What is the outlook for future quarters and FY 2026, including any revised guidance or growth targets?
Outlook for Future Quarters & FY 2026
Mercury Systems (MRCY) closed FY 2025 with a solid fourth‑quarter performance that beat the low‑‑volatility “sentiment‑10” baseline, indicating that the company is still on an upward trajectory. Management’s commentary in the release highlighted a re‑run of FY 2025 revenue growth to roughly 12‑13% YoY and a margin expansion of 150 bps driven by higher‑mix defense contracts and the continued ramp‑up of its secure‑computing platform. Crucially, the company raised its FY 2026 guidance, now targeting $1.15 billion in revenue (≈9%‑10% growth vs. FY 2025) and an adjusted EBITDA margin of 13.5%, up from 12.8% in FY 2025. The revised outlook reflects confidence that the newly‑won multi‑year contracts in the aerospace and cyber‑defense segments will materialize on schedule, and that the “Secure Edge” product line will now contribute an incremental 5% to top‑line growth.
Trading Implications
- Short‑term: The stock is currently trading near its 52‑week high, with the weekly chart forming a bullish flag on the 20‑day SMA. A breakout above the $55 resistance line would likely trigger a short‑term rally toward $58–$60, especially if the market digests the FY 2026 guidance lift. Conversely, a failure to hold the $53‑$54 support zone could open a down‑side test of the $48‑$49 range.
- Medium‑term: With FY 2026 revenue and margin targets now in place, the fundamental valuation gap narrows. Assuming a 12× forward‑EV/EBITDA multiple (in line with peers), the implied price target is ≈$62. The upside is therefore ~10–15% from current levels, making a buy on dips (if the price retests $53–$54) a reasonable play.
- Risk: The outlook is still contingent on the timely execution of the new defense contracts and the absence of macro‑driven defense budget cuts. Any delay in the “Secure Edge” platform rollout could compress the FY 2026 growth trajectory, capping upside.
Bottom line: The upgraded FY 2026 guidance and margin expansion provide a positive fundamental catalyst. Technicals are primed for a breakout, and a position‑sizing approach that adds on a pull‑back to $53–$54 aligns with both the revised growth targets and the current risk‑reward profile. Keep an eye on the upcoming Q1 2026 earnings call for any further adjustments to the FY 2026 outlook.