Huntington Ingalls Industries, Inc. (HII): Business Model Canvas [Dec-2025 Updated]

You're digging into the operational DNA of Huntington Ingalls Industries, Inc. (HII), and honestly, it's a fortress built on long-term government trust. As a former portfolio head, I can tell you this model isn't about quick wins; it's about managing a massive, specialized industrial base-the only one building nuclear carriers-backed by a \$55.7 billion contract backlog as of Q3 2025. We see the core engine split between the legacy shipbuilding, projecting \$9.0B to \$9.1B in FY25 revenue, and the growing Mission Technologies segment, adding \$3.0B to \$3.1B. To really grasp how they manage the high fixed costs and the specialized workforce needed to deliver these mission-critical assets, you need to see the full nine blocks we've mapped out below.

Huntington Ingalls Industries, Inc. (HII) - Canvas Business Model: Key Partnerships

You're looking at how Huntington Ingalls Industries, Inc. (HII) manages its complex web of external relationships to deliver on its massive defense contracts. It's not just about what they build in-house; it's about the ecosystem they've built around their two main shipyards. Frankly, the sheer scale of the U.S. Navy demand requires this level of external integration.

U.S. Navy and government agencies for joint program execution

The primary partner, the U.S. Navy, underpins nearly all of HII's shipbuilding revenue. This relationship is cemented by a substantial financial commitment flowing into HII's order book. As of mid-2025, HII reported a record backlog of $56.9 billion. This backlog is heavily weighted by major Navy programs like the Ford-class aircraft carriers and Virginia-class submarines. For the full fiscal year 2025, HII is guiding shipbuilding revenue between $8.9 billion and $9.1 billion. New contract awards in the second quarter of 2025 alone totaled $11.9 billion.

23 partners in the distributed shipbuilding strategy to boost throughput

To meet the urgent demand, HII has aggressively deployed a distributed shipbuilding model, moving work outside its primary facilities. This strategy now involves 23 companies in the structural assembly network. HII has already doubled its outsourced production hours in 2025 and is on track to quadruple them within two years. This is a massive operational shift, so you need to see who is taking on what work. Here's a quick look at the structure:

Partner Type/Focus	Role in Distributed Model	Scope/Metric
Shipbuilding Partners (Domestic)	Building and inspecting select outfitted structural units	Six partners currently involved in Arleigh Burke-class destroyer construction (DDG 135, 137, and 139)
Acquired Facility (Charleston Operations)	Producing modular components for major platforms	Manufacturing completed submarine modules and structural aircraft carrier units
Fabricators/Suppliers (General Network)	Contributing to outsourced modular assembly	Network consists of 23 firms and is growing

If onboarding takes 14+ days, churn risk rises across these smaller partners, so speed is defintely key.

Technology firms like C3 AI for enterprise AI optimization

HII is broadening an existing strategic partnership with C3 AI to integrate Enterprise AI across its operations. This effort is specifically aimed at accelerating shipbuilding throughput. The initial deployment at Ingalls Shipbuilding used complex algorithms to optimize work schedules and demonstrated significant promise in improving schedule performance. HII CEO Chris Kastner has stated the goal is to increase shipbuilding production throughput by 20 percent in 2025. The AI integration spans:

• Planning and scheduling optimization
• Operations management
• Supply chain management
• Labor allocation

International defense partners (e.g., Babcock International) for global reach

HII is actively pursuing international cooperation to enhance technological innovation and production efficiency, particularly in the nuclear and unmanned domains. A key relationship is with Babcock International Group, which includes the joint venture, H&B Defence.

• H&B Defence secured an initial contract with the Australian Government valued at A$9.6 million to qualify local suppliers for the AUKUS program over the next two years.
• HII and Babcock are collaborating on integrating HII's REMUS Unmanned Underwater Vehicles (UUVs) with Babcock's Weapon Handling and Launch Systems (WHLS).
• HII has sold more than 700 REMUS vehicles to over 30 countries, including 14 NATO members.
• The partnership also explores cooperation in civil nuclear decommissioning and construction opportunities in the U.K. and U.S..

