L3harris Technologies (LHX) Barclays 42nd Annual Industrial Select Conference summary

Budget and industry outlook

• 2025 is expected to be a year of significant change and volatility, with ongoing uncertainty in the defense budget process and positive trends for increased appropriations.

• Discussions include potential markups of $100–$155 billion for the 2025 defense budget, with expectations that final appropriations will exceed presidential requests as in prior years.

• Portfolio alignment has focused on divestitures and acquisitions to match evolving defense priorities, particularly around the president's 17 key areas.

• The company is confident in its positioning relative to these priorities and expects continued alignment with future warfare needs.

Operational efficiency and DOGE reform

• Cost reduction initiatives have removed $1.2 billion over two years, including workforce reductions and supply chain renegotiations, supporting industry-leading margins.

• DOGE reforms are seen as an opportunity to streamline DOD operations, reduce redundant procurement, and leverage data for better decision-making.

• Advocacy for industry involvement in Pentagon reform aims to ensure practical solutions and improved acquisition processes.

Technology partnerships and business model evolution

• Strategic partnerships, notably with Palantir, are driving AI and software integration, with several joint bids expected to impact 2025 and 2026 revenues.

• Internal use of Palantir's Foundry platform has enabled significant cost savings and data-driven decision-making.

• The business model increasingly emphasizes commercial practices, software, and high-margin, low-capital solutions over traditional defense contracting.