L3Harris and the National Security Tech Industrial Base: A Strategic Buy for Defense-Driven Growth

The U.S. defense industrial base is undergoing a seismic shift, driven by the urgent need to counter hypersonic threats and space-based vulnerabilities. At the center of this transformation is L3Harris Technologies (LHX), a company whose rapid facility expansions, strategic acquisitions, and deep integration into the Pentagon's Golden Dome initiative position it as a linchpin in the nation's modernization efforts. For investors, L3Harris represents not just a defense contractor but a proxy for the broader U.S. industrial policy tailwinds reshaping national security.

Facility Expansions: A Proxy for Industrial Policy

L3Harris has spent the past two years aggressively scaling its manufacturing footprint, with over $1.25 billion invested in new facilities across Indiana, Arkansas, and Virginia. These expansions are not arbitrary—they are directly tied to the Pentagon's Golden Dome and Hypersonic and Ballistic Tracking Space Sensor (HBTSS) programs. For example:
- Indiana: A $125 million expansion to produce advanced missile warning sensors and space components.
- Arkansas: A $193 million facility for large solid rocket motors (LSRMs), critical for both ground- and space-based interceptors.
- Virginia: A $250 million investment to scale production of propulsion systems and divert/attitude control units for hypersonic defense.

These projects align with the Pentagon's push for a multi-layered, space-enabled missile defense architecture, which requires rapid scaling of domestic production. By building out these facilities, L3Harris is not just meeting demand—it is securing its role as the backbone of the U.S. industrial base for next-generation defense systems.

Defense Contracts and Technological Edge

L3Harris's dominance in hypersonic defense is underpinned by its end-to-end capabilities in space-based tracking, propulsion, and AI-driven fire control systems. Key contracts include:
- SDA Tranche 2 Tracking Layer: A $919 million contract to build 18 satellites for near-global missile tracking.
- HBTSS Program: Five satellites already in orbit, with 40 more planned to achieve global coverage. These satellites have demonstrated fire-control quality tracking of hypersonic threats—a capability no competitor has matched.
- Aerojet Rocketdyne Acquisition: Bolstered propulsion expertise, including the RL10 engine, which powers upper stages for space-based interceptors.

The company's “Trusted Disruptor” strategy—leveraging commercial-grade efficiency in defense-grade systems—has allowed it to outpace rivals like Raytheon and Northrop Grumman. For instance, L3Harris's HBTSS satellite passed all MDA tests in 2024, while Northrop Grumman's prototype failed to meet requirements. This technological edge, combined with a common technology approach across programs, ensures interoperability and cost efficiency.

Financial Strength and Competitive Moat

L3Harris's financials reflect its strategic positioning:
- Revenue: $21.32 billion in FY2025, with a $34 billion backlog and a 1.5x book-to-bill ratio.
- Margins: Operating margins of 15.6% in 2025, outperforming peers like Raytheon (12–13%).
- Free Cash Flow: Grew 30.6% in 2025, funding R&D, dividends, and strategic investments.

The company's $1.2 billion cost-savings program (LHX NeXt) and disciplined capital allocation further strengthen its moat. With 77% of revenue tied to the U.S. Department of Defense and 22% from international markets, L3Harris is insulated from geopolitical volatility while benefiting from the $175 billion Golden Dome budget and the $1.55 trillion global defense market.

Investment Case: Immediate Action

The case for investing in L3Harris is compelling:
1. Tailwinds: The U.S. government is prioritizing hypersonic defense, with $175 billion allocated to Golden Dome through 2030. L3Harris is projected to capture $10–15 billion of this market by 2026.
2. Scalability: Its multi-state manufacturing network ensures it can meet surging demand for LSRMs, interceptors, and space-based sensors.
3. Margin Resilience: High operating margins and cost discipline position it to outperform peers in a capital-intensive sector.

With a $34 billion backlog, a 38% EPS beat in Q2 2025, and a stock trading at a 12x forward P/E (below its 5-year average of 15x), L3Harris offers a rare combination of defensive value and growth potential.

Conclusion

L3Harris is not merely a beneficiary of U.S. defense spending—it is a critical enabler of the nation's strategic shift toward space-based missile defense. Its facility expansions, technological leadership, and financial discipline create a defensible moat in a sector where demand is accelerating. For investors seeking exposure to the next phase of the U.S. industrial base, L3Harris is a strategic buy—with upside potential as the Golden Dome initiative and hypersonic modernization gain momentum.