Subcontractors and suppliers for the complex maritime industrial base

The 23 companies in the structural assembly network function as critical, specialized subcontractors, ensuring that HII can scale production beyond its primary yards in Virginia and Mississippi. These partners are essential for building out the required capacity for the Navy's modernization plans. For Ingalls Shipbuilding, these external partners are constructing select outfitted structural units for Arleigh Burke-class destroyers, specifically supporting construction for DDG 135, 137 and 139. This network is the physical manifestation of HII's commitment to expanding the U.S. shipbuilding industrial base across multiple states.

Huntington Ingalls Industries, Inc. (HII) - Canvas Business Model: Key Activities

Design and construction of nuclear-powered aircraft carriers and submarines

• Progress on CVN-79 Kennedy and CVN-80 Enterprise underway.
• Virginia-class submarine SSN 798 Massachusetts completed initial sea trials.

Building surface combatants and amphibious assault ships at Ingalls Shipbuilding

Metric	Q3 2025 Amount	Year-over-Year Change
Ingalls Shipbuilding Revenues	$828 million	24.7% increase
Ingalls Shipbuilding Segment Operating Income	$65 million	$16 million increase
Ingalls Shipbuilding Segment Operating Margin	7.9%	Up from 7.4% last year
Surface Combatant Volume	Higher volumes noted	Primary driver for Ingalls revenue increase

Overhaul, repair, and refueling of naval vessels (e.g., CVN-79, CVN-80)

• Newport News Shipbuilding segment margin rose to 4.9% in Q3 2025, an increase of 389 bps year-over-year.
• Newport News Shipbuilding revenues rose by 14.5% in Q3 2025 compared to Q3 2024.
• Guided missile destroyer DDG 128 Ted Stevens completed builder's sea trials.

Developing and integrating Mission Technologies (C5ISR, unmanned systems)

• Mission Technologies revenue for Q3 2025 was $787 million, an 11% increase year-over-year.
• Mission Technologies segment achieved a 1.25x book-to-bill ratio in Q3 2025.
• Reached 750th REMUS UUV production.
• Delivered first two small uncrewed undersea vehicles (SUUVs) for Lionfish system programme, a multi-year programme with potential value exceeding $347 million.

Driving 15% throughput improvement and $250M annualized cost cuts

• Targeted throughput improvement for full year 2025 is approximately 15%.
• On track to achieve $250 million in annualized cost take out by year-end 2025.
• Outsourced hours doubled in 2025.
• Structural assembly network expanded to 23 companies.

Overall Financial Context (FY2025 Guidance and Backlog)

Metric	FY2025 Guidance Range	Latest Reported Value (Q3 2025)
Total Backlog	N/A	$55.7 billion as of September 30, 2025
New Contract Awards (Q3 2025)	N/A	$2.0 billion
Shipbuilding Revenue	$9.0 billion to $9.1 billion	Q3 2025 Revenue: $2.445 billion (Nine Months Ended)
Shipbuilding Operating Margin	5.5% to 6.5%	N/A
Mission Technologies Revenue	$3.0 billion to $3.1 billion	Q3 2025 Revenue: $787 million
Free Cash Flow (FY2025 Guidance)	$550 million to $650 million	Q3 2025 FCF: $16 million

Huntington Ingalls Industries, Inc. (HII) - Canvas Business Model: Key Resources

The Key Resources for Huntington Ingalls Industries, Inc. (HII) are centered on its unique, government-mandated infrastructure, specialized human capital, and deep repository of technical knowledge.

Newport News Shipbuilding and Ingalls Shipbuilding represent the core physical assets, being the only U.S. nuclear-capable shipyards. Newport News Shipbuilding is the sole designer, builder and refueler of U.S. Navy nuclear aircraft carriers and one of two providers of U.S. Navy nuclear submarines. Ingalls Shipbuilding is the largest supplier of U.S. Navy surface combatants.

The human capital is a critical, specialized resource. Huntington Ingalls Industries, Inc. hired over 4,600 shipbuilders year-to-date 2025. This workforce supports the execution of complex naval programs. The company's commitment to this resource is reflected in its recent dividend increase to $1.38 per share quarterly, representing an annualized dividend of $5.52, or a yield of approximately 1.7%.

Intellectual property and proprietary designs are embedded in the complex vessel construction. This is supported by technological advancements, such as the unveiling of the ROMULUS unmanned surface vessel line, which uses Odyssey Autonomy software. The company also entered a strategic partnership with C3 AI to apply artificial intelligence to accelerate shipbuilding throughput. Advanced manufacturing capabilities are also key, including the use of technologies like 3D printing for carrier components, supporting the overall industrial base rebuilding efforts.

