The defense industry is a realm of giants, behemoths clashing in a constant battle for contracts and supremacy. But sometimes, a revolution occurs in the quietest corners, a revolution driven not by brute force, but by agile innovation. That's exactly what's happening at L3Harris, and it's all thanks to their silent conquest of the space domain.

While headlines scream about hypersonic missiles and billion-dollar fighter jets, L3Harris is quietly becoming a dominant force in space. Their recent Q1 2024 earnings transcript (Source: L3Harris Technologies Q1 2024 Earnings Call Transcript) reveals a staggering statistic: since the L3 and Harris merger five years ago, L3Harris has gone from having zero satellites in orbit to launching six in just this past quarter. Moreover, they've been awarded contracts for a staggering 60 satellites as prime contractor, a number that dwarfs many dedicated space companies.

This isn't just a case of riding the wave of increased space spending. L3Harris is actively taking market share, disrupting the traditional space landscape with their "trusted disruptor" strategy. They're winning contracts from established players, as evidenced by their recent $150 million win to provide secure networking to Taiwan, displacing a long-time incumbent.

Their success stems from their unique approach. While many new space companies focus solely on software, L3Harris combines their software expertise with a deep heritage in hardware. This allows them to offer comprehensive solutions, from satellite payloads and sensors to full mission control systems. They're not just building components, they're architecting entire space architectures.

This approach is paying off handsomely. Look closer at the segment data: their Space and Airborne Systems segment (SAS), which houses their space business, saw margins expand by a full 100 basis points in Q1 2024. This is directly attributed to their success in moving beyond the development phase of many of their space programs and entering the more lucrative production phase.

Here's the kicker: this space dominance is likely to translate into substantial future revenue growth. Consider the Space Development Agency's (SDA) Tranche 3 tracking program. L3Harris is the only company to have won Tranche 0, 1, and 2, a total of 38 satellites. Tranche 3, anticipated to be for another 18 satellites, could further solidify their position and drive significant revenue for years to come.

And it doesn't stop there. L3Harris is actively investing in capacity to fuel this growth. Their new satellite factory in Florida, already under construction, will enable them to churn out these advanced spacecraft at an even faster rate.

But here's the hypothesis that no one else seems to be talking about: L3Harris's success in space could have a ripple effect on their entire business. Their space-based technologies, from resilient communications to missile tracking, are directly applicable to their other segments, particularly Integrated Mission Systems (IMS) and Communication Systems (CS).

Imagine this: L3Harris successfully integrates Link 16, their ubiquitous tactical data link system, into the SDA's space architecture. This could revolutionize battlefield communications, providing real-time data sharing across all domains, and potentially open up a multi-billion dollar market for space-based tactical data links.

Hypothetical Revenue Growth for Space and Airborne Systems Segment (SAS)

The following chart is a hypothetical representation of L3Harris's SAS revenue growth, based on their current momentum in space and potential contributions from programs like SDA Tranche 3.

The numbers tell a compelling story. L3Harris's 2024 guidance for SAS revenue is $6.9 billion to $7.1 billion, with operating margin in the mid-to-high 11% range. However, considering their current momentum in space and the potential for substantial growth from programs like SDA Tranche 3, it's reasonable to hypothesize that SAS revenue could easily exceed $8 billion by 2026, with margins pushing towards 13%.

This silent space revolution is only just beginning, and L3Harris is poised to be its undisputed leader. While other defense giants remain earthbound, L3Harris is reaching for the stars, and their success will reshape the defense landscape for years to come.

"Fun Facts About L3Harris & Space"

From Zero to Sixty: In just five years, L3Harris has gone from having no satellites in orbit to being awarded contracts for 60, a testament to their rapid ascent in the space domain.

Trusted Disruptor: L3Harris combines a legacy of hardware expertise with cutting-edge software capabilities, a potent combination that's disrupting the traditional space industry.

Space Factory: Their new satellite factory in Florida, currently under construction, is a symbol of their commitment to sustained growth in the space market.