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August 16, 2025 • 4 min read
As America's largest military shipbuilder, Huntington Ingalls Industries (HII) is a linchpin of national defense, responsible for constructing the U.S. Navy's most complex vessels, from nuclear-powered aircraft carriers to advanced submarines. When HII releases its financial results, it offers a crucial look not just into the company's health, but into the broader defense industrial base. Let's dive into their recently released Q2 2025 financial report to see how the company is navigating the seas of today's market.
For the second quarter ending June 30, 2025, HII reported a mixed performance. While revenues saw a modest increase, profitability took a notable dip, signaling that the company is grappling with significant operational headwinds even as its order book swells.
At first glance, the top line looks solid. HII's total sales and service revenues for the quarter reached $3.1 billion, a 4% increase from the same period last year. This growth was driven by higher volumes across its shipbuilding segments, Newport News and Ingalls, as well as its Mission Technologies division.
However, a look further down the income statement reveals a different story. Operating income fell 14% to $163 million from $189 million in Q2 2024. Consequently, net earnings for the quarter decreased to $152 million ($3.86 per share), down from $173 million ($4.38 per share) a year prior.
To visualize how revenues flowed through to the bottom line, here is a breakdown of the company's income statement for the quarter:
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So, what's causing this disconnect between revenue and profit? A key factor lies in the complexities of long-term contract accounting. HII recorded a negative $10 million "cumulative catch-up adjustment" this quarter, a stark contrast to the positive $24 million adjustment in the same quarter last year. These adjustments reflect changes in the estimated profitability of long-term projects. The filing specifically flags "performance challenges" at the Newport News segment, which builds nuclear-powered aircraft carriers and submarines, as a primary driver of these unfavorable adjustments.
Despite the margin pressure, the future demand for HII's products looks exceptionally strong. The company's total backlog—a measure of future work secured by contracts—surged to $56.9 billion, a significant jump from $48.7 billion at the end of 2024. This massive order book, nearly all from the U.S. government, provides years of revenue visibility.
Another bright spot was the company's cash flow. For the first six months of 2025, HII generated $428 million in cash from operations, a dramatic reversal from the $211 million used in operations during the same period in 2024. This resulted in a positive free cash flow (cash from operations minus capital expenditures) of $268 million, a turnaround of over $640 million from the prior year. This improvement was largely driven by better management of working capital.
Huntington Ingalls Industries' latest report paints a picture of a company with immense long-term potential facing very real, near-term execution challenges. The robust backlog and improving cash flow demonstrate the foundational strength and critical importance of its business.
However, the declining profitability, particularly within the crucial Newport News segment, underscores the immense difficulty of building the world's most advanced warships. For investors and observers, the key will be to watch whether HII can resolve its operational performance issues and begin converting its record-breaking backlog into a more profitable reality. The company's ability to do so is not just a matter of financial performance, but a cornerstone of America's maritime strength.
Last updated: August 16, 2025