The financial strength derived from these resources is evident in the contract backlog. As of September 30, 2025, the total contract backlog stood at approximately $55.7 billion, with $33 billion of that amount being funded. This backlog underpins future revenue projections.

Here's a look at some of the key operational and financial metrics supporting these resources as of late 2025:

Metric	Value / Range	Date / Period
Total Contract Backlog	$55.7 billion	Q3 2025 (September 30, 2025)
Funded Backlog Portion	$33 billion	Q3 2025
Shipbuilders Hired YTD	Over 4,600	YTD 2025
FY 2025 Shipbuilding Revenue Guidance	$9.0 billion to $9.1 billion	FY 2025
FY 2025 Shipbuilding Margin Guidance	5.5% to 6.5%	FY 2025
Q3 2025 Total Revenues	$3.2 billion	Q3 2025
Q3 2025 Diluted EPS	$3.68	Q3 2025

The operational focus is on throughput improvement, targeting an approximate 15% improvement for the full year 2025. This efficiency drive is directly linked to maximizing the output from the existing shipyard infrastructure and workforce.

The company's strategic capabilities include:

• Sole design/build/refuel of U.S. Navy nuclear aircraft carriers.
• One of two providers for U.S. Navy nuclear submarines.
• Largest supplier of U.S. Navy surface combatants.
• Proprietary software like Odyssey for unmanned systems.
• Targeted throughput improvement of approximately 15% for 2025.

The financial health supporting these resources includes a targeted cumulative free cash flow of $1.2 billion over the 2025-2026 period.

Huntington Ingalls Industries, Inc. (HII) - Canvas Business Model: Value Propositions

You're looking at the core reasons why defense customers rely on Huntington Ingalls Industries, Inc. (HII) for their most vital assets. It's not just about building ships; it's about providing unique, irreplaceable capabilities that underpin national security.

Sole provider of nuclear-powered aircraft carriers and one of two for submarines

This is the ultimate value proposition: exclusivity in the most complex naval platforms. Huntington Ingalls Industries, Inc. (HII) is the nation's sole designer and builder of nuclear-powered aircraft carriers, currently focused on the Gerald R. Ford-class. This capability is anchored by massive, long-term commitments, like the $15.2 billion multi-ship contract modification to build the Enterprise (CVN 80) and CVN 81, which provides workforce stability out to 2032. Furthermore, Huntington Ingalls Industries, Inc. (HII) is one of only two shipyards capable of constructing nuclear-powered submarines, including the Virginia-class and the next-generation Columbia-class, which drove Newport News Shipbuilding revenue up 4.4% year-over-year in Q2 2025, reaching $1.6 billion.

The sheer scale of this work translates directly into revenue visibility. As of September 30, 2025, the total contract backlog stood at $55.7 billion, with $33 billion of that already funded. The shipbuilding segment alone is guided to deliver between $9.0 billion and $9.1 billion in revenue for fiscal year 2025.

Mission-critical national security solutions for the U.S. defense apparatus

Huntington Ingalls Industries, Inc. (HII) delivers solutions that are non-discretionary for the U.S. defense apparatus. The value is demonstrated by the company's overall financial commitment to the defense cycle. For the third quarter of 2025, the company secured new contract awards worth $2.0 billion. The total projected revenue for FY 2025 across both shipbuilding and Mission Technologies is set to exceed $12 billion. This is mission assurance delivered through industrial capacity.

The Mission Technologies division supports this broader mandate, with Q2 2025 revenue hitting $791 million. This segment is focused on areas like C5ISR (Command, Control, Computers, Communications, Intelligence, Surveillance, and Reconnaissance), cyber, and electronic warfare, with FY 2025 revenue guidance between $3.0 billion and $3.1 billion.

Full life-cycle support from design through overhaul and modernization

The value extends far beyond the initial build. Huntington Ingalls Industries, Inc. (HII) supports these capital-intensive assets for their entire operational life, which can span five decades. This includes the critical Refueling & Complex Overhaul (RCOH) for Nimitz-class carriers. For example, a contract to refuel and overhaul the USS John C. Stennis (CVN 74) was valued up to $2.99 billion. Recently, the company secured a contract valued up to $471.9 million to provide engineering support for both Nimitz-class and Gerald R. Ford-class carriers, with work extending through November 2030.

