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what it is
Mercury builds the computers and electronics that help U.S. defense systems see, process, and react faster.
how it gets paid
Last year Mercury Systems made $912M in revenue. embedded processing was the main engine at $274M, or 30% of sales.
why it's growing
Revenue grew 9.2% last year on ~$912M. The 27% gross margin matters most because margin repair, not just top-line noise.
what just happened
Mercury reported quarterly EPS of -$0.25 versus a $0.40 estimate, a sharp miss despite better revenue momentum.
At a glance
B+ balance sheet — decent shape, but not bulletproof
15/100 earnings predictability — expect surprises
128.7x trailing p/e — you're paying up for this one
7.0% return on capital — nothing to write home about
xvary composite: 39/100 — weak
What they do
Mercury builds the computers and electronics that help U.S. defense systems see, process, and react faster.
Mercury sits inside defense programs where failure is expensive and replacement is slow. RTX was about 13% of fiscal 2025 sales, Lockheed Martin about 10%, and the U.S. Navy about 10%, per the filing summary in this feed. That concentration is a risk, but it also tells you these are entrenched relationships where your hardware has to work the first time.
How they make money
$912M
annual revenue · their business grew +9.2% last year
embedded processing
$274M
+4.4%
rf and microwave
$210M
+4.4%
mission systems and software
$164M
+1.0%
sensors and avionics
$146M
+9.2%
secure storage and other
$118M
2.3%
The products that matter
embedded defense computing
Embedded Computer Systems
~$912M FY revenue (see table)
Embedded processing, RF, mission systems, and sensors sum to the ~$912M year in this snapshot—margin repair matters more than a mis-sized legacy headline.
core
largest customer channel
RTX relationship
~13% of FY sales
RTX-scale exposure can accelerate recovery if orders rebound—it can also break the quarter if procurement timing slips.
largest exposure
major defense accounts
Lockheed Martin and Navy
~10% + ~10%
Lockheed Martin and the U.S. Navy were each on the order of ~10% of sales in the same filing summary—three large primes still dominate the customer list.
concentration risk
Key numbers
128.7x
trailing p/e
P/E → how many dollars you pay for $1 of earnings → so what: you are paying a luxury multiple for a company still in recovery.
-2.2%
operating margin (trailing)
Operating margin → profit after running the business → so what: Mercury was still slightly underwater at the operating line in this feed (not the same period as a single quarter’s gross margin).
$592M
long-term debt
Debt → money the company owes → so what: the turnaround has less room for mistakes when debt is this large.
7.0%
return on capital
Return on capital → profit earned on invested money → so what: 7% is okay, not great, for a company priced like a premium asset.
Financial health
B+
strength
- balance sheet grade B+ — solid but not elite
- risk rank 3 — safer than 50% of stocks
- price stability 25 / 100
- long-term debt $592M (11% of capital)
- net profit margin n/m — latest quarter EPS was negative; do not trust a tidy net margin % mid-turnaround
- return on equity 9% — $0.09 profit for every $1 investors have put in
B+ — functional but not a standout on the balance sheet.
Total return vs. market
You invested $10,000 in MRCY 3 years ago → it's now worth $15,040.
The index would have given you $13,880.
source: institutional data · total return
What just happened
missed estimates
Mercury reported quarterly EPS of -$0.25 versus a $0.40 estimate, a sharp miss despite better revenue momentum.
Revenue rose to $233 million in fiscal Q2 2026, up 4.4% vs. prior year, and adjusted EBITDA improved. The GAAP EPS miss is the clean read here; the -2.2% operating margin in the glance strip is trailing / company scope—not the same line as a single quarter’s gross margin.
$233M
revenue (Q2 FY26)
-$0.25
eps (Q · GAAP)
27.0%
gross margin (Q)
the number that mattered
The 27.0% gross margin matters most because margin repair, not just revenue growth, decides whether this turnaround is real.
