DRS Stock Forecast & Price Target

Leonardo DRS Inc. has displayed impressive financial growth, securing $1.3 billion in new funded bookings during Q3/25, resulting in a 24% year-over-year increase and contributing to a total backlog of $8.9 billion, which is up 8% annually. The company's Advanced Sensing and Computing segment continues to drive revenue, bolstered by robust demand in the Integrated Mission Systems segment, which achieved 34% topline growth due to strong performance in C-UAS and the Columbia Class submarine programs. Additionally, EBITDA margins improved by 120 basis points year-over-year, showcasing operational leverage and increased profitability from critical programs.

Leonardo DRS's financial outlook appears negative primarily due to a decline in consolidated adjusted EBITDA margins, which decreased to 12.2% year-over-year, largely impacted by elevated research and development expenses and less efficient program execution. The Advanced Sensing and Computing segment experienced a significant margin contraction of 100 basis points to 11%, attributed to a combination of a higher R&D investment—80% of which was funneled into this segment—and an unfavorable product mix. Additionally, ongoing pressures from the Germanium supply chain further compound the company's financial challenges as it seeks to enhance its operational efficiency and mitigate risks associated with reliance on external sources.