BAE Systems (LSE:BA) upgraded its free cash flow guidance for 2026 on Thursday, telling investors it now expects to deliver around £3bn, up from the previous guidance of more than £2bn given at its half-year results in July.
The London-listed defence, security and aerospace group left its sales, underlying EBIT and underlying EPS guidance unchanged from the ranges set in July: sales growth of 8% to 10% on 2025's £30.7bn, underlying EBIT growth of 10% to 12% on 2025's £3.3bn, and underlying EPS growth of 11% to 13% on 2025's 75.2p.
Strong trading in the Electronic Systems, Air and Platforms & Services sectors has more than offset subdued growth and margins in the Maritime sector, where BAE is progressing through the first-in-class stage of the Type 26 frigate programme.
The company has secured £33bn of orders so far in 2026, with further agreements anticipated before year-end, and said the free cash flow upgrade reflects some benefit from customer advances received to date, excluding any material advances it may receive for the remainder of the year.
"We've delivered strong financial and operational performance year to date, as well as positive order intake momentum," said chief executive Charles Woodburn, adding that the company's "substantial backlog provides good visibility" and leaves it "well positioned to deliver sustainable growth over the years ahead."
Second-half order wins included roughly £1.6bn tied to the Global Combat Air Programme, including BAE's share of a £4.6bn contract awarded to Edgewing, and roughly £1.5bn from its share of MBDA orders.
In Maritime, the company secured about £4.3bn of further funding to progress the UK's Dreadnought Class nuclear deterrent submarines, alongside an about A$1.3bn contract for Australia's High Frequency Surveillance capability system, which BAE described as Australia's largest ever defence export.
Electronic Systems brought in roughly $1bn of incremental funding for munitions programmes including APKWS precision guidance systems and THAAD infrared seekers, while Platforms & Services secured about $0.8bn to continue full rate production of Armored Multi-Purpose Vehicles for the US Army, plus roughly $0.5bn for Ordnance Systems' Holston and Radford Army Ammunition Plants.
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Guidance remains stated on a constant-currency basis using a GBP:USD rate of $1.32, against a year-to-date average of approximately $1.34; BAE said a 5 cent move in the exchange rate affects sales by around £500m, underlying EBIT by around £70m and underlying EPS by around 1.4p.
Total cash returned to shareholders in 2026 is expected to reach around £1.6bn, comprising the 2025 final dividend, the 2026 interim dividend of 15.0p payable on 2 December, and approximately £500m of share repurchases.
BAE Systems will report preliminary results for the year ending 31 December 2026 on 19 February 2027.