-
mercury systems posted ~4% vs. prior year sales growth in fiscal Q2 2026 (year ends june 26th.). wires that say EPS “more than doubled” usually mean a different EPS definition or a vs. prior year move off a prior loss base—GAAP EPS was still -$0.25 vs about $0.40 consensus in this snapshot.
-
looking ahead, we expect that the company’s recovery in both the top and bottom lines will continue through the current year and on into fiscal 2027, as management continues to execute on its long-term strategy to get the company back on track.
-
despite the positive signs, however, the stock still fell sharply on the most recent earnings news, largely due to a disappointing outlook and concerns that the recovery efforts may fall short.
-
improving margins is a critical goal here.although the company’s adjusted earnings have been back in the black since the final quarter of fiscal 2024, on a gaap basis, mercury is still posting quarterly net losses.
-
this is due to the combination of low-margined sales and a sizeable order backlog.although having a significant backlog is often a positive, in that it offers stability and predictability in revenues, it also limits flexibility, especially with regards to pricing and product mix. if orders have been placed in advance, it becomes more challenging to adjust prices in response to market conditions or business needs, or to switch to selling highermargined products.
source: company earnings report, 2026
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What could go wrong
the #1 risk is three-customer concentration across RTX, Lockheed Martin, and the Navy.
med
three customers drive the whole revenue picture
39.4% of sales are tied to RTX, with 30.3% each tied to Lockheed Martin and the Navy. That's 100% of the business concentrated in three relationships as presented in this dataset.
if one program slips, gets delayed, or is repriced, the damage shows up fast because there is no visible diversification buffer here.
med
the recovery is being priced in before it is fully earned
trailing p/e is 128.7x and the stock sits at $82.36 against a 3–5 year target midpoint of $67. that is not a cheap turnaround.
if revenue does not rebound toward the $955M fiscal 2026 estimate, the multiple has room to compress before the business has time to heal.
med
adjusted improvement has not yet become clean GAAP profitability
the latest quarter still showed -$0.26 EPS, and the company is described as remaining loss-making on a GAAP basis despite adjusted improvement since fiscal 2024.
that means the turnaround can look healthier in presentation slides than it does in reported earnings.
med
backlog can preserve revenue while capping flexibility
management has a large order backlog, but backlog is not automatically high quality. lower-margin work or older pricing can stay in the queue longer than investors want.
that can slow margin repair even if top-line recovery continues.
100% of the revenue picture shown here runs through RTX, Lockheed Martin, and the Navy, while the stock trades above its $67 midpoint target. You are underwriting execution and concentration at the same time.
source: institutional data · regulatory filings · risk analysis
Pay attention to
earnings
next earnings report in may
this is the next hard proof point for whether the recovery narrative is becoming real revenue and cleaner EPS.
metric
revenue path toward $955M
analysts expect fiscal 2026 revenue to reach $955M. every quarter now gets judged against that rebound path.
risk
customer concentration staying this extreme
if RTX, Lockheed Martin, and the Navy keep representing the entire sales picture, one delayed program can still knock the story sideways.
trend
GAAP losses versus adjusted recovery
the market will tolerate adjustment-heavy results for only so long. you want the reported EPS line to stop fighting the thesis.
Analyst rankings
short-term outlook
bottom 5%
momentum score 5 — the lowest rating. in human-speak, analysts think near-term performance could be rough.
risk profile
average
stability score 3 means middle-of-the-road balance-sheet and trading risk. not especially safe. not especially chaotic.
chart momentum
top 20%
technical score 2 says price action has been better than the fundamentals suggest. welcome to turnaround stocks.
earnings predictability
15 / 100
earnings predictability is 15/100. translation: if you want smooth quarterly numbers, this is the wrong ticker.
source: institutional data
Institutional activity
institutions have been net buying for 3 consecutive quarters — 170 buyers vs. 134 sellers in 3q2025. total institutional holdings: 65.5M shares. net buying for 3 quarters.
source: institutional data
Price targets
3-5 year target range
$28
$106
$82
current price
$67
target midpoint · 19% from current · 3-5yr high: $85 (+5% · 1% ann'l return)
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