Huntington Ingalls Industries (HII) shares plummeted 8.23% during intraday trading on Tuesday, following the release of its first quarter 2026 financial results that revealed a significant earnings shortfall and contracting profitability.

The defense contractor reported first quarter adjusted operating income of $49 million, which substantially missed the IBES estimate of $150.1 million. This earnings miss appears to be the primary driver behind the sharp decline. While the company's Q1 revenue of $3.1 billion exceeded the $3.015 billion estimate, profitability metrics disappointed investors with operating margin declining to 5.0% from 5.9% in the same period last year.

Higher costs amid inflation and volatility in global trade weighed on the shipbuilder's margins. The company faced mounting cost pressures despite strong U.S. demand for submarines and aircraft carriers. The Mission Technologies segment showed particular weakness with operating income decreasing to $35 million from $40 million in the prior year period, and the segment's EBITDA margin fell to 7.8% from 9.1%. Additionally, the company reported negative free cash flow of $461 million for the quarter.