Elbit wants lasers to become the next chapter of its defense boom
CEO Bezhalel “Butzi” Machlis says the company is developing high-power laser systems for airborne platforms as Elbit accelerates production to convert unprecedented demand into revenue.
Elbit Systems is expanding its development of high-power laser and directed-energy systems as it seeks to broaden its portfolio beyond its traditional defense businesses, with President and CEO Bezhalel "Butzi" Machlis saying the company is seeing significant interest from countries around the world.
Elbit recently unveiled an airborne laser system under development for helicopters and fighter jets. Machlis said the company expects development of systems intended for deployment on combat helicopters to be completed "soon," although he declined to provide a specific timetable.
According to Machlis, the systems are attracting significant interest from multiple countries. The development of high-power lasers and other directed-energy technologies is part of Elbit's broader effort to expand its product portfolio as governments increase spending on defense systems.
The company's expansion is already being reflected in its manufacturing footprint. As demand and its order backlog continue to grow, Elbit is accelerating investments in production capacity at facilities in Israel and around the world through dozens of subsidiaries. Since the beginning of the year, the company has invested more than $157 million in expanding manufacturing capacity, twice the amount invested in the same period last year.
"The acceleration of investments in manufacturing infrastructure represents a methodical approach to expanding operations, improving productivity, increasing production capacity and strengthening our ability to deliver on a large scale," Machlis said. The investments, he added, are intended to enable the company to "convert its backlog of orders into revenue and sustainable growth."
Elbit ended the second quarter of 2026 with a record order backlog of $32 billion, up $8.2 billion from the corresponding quarter last year. The increase reflects continued demand for the company's defense systems in Israel and around the world.
Some 73% of Elbit's backlog is generated outside Israel, with Europe accounting for most of the increase during the quarter. According to Elbit, 42% of its current backlog is expected to be realized by the end of 2027, giving the company significant visibility into future revenue.
The record backlog came alongside strong quarterly results. Second-quarter revenue rose 16% from the corresponding quarter to approximately $2.3 billion, while net profit attributable to shareholders jumped 38% to $173.6 million.
Operating profit increased 39% to $218.8 million, while the operating margin improved to 9.6%, compared with 8% in the second quarter of 2025. Cash flow from operating activities reached $517.8 million in the first half of the year, compared with $304 million in the corresponding period.
Elbit has also added hundreds of employees since the beginning of the year as it expands its manufacturing capabilities.
Yet the strong results failed to convince investors. Elbit's shares, which were valued at NIS 121 billion ($40.3 billion) on the Tel Aviv Stock Exchange before Tuesday's trading session, fell 9.4% on Tuesday.
The sharp decline appears to reflect the exceptionally high expectations that had built up among investors ahead of the results, following the stock's steep rally in recent months.
"Although the results are good, they were mostly in line with market expectations, and it seems that some investors chose to take advantage of the publication of the reports to realize profits after the stock rose about 60% over the past year and more than 30% since the beginning of this year," said Ilya Feiner, an analyst at Leader Capital Markets.
Feiner said the market's reaction could prove too harsh. "The continued increase in the order backlog provides a high level of visibility for further growth in the company's results, while its growth engines support long-term expansion," he said. "From a broader perspective, the stock's reaction is consistent with the recent volatility across the defense sector, both in Israel and globally."
The war in Israel, which will enter its third year in less than two months, continues to be reflected in Elbit's business. Revenue in its land systems division jumped 32% in the quarter, driven by increased sales of various types of munitions to Israel's defense establishment, particularly tank and artillery shells.
Revenue generated in Israel reached $855 million, accounting for 37.4% of Elbit's total quarterly revenue, compared with 34% in the corresponding quarter last year.
The company's rapid expansion is also creating pressure on its balance sheet and cash needs. Machlis indicated that the Israeli Defense Ministry still owes Elbit billions of shekels, although he did not disclose the exact amount.
"This is a debt whose scope is not small and it is growing, and I hope that a solution will soon be found that will enable its repayment," he said.
It was recently reported that the Defense Ministry owes Israel's three largest defense companies, Israel Aerospace Industries, Rafael and Elbit, more than NIS 15.5 billion ($5.2 billion).
