Israel signs $1 billion air defense deal with IAI while preparing for possible renewed conflict with Iran
Arrow 3 manufacturer posts record quarter while Defense Ministry deepens procurement push.
The Defense Ministry, which already owes Israel Aerospace Industries (IAI) more than NIS 4 billion ($1.37 billion) and has struggled to settle payments amid budget disputes with the Finance Ministry, continues to place major new orders with the company. IAI announced on Thursday that it had signed a new $1 billion deal with the Defense Ministry for the procurement of air defense systems.
Neither IAI nor the Defense Ministry disclosed which systems are included in the agreement. In a filing to the Tel Aviv Stock Exchange, the company said the contract relates to the core of its strategic operations and noted that it does not expect the deal to affect its ability to meet existing or future obligations.
IAI manufactures the Arrow 3 air defense system and its radars, as well as radar systems used in Rafael’s Iron Dome and David’s Sling platforms. Arrow 3 serves as Israel’s primary defense against ballistic missile threats from Iran and Yemen. Over the past year, and in coordination with the Israeli defense establishment, IAI significantly expanded production of Arrow interceptors for the Israeli Air Force while simultaneously fulfilling large export orders for Germany, which purchased the system in deals totaling approximately $7 billion.
The company also produces the Barak MX air defense system, which is used by the IDF to protect coastal and maritime assets from missiles and aircraft and has been exported to multiple countries. Beyond air defense systems, IAI manufactures mission aircraft, executive jets, attack missiles, and drones. This summer, the Israeli Air Force is expected to open a new drone squadron based on the Heron MK-2, considered the company’s most advanced unmanned aerial system.
Alongside the announcement of the Defense Ministry deal, IAI published record financial results for the first quarter of the year. Its order backlog reached approximately $33 billion, while quarterly sales surpassed the $2 billion mark for the first time, climbing to approximately $2.1 billion, a 31% increase compared to the same period last year.
Around 35% of quarterly sales came from the Israeli market, driven by extensive procurement activity by the IDF and the continuation of the regional conflict. Sales in Israel totaled approximately $740 million, up from about $570 million in the corresponding quarter last year.
Asia was the company’s second-largest market, with sales reaching approximately $665 million, compared to about $430 million in the same period a year earlier. Sales in Europe rose to roughly $410 million, up from approximately $325 million.
Quarterly net profit reached $220 million, an increase of 34% year-over-year, representing 11% of total sales. The company’s military divisions, Military Aircraft, Missile Systems and Space, and ELTA, posted a combined 48% increase in revenue, generating approximately $250 million in profit. By contrast, profit in the aviation division declined from $9 million to $6 million.
IAI’s EBITDA reached approximately $320 million, up 34% compared to the corresponding quarter. The results could support plans to float roughly 30% of the company on the Tel Aviv Stock Exchange at an estimated valuation of NIS 80-100 billion ($27.4-34.2 billion).
Preparations for the IPO are being advanced by the Government Companies Authority and recently gained momentum following the appointment of Boaz Levy as chairman of the company. Levy has served as IAI’s CEO since early 2022, and his appointment as chairman was finalized in recent days with the approval of Defense Minister Israel Katz and the minister responsible for government companies, David Amsalem.
The board meeting approving the company’s first-quarter results was Levy’s first as chairman. His former role as CEO is currently being filled by Moshe Levy, head of IAI’s military aircraft division. The company is expected to appoint a search committee for a permanent CEO in the coming days.
