Curtiss-Wright (CW) Q2 2025: Backlog Hits $3.8B, Fueling Multi-Year Defense and Nuclear Upside
Curtiss-Wright’s Q2 results confirm a step-change in backlog, margin, and strategic positioning, with a $3.8 billion backlog—up 12% YTD—anchoring visibility through 2025 and beyond. Management’s confidence is reflected in raised guidance, accelerated capital return, and a sharpened focus on defense and commercial nuclear, where global demand signals are intensifying. Investors should watch for execution on nuclear scale-up and defense program wins as the company pivots to multi-year compounding growth.
Summary
- Backlog Expansion Anchors Visibility: Record backlog and order momentum provide multi-year revenue security.
- Defense and Nuclear Drive Growth: Strategic bets on global defense and commercial nuclear are materializing into tangible upside.
- Capital Return Accelerates: Share buyback and dividend growth signal balance sheet strength and shareholder focus.
Performance Analysis
Curtiss-Wright delivered a robust Q2, with broad-based growth across its naval and power, defense electronics, and aerospace segments. The company’s organic sales growth was driven by higher volumes in naval programs—most notably the Columbia-class submarine—and continued defense electronics momentum, particularly in embedded computing for fighter jets and UAVs, unmanned aerial vehicles, a key defense growth market. Operating margin expansion outpaced revenue growth, reflecting operational leverage and commercial discipline.
Order intake was a standout, with $1 billion in new bookings and a book-to-bill above 1.1x, pushing the backlog to a new high. Free cash flow conversion approached 100%, underpinned by disciplined working capital and higher earnings. Segment performance was differentiated: defense electronics delivered margin records, naval and power benefited from both core and acquired assets, while aerospace and industrial held steady despite global industrial softness.
- Defense Electronics Margin Surge: Operating margin in defense electronics rose sharply, supported by throughput gains and pricing.
- Commercial Nuclear Upside: Nuclear aftermarket and SMR, small modular reactor, development contributed to power segment outperformance.
- Capital Allocation Shift: $400 million share repurchase authorization and a 14% dividend increase reflect management’s confidence in future cash generation.
While macro headwinds linger in industrial markets, the company’s diversified portfolio and backlog strength mitigate near-term risk and position it for continued compounding growth.
Executive Commentary
"As you will hear in our discussion today regarding our second quarter performance and the increases to our 2025 guidance we are delivering on our pivot to growth strategy and in turn driving strong results for our shareholders... As we look to the next five to ten years and beyond, we see numerous opportunities developing globally that we expect to provide tremendous upside to Curtis Wright's long-term growth."
Lynn Bamford, Chair and Chief Executive Officer
"Our continued efforts to drive margin improvement through commercial excellence and improved manufacturing throughput are now expected to promote further margin expansion. As a result, we now expect operating income growth of 18 to 20% and operating margin expansion of 190 to 210 basis points to a new all-time high range of 26.8 to 27% [in Defense Electronics]."
Chris Farkas, Vice President and Chief Financial Officer
Strategic Positioning
1. Defense Market Alignment and Foreign Military Sales Surge
Curtiss-Wright’s portfolio is tightly aligned with U.S. Department of Defense (DoD) priorities, including shipbuilding, next-generation air, and missile defense. The company highlighted a 20% YoY increase in direct foreign military sales, now expected to reach 10% of total revenue, with content wins across NATO programs and key platforms such as the Boxer tank and European fighter jets. This diversification across U.S. and allied defense budgets provides insulation against single-market volatility and opens new growth vectors as global defense spending rises.
2. Commercial Nuclear Scale-Up and SMR Optionality
The nuclear business is at an inflection point, with aftermarket and new-build opportunities accelerating. Management underscored the $1.5 billion-plus pipeline tied to AP-1000 reactors in Europe and the U.S., and new partnerships such as Rolls-Royce SMR. The company’s role as sole supplier of reactor coolant pumps to Westinghouse anchors its positioning for both large and small modular reactor buildouts. Regulatory support and global decarbonization imperatives further underpin the long-term nuclear thesis.
3. Operational Excellence and Margin Expansion
Margin gains are being driven by process discipline, restructuring, and throughput improvements, especially in defense electronics. Commercial excellence initiatives—pricing, absorption, and supply chain optimization—are delivering incremental profitability. The company is also investing over $20 million in incremental R&D to sustain innovation and support capacity expansion, particularly in nuclear and subsea markets.