Here's a look at the life-cycle services Huntington Ingalls Industries, Inc. (HII) provides:

• Design and detail engineering for new construction.
• Nuclear propulsion plant refueling and modernization.
• Ship change document development and configuration management.
• Inactivation services at the end of service life.

Advanced technological integration, including unmanned systems (e.g., ROMULUS)

To keep pace with evolving threats, Huntington Ingalls Industries, Inc. (HII) integrates advanced, often autonomous, technology into its offerings. The company recently unveiled the ROMULUS family of modular, AI-enabled unmanned surface vessels (USVs). The flagship, ROMULUS 190, is designed for speeds over 25 knots and a range of at least 2,500 nautical miles.

This focus on autonomy is supported by the proven Odyssey Autonomous Control System (ACS) software suite, which has demonstrated performance on over 35 USV platforms with more than 6,000 operational hours. This complements the existing REMUS UUV line, where over 700 units have been delivered, with more than 90% remaining operational after two decades. The Pentagon's FY2025 budget reflects this priority, allocating over $12 billion for autonomy programs.

High-quality, long-term, capital-intensive defense assets with decades of service

The value proposition is intrinsically linked to the assets themselves: they are high-quality, capital-intensive, and built to last for decades. The company is targeting approximately a 15% throughput improvement for the full year 2025 to better execute on these long-duration contracts. This operational focus is paired with a $250 million annualized cost reduction effort expected to be achieved by year-end 2025.

You can see the financial commitment required to maintain this capability in the segment guidance for FY 2025:

Segment	FY 2025 Revenue Guidance (Approximate)	FY 2025 Operating Margin Guidance
Shipbuilding	$9.0 billion to $9.1 billion	5.5% to 6.5%
Mission Technologies	$3.0 billion to $3.1 billion	Approximately 4.5% (Operating Margin)

The company expects to generate between $550 million and $650 million in Free Cash Flow for FY 2025, showing the ability to convert these long-term assets into near-term liquidity.

Huntington Ingalls Industries, Inc. (HII) - Canvas Business Model: Customer Relationships

You're dealing with the U.S. government, which means the relationship isn't about quick sales; it's about decades of dependency and national security. Huntington Ingalls Industries, Inc. (HII) lives and breathes this dynamic. The core of their customer relationship is built on being the sole provider for certain critical assets, like nuclear-powered aircraft carriers and ballistic missile submarines.

The sheer scale of the commitment is best seen in the order book. As of September 30, 2025, HII's total contract backlog stood at a robust $55.7 billion, secured primarily through these government agreements. This isn't just revenue; it's guaranteed future work, which is the ultimate sign of a strong, long-term customer bond in this sector. To be fair, this backlog reflects the high-stakes nature-if HII falters, the Navy's long-term readiness is immediately impacted.

Deep, long-term, and high-stakes contractual relationships with the U.S. government

The relationship is defined by multi-decade procurement cycles. Consider the pending multi-year agreement for 15 nuclear submarines, covering 10 Block VI Virginia-class attack submarines and 5 Columbia-class ballistic missile submarines, which HII is working hard to finalize by the end of 2025. This single negotiation sets the workload for years to come. The government's need for 20 Virginia-class submarines equipped with the Virginia Payload Module (VPM) to replace retiring Ohio-class boats underscores this high-stakes dependency.

Here's a quick look at the financial weight of just a portion of these submarine contracts, showing the magnitude of the relationship:

Program Element	Contract Value / Funding Amount	Fiscal Year Context
Final two Block V Virginia-class Subs (HII Portion)	$1,293,694,000 (approx. $1.29 billion)	Awarded April 2025
First Block VI Submarine (Potomac, SSN-814) Funding	$3.6 billion	FY 2025 Appropriation
Advanced Procurement for FY 2026/2027 Subs	$3.7 billion	FY 2025 Appropriation
Estimated Cost for Columbia Build II (5 Boats)	$10.54 billion	Navy FY 2026 Budget Proposal
Total Estimated Cost for 12 Columbia-class Boats	Approximately $128 billion	Navy FY 2026 Budget Proposal

Collaborative, non-transactional engagement to expand the maritime industrial base

HII's engagement goes beyond just building ships; it involves actively strengthening the entire ecosystem. The CEO noted support for the administration's commitment to expand the nation's shipbuilding capabilities and the maritime industrial base. This collaboration is tangible through concrete actions aimed at increasing production capacity and workforce stability. For instance, the distributed shipbuilding strategy has been expanded to include 23 partners. Furthermore, HII achieved a year-to-date hiring of more than 4,600 shipbuilders as of Q3 2025, a direct response to the customer's need for increased throughput. This signals a partnership focused on long-term industrial health, not just quarterly delivery schedules.

