Teledyne Technologies (NYSE:TDY) reported its strongest quarterly sales and operating earnings in company history for the third quarter of 2026, supported by broad-based growth in digital imaging, defense-related applications and commercial markets. Management raised its full-year sales and earnings outlook for the third consecutive quarter, citing sustained order momentum and a funded backlog of approximately $5.3 billion.
Executive Chairman Robert Mehrabian said the company now expects 2026 revenue of $6.625 billion, representing an 8.3% increase from 2025 and nearly twice the growth rate projected in January. Teledyne also forecast non-GAAP earnings per share of $25.45, up $1.80 from its initial January outlook and representing a 16% increase from the prior year.
“For all of Teledyne, orders have exceeded sales for 12 consecutive quarters,” Mehrabian said. He added that approximately 72% of the company’s backlog is expected to convert into revenue within the next 12 months.
Digital Imaging Leads Segment Growth
President and CEO George Bobb said third-quarter sales in the Digital Imaging segment rose 15%, including 14.3% organic growth. The performance reflected growth across both defense and commercial markets, with particular strength in infrared detectors and systems used for space-based imaging and unmanned platforms.
Sales of infrared detectors for space-based imaging increased more than 25%, as did revenue from infrared subsystems and cameras supplied for unmanned air systems and unmanned maritime surface vehicles, according to Bobb. Commercial end markets also expanded, including industrial and scientific vision sensors and cameras, healthcare X-ray products, commercial thermography cameras, maritime-navigation electronics, geospatial sensors and software, and MEMS products.
Digital Imaging’s non-GAAP operating margin increased 376 basis points year over year to 25.4%. Mehrabian said the company expects Digital Imaging revenue of about $2.5 billion for the full year, including 10% organic growth and roughly 0.6% growth from acquisitions.
Management attributed the segment’s margin progress partly to cost actions taken in 2025. Bobb said gross margins rose by roughly 100 basis points year over year in the quarter, while research and development spending was not materially higher. Mehrabian said Teledyne expects full-year Digital Imaging margin expansion of about 225 basis points and continues to target annual margin improvement across its portfolio.
Orders Strengthen Across Other Businesses
Instrumentation segment sales increased 1.9% from a year earlier. Marine instrument sales rose 2%, driven by defense-related interconnect sales for U.S. Virginia and Columbia submarines as well as continued offshore energy activity. Environmental instrument sales rose 7.1%, led by gas-monitoring products and more modest growth in laboratory and life-sciences instruments.
Electronic test-and-measurement sales declined 6.3%, which Bobb attributed in part to order timing. However, orders in that business increased 18% year over year, resulting in a record book-to-bill ratio of 1.23. Instrumentation’s operating margin declined modestly due to product mix but improved sequentially for the second consecutive quarter. Bobb said the company expects continued sequential margin improvement, though fourth-quarter margins are not expected to return to 2025 levels.
Aerospace and Defense Electronics sales increased 4.3%, as 7.4% growth in defense electronics was partly offset by lower commercial aerospace revenue. The segment posted a 1.29 book-to-bill ratio, with strong bookings in both defense and aerospace. Its non-GAAP operating margin improved 86 basis points despite a heavier mix of defense electronics, which carries lower margins than commercial avionics.
Engineered Systems revenue increased 7.8%, primarily due to higher sales of marine and other manufacturing programs. Segment operating margin was largely unchanged from the prior year.
Cash Flow, Buybacks and Varex Transaction
Chief Financial Officer Steve Blackwood said operating cash flow totaled $352.5 million in the third quarter, up from $343.1 million a year earlier. Free cash flow reached a third-quarter record of $319.5 million, compared with $313.9 million in 2025. Teledyne ended the quarter with $1.47 billion in net debt, consisting of about $2.03 billion in debt and $562.4 million in cash.
The company repurchased $224.6 million of its shares during the period at a weighted average price of approximately $607 per share. Mehrabian said Teledyne has deployed nearly $980 million toward stock repurchases over the past three years at an aggregate weighted average price of $479 per share.
Management also discussed its pending acquisition of Varex, which it expects to close early in 2027, subject to the regulatory process and shareholder approval. Varex’s special stockholder meeting is scheduled for Oct. 28.
Mehrabian said Teledyne had followed Varex for more than six years and was attracted to its X-ray detector portfolio, including products for high-energy oncology imaging and photon-counting detectors. He said Teledyne expects to apply its “80/20” operating approach to the acquired business, initially emphasizing margin improvement and potentially reducing lower-margin revenue before seeking mid-single-digit growth and commercial synergies.
Outlook
For the fourth quarter, Teledyne forecast GAAP earnings per share of $5.68 to $5.83 and non-GAAP earnings per share of $6.60 to $6.70. Full-year GAAP earnings per share are expected to be $21.71 to $21.87, while non-GAAP earnings per share are projected at $25.40 to $25.50.
Mehrabian said the company expects fourth-quarter organic revenue growth of roughly 7% to 8%, subject to execution. Looking toward 2027, he said Teledyne expects improvement from current momentum and backlog, though management declined to provide a detailed forecast. The company sees potential for growth above its historical pace, with expectations for mid- to higher-single-digit growth across its portfolio.
About Teledyne Technologies (NYSE:TDY)
Teledyne Technologies Incorporated (NYSE: TDY) is an industrial technology company that develops and manufactures sophisticated electronic, digital imaging, aerospace and defense products. Its offerings are used in commercial, industrial, scientific, government and defense applications where sensing, imaging, measurement and data processing are important.
The company’s businesses include digital imaging sensors and cameras, scientific instruments, environmental and marine monitoring systems, aerospace and defense electronics, communications equipment, data-acquisition systems and engineered components.