4. Balanced Capital Deployment and M&A Discipline
Management reaffirmed M&A as a top capital allocation priority, but is exercising discipline, walking away from deals that do not meet strategic or financial hurdles. In the interim, excess capital is being returned to shareholders via buybacks and dividend growth. The company’s balance sheet is under-levered, providing dry powder for future acquisitions in defense electronics, nuclear, and safety-critical systems.
5. Technology Leadership at the Tactical Edge
Innovation in embedded computing and AI-enabled systems is expanding Curtiss-Wright’s role in next-generation defense applications, from sensor fusion to autonomous and command-and-control platforms. The company’s partnership with Nvidia for GPU-based tactical edge solutions is already translating into content wins in modernization programs, positioning it for secular growth as defense customers digitize the battlespace.
Key Considerations
This quarter’s results reflect a company executing on multiple growth vectors while maintaining operational discipline. The following considerations will shape future performance:
Key Considerations:
- Backlog Durability: Record $3.8 billion backlog anchors visibility, but execution on delivery and program ramp is critical for sustained growth.
- Nuclear Ramp Complexity: Scaling for AP-1000 and SMR orders will test supply chain and capital investment discipline; timely execution is key to capturing upside.
- Defense Budget Outperformance: Alignment with DoD and NATO priorities positions Curtiss-Wright to outgrow baseline budgets, but program timing and government funding cycles introduce risk.
- Margin Sustainability: Defense electronics margin expansion is impressive, yet ongoing restructuring, ERP implementation, and FX volatility could pressure incremental gains.
- M&A Optionality: Management’s willingness to walk from deals underscores discipline, but inorganic growth remains a core lever for long-term compounding.
Risks
Execution risk looms large as Curtiss-Wright scales nuclear and defense platforms, with potential for supply chain delays, regulatory shifts, or program slippage. Macro uncertainty in industrial markets and FX headwinds could weigh on segment performance. While backlog provides revenue security, timing of large defense and nuclear orders remains a swing factor, and capital deployment discipline must be maintained to avoid value-destructive M&A.
Forward Outlook
For Q3 2025, Curtiss-Wright guided to:
- Sequential improvement in sales and operating income in aerospace and industrial, driven by volume and pricing initiatives.
- Defense electronics margins to match Q2 levels on lower sales, with a strong Q4 expected as order timing normalizes.
For full-year 2025, management raised guidance:
- Sales growth of 9 to 10%.
- Operating margin expansion of 100 to 120 basis points, targeting a record 18.5%+ margin.
- Adjusted EPS growth of 16 to 19%.
- Free cash flow of $520 to $535 million, conversion above 108%.
Management cited strong backlog, robust defense and nuclear pipelines, and ongoing operational initiatives as drivers for the raised outlook. Additional upside is possible if AP-1000 or SMR orders materialize ahead of plan.
- Watch for Q4 defense order surge tied to U.S. government fiscal year-end.
- Monitor progress on nuclear capacity investments and SMR prototype transitions.
Takeaways
Curtiss-Wright’s Q2 marks a strategic inflection, with backlog and margin expansion setting the stage for multi-year compounding. Defense and nuclear are the clear growth engines, while disciplined capital allocation and operational execution underpin the investment case.
- Backlog and Program Visibility: $3.8 billion backlog secures revenue for 2025 and supports confidence in multi-year growth targets.
- Margin and Cash Flow Resilience: Margin expansion and near 100% cash conversion reflect strong execution and operational leverage.
- Strategic Bets on Nuclear and Defense: Execution on AP-1000, SMR, and defense modernization will determine the pace and magnitude of future upside.
Conclusion
Curtiss-Wright exits Q2 with record backlog, rising margins, and a sharpened focus on high-growth defense and nuclear markets. The company’s ability to convert pipeline into profitable growth, while maintaining capital discipline, will be the key watchpoint for investors as it pivots to a multi-year compounding story.
Industry Read-Through
Curtiss-Wright’s results spotlight the sustained global upcycle in defense and nuclear infrastructure, with NATO and allied demand surging and the U.S. doubling down on next-generation military and energy platforms. The company’s success in embedding itself in critical defense and nuclear supply chains signals opportunity for peers with differentiated technology and program alignment. For the broader aerospace, defense, and industrial complex, backlog visibility and capital allocation discipline are emerging as key differentiators as macro and government funding cycles remain volatile. Investors should monitor how peers manage supply chain scale-up, R&D investment, and capital returns as the sector enters a new phase of multi-year demand.