We concluded 2025 with the largest quarterly orders, sales, and non-GAAP earnings, as well as operating margin in the company's history. Getting back to 2025, fourth quarter sales increased 7.3% from last year, while non-GAAP earnings increased 14.1%. For the full year, sales increased 7.9%, and non-GAAP earnings increased 11.5%. In digital imaging, Teledyne FLIR performed very well, with particular strength in unmanned and other defense surveillance systems, while within marine instrumentation, we achieved record sales of autonomous underwater vehicles.
In terms of capital deployment, 2025 was our second largest year in history, with over $850 million spent on acquisitions throughout the year and $400 million for stock repurchases within the fourth quarter. Nevertheless, having generated approximately $1.1 billion in free cash flow for two consecutive years, we ended 2025 with a leverage ratio of just 1.4 times. Last week, we continued our String of Pearls strategy with the acquisition of DD-Scientific, a UK-based manufacturer of high-performance electrochemical gas sensors. Gas sensors are not only a critical technology component used in our environmental instruments, but such sensors are also an attractive consumable business with high recurring revenue.
Turning to 2026, while it's still early, we are reasonably confident in our current outlook for both revenue and earnings. That is, we believe full year 2026 revenue will be approximately $6.37 billion, and non-GAAP earnings at the midpoint will be approximately $23.65, both of which are consistent with current consensus estimates. As in 2024 and 2025, we expect normal seasonality in 2026, with approximately 48% of sales and 46% of earnings in the first half of the year. In the digital imaging segment, fourth quarter sales increased 3.4% despite a tough comparison, primarily due to strong sales from Teledyne FLIR.
| Metric | Period | Current guidance |
|---|---|---|
| Revenue | FY2026 | ~$6.37 billion (new) |
| Non-GAAP EPS (midpoint) | FY2026 | ~$23.65 (range $23.45-$23.85) (new) |
| GAAP EPS | FY2026 | $19.76-$20.22 (new) |
| Non-GAAP EPS | Q1 2026 | $5.40-$5.50 (new) |
| GAAP EPS | Q1 2026 | $4.45-$4.59 (new) |
| First-half revenue/earnings seasonality | FY2026 | ~48% sales / 46% earnings (consistent) |
| Metric | YoY | Note |
|---|---|---|
| Q4 total sales | +7.3% | healthy defense plus continued short-cycle commercial recovery |
| Q4 non-GAAP earnings | +14.1% | favorable operating results and cost reductions |
| Digital imaging sales | +3.4% | strong FLIR sales, especially infrared components for unmanned systems, despite a tough comparison |
| Instrumentation sales | +3.7% | marine interconnects, AUVs, and environmental gas/air monitoring growth |
| Aerospace and defense electronics sales | +40.4% | optics and Micropac acquisitions plus organic defense and commercial aerospace growth |
| Engineered systems revenue | -9.9% | delayed contract awards originally anticipated in Q4 |
| Q4 free cash flow | +to $339.2M (record) | favorable Q4 operating results versus 2024 |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Short-cycle commercial recovery | certain short-cycle markets contracted in 2023-2024 | Recovering, with no short-cycle business expected to contract on a full-year basis in 2026 | Improving |
| Unmanned/autonomous systems | — | ~$500M in 2025 across air, ground, underwater; expected ~$550M (about 10% growth) in 2026 | Growing |
| Capital deployment (M&A vs. buybacks) | discouraged on M&A prices a few months ago | More encouraged on a range of acquisitions including ~$1B targets; buybacks remain opportunistic | Improving |
| Digital imaging margin | FY2025 ~22.6% | Targeting ~23.4% in 2026, hoping toward 24% | Improving |
| Defense program wins | — | Tranche 3 Tracking Layer worth north of $100M over coming years; OPF-L loitering munition production award | Expanding |
| Memory cost inflation | — | Net risk seen as small; memory suppliers are also customers of T&M instruments | Neutral |