Leonardo DRS, Inc. (DRS)

How it makes money

Revenue comes from long-term government contracts rather than one-off sales: DRS bids on defense programs and recognizes revenue as work is performed over multi-year periods. It sells partly as prime contractor directly to the Pentagon and partly as a subcontractor to larger primes like Lockheed Martin. About $3.2 billion of 2025 revenue sat in fixed-price contracts, meaning DRS — not the government — absorbs the cost if a program runs over budget, a structure that rewards disciplined engineering and punishes estimation errors.

Revenue by segment

DRS competes on decades of accumulated defense engineering know-how, security clearances and program-specific qualifications that a new entrant cannot buy quickly. Once a system is designed into a Navy ship or Army vehicle program, replacing the supplier means re-qualifying a new one through years of testing — a barrier that protects existing programs more than it wins new ones.

Demand tracks U.S. defense appropriations, which move in multi-year budget cycles rather than with the economy. That gives revenue more stability than a typical industrial company, but it is not immune to politics: government shutdowns, continuing resolutions and shifting Pentagon priorities can delay contract awards and payments even when underlying programs are healthy.

Key risks

• Dependence on U.S. government spending — A shutdown, a continuing resolution or a shift in defense priorities can delay contract awards and payments. Because government work — direct or indirect — is nearly the entire business, a funding disruption hits DRS harder than a diversified industrial supplier.
• Fixed-price contract exposure — About $3.2 billion of 2025 revenue was under fixed-price contracts, where DRS bears the cost of any engineering overrun or supply delay instead of passing it to the customer.
• Foreign ownership limits on autonomy — Because its parent Leonardo is an Italian company, DRS operates under a foreign ownership, control and influence mitigation agreement with the Department of Defense that constrains how the parent can direct classified work.
• Supply chain dependence on specialty materials — Components such as germanium for infrared sensors have faced shortages before; a renewed disruption at a small number of specialty suppliers can delay delivery on programs already committed to fixed schedules.

Top customers account for 80% of revenue

In 2025, 80% of revenue came directly or indirectly from the U.S. government, split roughly evenly between the Navy and the Army. No single contract exceeded 10% of revenue.