mission-critical capabilities into the hands of those who need them faster.”
“The global threat picture remains highly volatile and governments are responding with sustained increases in their defence budgets. The combination of our proven execution, diverse geographic footprint and continued investment in our technology and facilities, alongside our healthy order backlog and growing opportunities across our markets, positions us to keep delivering long-term growth.”
Charles Woodburn, CEO of BAE Systems