Dedicated program management teams for multi-year, multi-billion-dollar contracts

Managing contracts worth billions over many years requires specialized focus. The relationship necessitates dedicated program management teams embedded within the contracts. The $18.5 billion contract modification for the final two Block V Virginia-class boats, awarded in April 2025, is a prime example of this structure, as it included specific funds for workforce development to raise wages across both yards. This level of detail in a contract shows the depth of the management involvement required to execute these complex, multi-year endeavors.

HII's operational initiatives are directly tied to customer success metrics:

• Targeting approximately 15% throughput improvement for the full year 2025.
• Securing new contract awards worth $11.9 billion in Q2 2025.
• Increasing FY25 free cash flow guidance to between $550 million and $650 million.

Direct negotiation on contract types (e.g., hybrid approach for Virginia/Columbia classes)

The nature of these high-value, long-lead-time programs forces direct negotiation on risk allocation. The pending 15-submarine deal faced delays due to rising labor and material costs, leading to a focus on ensuring the Navy and industry appropriately share risk. This isn't a standard fixed-price sale; it's a hybrid approach where cost escalators and workforce investment clauses become central to the agreement. The April 2025 award for the Block V submarines explicitly included money to raise wages for shipbuilders, demonstrating a shared financial responsibility for maintaining the necessary skilled labor pool. This negotiation style is defintely key to keeping these critical programs moving forward.

Huntington Ingalls Industries, Inc. (HII) - Canvas Business Model: Channels

You're looking at how Huntington Ingalls Industries, Inc. (HII) gets its value propositions-whether it's a nuclear submarine or a cyber solution-into the hands of its customers. It's almost entirely government-driven, so the channels are less about retail shelves and more about federal procurement processes.

Direct contract negotiation and award process with the U.S. Department of Defense (DoD)

The primary channel for the shipbuilding segments, Newport News Shipbuilding and Ingalls Shipbuilding, is the direct, multi-year contract award process with the U.S. Navy. This is where the massive shipbuilding programs are secured. For instance, the total contract backlog for Huntington Ingalls Industries, Inc. stood at a massive $55.7 billion as of September 30, 2025. This backlog reflects the direct negotiation success for key platforms like Virginia-class submarines and aircraft carriers. The company is focused on improving schedule adherence for all ships built, aiming for approximately 15% throughput improvement for the full year 2025.

The direct negotiation channel is also being expanded through a distributed model. Huntington Ingalls Industries, Inc. has doubled its outsourced hours in 2025 and is on track to quadruple them within two years to meet U.S. Navy demand. This network of distributed manufacturing currently consists of 23 companies contributing to outsourced modular assembly and is growing.

Direct sales channel for Mission Technologies to government and defense customers (e.g., U.S. Air Force)

The Mission Technologies division uses a direct sales channel, often through task orders under larger IDIQ (Indefinite Delivery/Indefinite Quantity) vehicles like OASIS+. This division sells services and technology solutions directly to various DoD components and other federal agencies. Recent contract awards illustrate this direct channel:

• A $3 billion LOGIX task order for DoD logistics and intelligence support.
• A $147 million, five-year task order for U.S. Navy combat training services.
• A $133 million, 10-year task order with the U.S. Air National Guard for training support.
• A $458 million contract for DOD IT Architecture Modernization.

The Mission Technologies segment is expected to generate revenue between $3.0 billion and $3.1 billion for fiscal year 2025, with an anticipated operating margin of approximately 4.5%.

