L3Harris Defense Restructuring: How Pentagon Investments in Patriot and Tomahawk Systems Shape a New Corporate Strategy

Over the past month, L3Harris Technologies has executed a remarkable strategic pivot that could reshape its role in America’s defense ecosystem. The driving force behind this transformation involves some of the nation’s most critical missile systems—including the Patriot air defense platform and the Tomahawk cruise missile—which are now anchoring the company’s boldest reorganization in years.

The Strategic Breakup: Three Companies Emerge from One

L3Harris kicked off its transformation in early January with a sweeping announcement: its four primary business divisions would be consolidated into three distinct operating units. This restructuring wasn’t merely administrative—it marked the beginning of what management calls a “first-of-its-kind partnership” with the Pentagon, positioning the company to unlock value in two highly specialized defense sectors.

The realignment separated L3Harris into three core business pillars: Space and mission systems (encompassing satellite capabilities, missile warning systems, and global defense programs); Communications and spectrum dominance (focused on communications technology and electronic warfare); and Missile solutions (dedicated to propulsion systems, hypersonic technology, and advanced missile propulsion—the division that produces motors for systems like Patriot PAC-3, THAAD, Tomahawk, and the Standard Missile family).

This division of labor reveals a strategic intent: isolate the most profitable and strategically important elements of the business.

Rocketdyne’s New Chapter: Separating Commercial From Military

Just days after the restructuring announcement, L3Harris revealed that private equity firm AE Industrial Partners would acquire a controlling 65% stake in the company’s “space propulsion and power systems business.” The resurrected Rocketdyne brand—which had developed upper-stage rocket engines for more than six decades—would become an independent enterprise, retaining its contracts with United Launch Alliance and NASA.

This separation makes strategic sense. Rocketdyne builds the R10 engine powering the second stage of ULA’s Vulcan Centaur rocket and NASA’s Space Launch System, but these are fundamentally civilian and commercial applications. By spinning off Rocketdyne, L3Harris can focus its remaining missile solutions division entirely on defense applications—particularly the propulsion systems underpinning Patriot and Tomahawk platforms.

L3Harris retained a minority stake in Rocketdyne, creating a continuing relationship while allowing the company to redirect capital toward military-focused innovation.

The Pentagon’s Bold Investment: Weaponizing Corporate Structure

The plot deepened when L3Harris announced an unprecedented direct investment from the Department of Defense into the missile solutions division. The Pentagon agreed to invest $1 billion through the purchase of preferred stock in this business unit—essentially creating a government-backed equity stake in America’s advanced missile propulsion capabilities.

This investment, expected to close in the current quarter, represents more than financial support. It’s a bet on the strategic importance of systems like Patriot, Tomahawk, and THAAD—all of which depend on the advanced propulsion technology that missile solutions produces. Following the preferred stock injection, the missile solutions business will be spun off as a standalone public company in the latter half of 2026. Upon its initial public offering, the Department of Defense will convert its preferred shares into common stock, becoming a shareholder in the new entity.

CEO Christopher Kubasik framed the new company as a “pure-play missile solutions provider” with a mission to be part of America’s “Arsenal of Freedom”—language that underscores the national security imperative underpinning this restructuring.

The Financial Arithmetic: Smaller But Stronger

The numbers reveal why this breakup makes financial sense. According to S&P Global Market Intelligence data, the Rocketdyne and missile solutions businesses combined generate approximately $9.3 billion in annual revenue and just over $1.1 billion in operating profit. The remaining L3Harris—comprising space and mission systems plus communications and spectrum dominance—retains roughly $12.3 billion in annual business with about $2.2 billion in operating profit.

This split creates a paradox: L3Harris will be significantly smaller in absolute revenue terms, yet considerably more profitable in relative terms. By shedding its engine and motor manufacturing divisions, the core company sharpens its focus on higher-margin defense and aerospace services where it maintains competitive advantages.

Meanwhile, the missile solutions spinoff—anchored by Patriot, Tomahawk, and related systems—captures a business with substantial recurring revenue from military procurement cycles. And Rocketdyne, now private-equity-backed, can pursue commercial rocket engine contracts without the bureaucratic constraints of a publicly traded defense contractor.

What This Means for Investors

If you own L3Harris stock today, you’re not simply holding one company—you’re holding a claim on three future entities. Each will pursue distinct strategic objectives: a commercial rocket engine manufacturer, a specialized military propulsion provider, and a diversified space and communications defense contractor.

The Pentagon’s direct investment signals confidence in the missile solutions business, particularly given global security concerns and the renewed emphasis on advanced military capabilities like Patriot and Tomahawk platforms. This backing could accelerate growth and reduce execution risk for the spinoff.

However, uncertainty remains about which product lines each company will retain, how revenue and profit will ultimately divide, and whether the spinoff operations will trade at a premium or discount relative to the current L3Harris valuation. The restructuring also requires shareholder approval and regulatory clearance, adding execution risk.

The Bottom Line

L3Harris’s transformation represents a bold bet on specialization. By separating its rocket engine and missile propulsion businesses from its core defense and communications operations, the company is acknowledging a fundamental truth: different business models thrive under different ownership structures. Patriot and Tomahawk production benefits from focused military expertise and government partnerships. Commercial rocketry thrives under private equity flexibility. And diversified defense services excel when unburdened by manufacturing complexity.

For investors, this restructuring could ultimately prove beneficial for L3Harris shareholders—assuming the company successfully manages the separation and the remaining entity commands a premium valuation for its streamlined, higher-margin portfolio. But track the details closely, as the devil will be in the execution.