Mercury Systems (MRCY) Stock Forecast & Price Target

Mercury System is viewed positively because the turnaround under new management has restored execution, with FY26 revenue of $984M, adjusted EBITDA of $150M, record bookings of $1.5B, and backlog near $1.9B supporting stronger visibility into FY27 and the preliminary FY28 outlook. Its merchant-supplier role in secure embedded processing for radar, autonomy, electronic warfare, and cyber resilience positions it to benefit from broad defense modernization, while backlog increasingly skews toward higher-margin production programs. Financially, the company is showing improving leverage and cash generation, including $150M of debt paydown and $68M of FY26 free cash flow, alongside expectations for revenue approaching $1.1B in FY27 and further margin expansion.

Mercury System is exposed to heavy dependence on U.S. defense spending, so continuing budget resolutions, shutdown risk, and shifting federal priorities can delay funding and reduce program volumes outside management’s control. Customer and program concentration is also a major weakness, with RTX, LMT, and NOC accounting for 36% of FY26 revenue and five customers representing 54% of receivables, limiting pricing power and making cash collections vulnerable to any program slip. Although revenue of $289.8M beat consensus and backlog reached a record $1,945M, FCF conversion was only 10% and recent GAAP losses, fixed-price execution risk, and cost pressures suggest profitability remains fragile.