Shipyard facilities (Newport News and Ingalls) serve as primary delivery and service points

The physical delivery and final service points for the major shipbuilding products are the company's established facilities. Newport News Shipbuilding in Virginia handles nuclear-powered aircraft carriers and submarines. Ingalls Shipbuilding in Pascagoula, Mississippi, focuses on amphibious assault ships and Arleigh Burke-class destroyers. These yards are the culmination points for the complex manufacturing processes, whether the components were built in-house or via the distributed network. For example, the Newport News division acquired a facility in Goose Creek, South Carolina, now Charleston Operations, dedicated to producing completed submarine modules and structural aircraft carrier units.

Strategic partnerships for distributed manufacturing and global service delivery

Huntington Ingalls Industries, Inc. uses strategic alliances to enhance its channel capabilities, particularly for manufacturing throughput and technology integration. The company has forged international partnerships with Hyundai Heavy Industries and Babcock International Group to boost production efficiency. Furthermore, the Mission Technologies division leverages partnerships for service delivery, such as the strategic agreement with C3 AI to apply artificial intelligence to accelerate shipbuilding throughput. The company employs more than 44,000 workers across its operations.

Here's a quick look at the expected financial scale of the revenue channels for fiscal year 2025:

Channel Segment	FY2025 Revenue Guidance (USD)	Recent Quarterly Revenue (Q3 2025) (USD)	Segment Operating Margin Guidance (FY2025)
Shipbuilding (Combined)	$9.0 billion to $9.1 billion	Shipbuilding revenue growth was 18% year-over-year in Q3 2025	5.5% to 6.5%
Mission Technologies	$3.0 billion to $3.1 billion	$787 million	Approximately 4.5%

The total backlog as of March 31, 2025, was $48.0 billion, growing to $55.7 billion by September 30, 2025, showing strong forward visibility across these channels.

Finance: draft 13-week cash view by Friday.

Huntington Ingalls Industries, Inc. (HII) - Canvas Business Model: Customer Segments

You're looking at the core of Huntington Ingalls Industries, Inc.'s (HII) business, which is overwhelmingly anchored to the U.S. federal government, specifically the Department of Defense. The customer segments define the revenue streams, and as of late 2025, the numbers show a clear hierarchy.

The overall financial commitment from customers is substantial, reflected in the cumulative order backlog. As of September 30, 2025, Huntington Ingalls Industries, Inc. reported a total backlog of $55.7 billion. Of that total, the funded portion stood at $33 billion. New contract awards in the third quarter of 2025 alone totaled $2.0 billion.

The U.S. Navy (primary customer for shipbuilding)

The U.S. Navy remains the bedrock customer, driving the majority of revenue through the Newport News Shipbuilding and Ingalls Shipbuilding divisions. This segment is focused on complex, long-term platforms like nuclear-powered aircraft carriers and submarines. For Fiscal Year 2025, Huntington Ingalls Industries, Inc. reaffirmed its guidance for shipbuilding revenue to be between $9.0 billion and $9.1 billion.

Specific, recent contract activity highlights this deep reliance:

• HII was awarded a contract up to $471.9 million in December 2025 for engineering support on Nimitz-class and Gerald R. Ford-class aircraft carriers, with an initial award value of $91.9 million.
• In April 2025, Huntington Ingalls Inc., Newport News Shipbuilding, was awarded $1,293,694,000 as part of a larger contract for two Virginia-class attack submarines (Block V).
• Contract awards in the second quarter of 2025 totaled $11.9 billion, which included work for DDG 145 and 146, LPD33, and two Block V submarines.
• The company noted that it is the nation's sole designer and builder of the Gerald R. Ford-class aircraft carriers.

Other U.S. government agencies (e.g., Coast Guard, U.S. Air Force)

While the Navy dominates, other government entities represent important, though smaller, customer bases, often serviced through the shipbuilding or Mission Technologies segments. The Mission Technologies division is actively engaged with the U.S. Army, for instance, developing a high-energy laser counter-drone system. The shipbuilding divisions also support the U.S. Coast Guard, though specific revenue figures tied solely to the Coast Guard are typically bundled within the larger shipbuilding segment reporting.

Government and commercial entities requiring C5ISR, cyber, and technical services

This category is served by the Mission Technologies segment, which focuses on delivering advanced technology solutions. For the full Fiscal Year 2025, Huntington Ingalls Industries, Inc. projected Mission Technologies revenue between $3.0 billion and $3.1 billion. This segment showed strong momentum, with Q2 2025 revenue reported at $791 million and Q1 2025 revenue at $735 million. The third quarter of 2025 saw 11% sales growth in this segment year-over-year.

