Mercury Systems reported record fourth-quarter 2026 revenue of $289.8 million, surpassing analyst expectations of $266.4 million, and expanded its backlog to $1.9 billion. However, the aerospace and defense company's adjusted EPS of $0.37 fell short of the $0.38 analyst estimate and was lower than $0.47 in the prior year. Investors are concerned about the company's declining profitability, with operating margin contracting to 5% from 8.6% and profit margin to 0.3% from 8.6% in Q4 2025. Shares are also trading at a high valuation of 70 times forward earnings.