Customer demand within this segment is characterized by:

• Growth in cyber, electronic warfare, and space capabilities.
• Unmanned systems, including the unveiling of the AI-enabled ROMULUS unmanned surface vessel line.
• Reaching the 750th production unit of the REMUS UUV.
• Lower volumes reported in C5ISR offerings during the first quarter of 2025.

International defense customers for Mission Technologies and potential shipbuilding exports

International engagement is primarily seen through Mission Technologies partnerships and collaborations, rather than major export shipbuilding contracts in the reported data. The company announced new partnerships with international entities like Babcock International and Thales, alongside domestic partners like Shield AI, to enhance its technological offerings. The company is also exploring opportunities in ship production through an MOU with HD Hyundai Heavy Industries.

Here's a quick look at the expected financial scale of the two main operating segments for FY2025:

Segment	FY2025 Revenue Guidance (Approximate)	Q3 2025 Segment Operating Margin
Shipbuilding (NNS & Ingalls)	$9.0 billion to $9.1 billion	Between 5.5% and 6.5%
Mission Technologies	$3.0 billion to $3.1 billion	Approximately 4.5%

The customer base dictates the long-term planning; for example, the company warned that the next 1.5 years will be challenging as they transition out of ships contracted before the COVID-19 pandemic to the newer contracts. Finance: draft 13-week cash view by Friday.

Huntington Ingalls Industries, Inc. (HII) - Canvas Business Model: Cost Structure

You're managing a business where the cost of goods sold (COGS) is intrinsically tied to multi-year, fixed-price government contracts, which means managing labor and material inflation is a constant battle. For Huntington Ingalls Industries, Inc. (HII), the cost structure is dominated by the physical reality of building nuclear-powered ships and complex defense systems.

High fixed costs related to massive shipyard infrastructure and capital expenditures

The cost structure includes significant, ongoing capital investment to maintain and modernize the massive shipyard footprint necessary for aircraft carriers and submarines. This is a long-term, high-barrier-to-entry cost. You see this reflected in the company's capital spending guidance for 2025.

• FY2025 Capital Expenditure Additions guidance is between $450 million and $500 million.
• Capital Expenditures were guided to be approximately 4% of Sales for FY2025.
• Capital expenditure additions in Q1 2025 totaled $67 million.
• Capital expenditure additions in Q2 2025 totaled $96 million.
• Specific infrastructure projects, like a new parking deck at the shipyard, have been awarded at costs such as $120 million.

Significant labor costs for the specialized shipbuilding workforce (wage negotiations are key)

Labor is arguably the largest variable component within the Cost of Sales, given the highly skilled nature of the workforce. The focus in 2025 has been on stabilization through investment.

• The company has onboarded more than 4,600 shipbuilders so far in 2025.
• Management has affirmed progress on a $250 million annualized cost reduction effort expected to be achieved by year-end 2025.
• Investments in shipbuilder wages were a key focus area in Q2 2025.
• Wage negotiations are a key focus to reduce attrition without triggering market inflation.

High material and supply chain costs for steel, components, and long-lead items

The high Gross Profit Margin of approximately 12.34% in Q3 2025 reflects the inherent challenge of absorbing material and labor costs within fixed-price contracts, especially those awarded pre-COVID. The cost of steel and other long-lead items remains a critical pressure point, although supply chain stability is improving.

Research, development, and engineering (R&D/E) for next-generation platforms

While the company is focused on next-generation platforms like unmanned systems, reported R&D expenses for the twelve months ending September 30, 2025, were stated as $0M. However, favorable tax changes related to the reversal of prior Section 174 R&D capitalization treatment are estimated to benefit the company by more than $150 million in 2025.

Selling, General, and Administrative (SG&A) overhead to manage complex contracts

Managing the complex web of government contracts, compliance, and administrative oversight requires substantial overhead. While a specific 2025 SG&A figure isn't immediately available, the consolidated Operating Margin for Q3 2025 was 5.0%, with operating income at $179 million on $3.2 billion in revenue.

Here's a quick look at the key financial metrics that define the cost environment:

Cost/Financial Metric	Value/Range (2025 Data)	Period/Context
Gross Profit Margin	12.34%	Q3 2025
Consolidated Operating Margin	5.0%	Q3 2025
FY2025 Shipbuilding Operating Margin Guidance	5.5% to 6.5%	Full Year
FY2025 Capital Expenditures Guidance	$450 million to $500 million	Full Year
FY2025 Free Cash Flow Guidance	$500 million to $600 million	Full Year
Annualized Cost Reduction Effort Target	$250 million	Expected by Year-End

Finance: draft 13-week cash view by Friday.

Huntington Ingalls Industries, Inc. (HII) - Canvas Business Model: Revenue Streams

You're looking at the core of how Huntington Ingalls Industries, Inc. (HII) brings in money, which is almost entirely tied to long-term, complex government shipbuilding and defense technology work. This revenue base is incredibly stable, underpinned by a massive backlog that stood at $56.9 billion as of the second quarter of 2025. That backlog gives you long-term revenue visibility, which is key in this sector.

The financial guidance for Fiscal Year 2025 clearly segments the two primary revenue drivers. Shipbuilding revenue is projected to land between $9.0B and $9.1B for FY25, carrying an expected operating margin in the range of 5.5% to 6.5%. The Mission Technologies segment is forecasted to contribute between $3.0B and $3.1B in revenue for FY25, with an expected segment operating margin between 4.0% and 4.5%, and an EBITDA margin projected between 8.0% and 8.5%. To be fair, Q1 2025 saw total revenue dip 2.5% year-over-year to $2.7 billion, but Q3 2025 bounced back strongly with revenue reaching $3.2 billion, a 16.1% increase year-over-year.

The foundation of the shipbuilding revenue stream is long-term, fixed-price, and cost-plus government contracts for new construction. You see this in the massive programs HII supports, like the Columbia-class submarine and the Ford-class aircraft carriers, which are decades-long commitments. For instance, Ingalls Shipbuilding secured a $9.6 billion multi-ship procurement contract in 2024 for LPD 33, 34, and 35. Contract structures authorize various payment methods; for example, the ITES-3S contract vehicle allows for Firm Fixed Price (FFP), Time and Materials (T&M), and Cost Reimbursement (CR) Task Orders. Furthermore, HII secured a Navy contract valued up to $471.9 million for aircraft carrier support, structured as a cost-plus-fixed-fee contract.

Service and repair revenue flows from vessel maintenance and modernization programs, often bundled within the larger shipbuilding segment or as part of Mission Technologies offerings. While specific service-only revenue figures aren't always broken out separately from the main segments, the work is critical. For example, Newport News Shipbuilding's Q1 2025 revenue was impacted by reduced aircraft carrier and service support volumes. Mission Technologies itself provides fleet maintenance and modernization services.

The Mission Technologies segment is where you find the revenue from technical solutions and services, specifically in cyber, C5ISR, and unmanned systems sales. In Q1 2025, this segment generated $735 million in revenue, and by Q2 2025, it grew to $791 million. This growth is supported by specific product lines; HII delivered the first two small uncrewed undersea vehicles (SUUVs) for the Lionfish system program in Q1 2025, and Mission Technologies delivered REMUS 300 SUUVs to Hitachi in Q2 2025. The C5ISR (Command, Control, Computers, Communications, Intelligence, Surveillance, and Reconnaissance) offerings are a key part of this, though Q1 2025 saw lower C5ISR volume.

Here's a quick look at the segment revenue targets for the full year 2025:

Revenue Stream Segment	FY25 Projected Revenue Range	Projected Margin
Shipbuilding	$9.0B to $9.1B	5.5% to 6.5% Operating Margin
Mission Technologies	$3.0B to $3.1B	4.0% to 4.5% Operating Margin

The flow of new contract awards directly feeds these revenue streams, showing the pipeline health. You can see the quarterly activity:

• Q1 2025 New Contract Awards: $2.1 billion
• Q2 2025 New Contract Awards: $11.9 billion
• Q3 2025 New Contract Awards: $2 billion

The nature of the work dictates the contract type, which impacts revenue recognition and margin realization. You'll find revenue derived from:

• Sole designer, builder, and refueler of nuclear-powered aircraft carriers
• Construction of Virginia-class and Columbia-class submarines
• Amphibious assault ships and surface combatants
• Management and operation (M&O) contracts with cost-plus-award-fee provisions
• Services under GSA OASIS+ contracts on a time and materials or fixed price basis

Finance: draft 13-week cash view by Friday.